@FF12: Price control equals creative shackles for broadcast: Hernan Lopez, Fox Intnl Channels

16 Mar,2012

 

[youtube width=”400″ height=”250″]http://www.youtube.com/watch?v=MCkprEBcPAs[/youtube]

Video and Text By Shruti Pushkarna

 

As President and Chief Executive Officer of Fox International Channels (FIC) Hernan Lopez oversees a massive international multichannel television organization that operates over 200 channels and their related online and production units. Mr. Lopez is responsible for all operations of FIC, which produces channels primarily under the brands Fox, National Geographic Channel, FX, Fox Life, Fox Crime, NatGeo Wild, MovieCity and Star Movies. He also oversees Fox’s US Hispanic cable networks, Fox Deportes and Utilisima. On the sidelines of FICCI Frames 2012, he spoke to MxM India about digitization, the vision for the Indian broadcast industry, HD penetration and economic uncertainty. Excerpts:

 

On digitization

I believe that digitization is good for consumers, for television industry and for both on the platform side and broadcaster side and like any process of gradual change of technology it won’t be without hiccups. There will be consumers that will be confused, there will be broadcasters who will be getting more or less space than they did before but at the end of the day all television markets that have gone from analog to digital have seen an increase in consumer satisfaction, in industry revenues and in the transparency of the system overall.

 

Price control equals to creative shackles

I argued in my presentation that price controls are putting artificial limit on the total revenue that the Indian television industry can generate and that limit in turn puts a limit on how much can it spend on content, how much you can afford to pay writers, directors, etc. What I have argued is that if the price controls went away, that’ll create a new incentive for television broadcasters to invest more in drama productions that can be here in India and also exported all around the world.

 

On economic uncertainty

We have seen uneven stories as it relates to advertising in Europe, for instance pan European advertising is down in some of the southern European countries but in some European markets, it’s up and it’s also significantly up in Latin America and Eastern Asia. So overall worldwide total advertising revenue is up.

 

Advertising vs. subscriptions – what’s the right mix?

In the US it’s close to 50:50 and I believe it will take many years for India to get to that stage but I think that’s a healthy balance.

 

On HD penetration

HD is a service that today consumers see as a luxury, at some point they will come to see it as a necessity. So around the world, as global television broadcasters, we are very advanced in giving all of our channels in both HD and SD. In fact it’s very much a policy that whenever we launch a new channel we try to do it simultaneously in HD and SD. And when consumers get used to that kind of service, it’s hard for them to go back.

 

Do away with price control, Hernan Lopez tells FICCI Frames 2012

 

By Archita Wagle

 

The morning session on the second day of FICCI Frames 2012 opened with Anto Joseph, Resident Editor, Financial Chronicle, introducing Hernan Lopez, CEO, Fox International TV. Mr Lopez started his address by talking about how India and Indian presence is felt in the US, be it Indian doctors or yoga. But he rued the fact that inspite the ideas or innovations in diverse fields, one area that sadly lacked the innovative ideas and content was television.

 

According to Mr Lopez, the reason for India’s lack was due to the fact that Indian talent “operates under price control which equals creative shackles”. Citing the example of Columbia which exports its programs to 80 countries, Mr Lopez compared the two and said that inspite having creative talent, technical expertise and skilled tradesmen at par; Columbia is much ahead as it is not restricted by regulations and price control.

 

Mr Lopez said that Indian television industry was almost totally dependent on advertising revenues, almost $2.6 billion per year, which coupled with the fact that there was an overabundance of channels and less number of affiliates meant that the broadcasters were in a tight bind. He added that even then, almost $700 million had to be paid in carriage fees, which meant that paying the talent came last.

 

The way forward according to Mr Lopez was if the price control was done away with. He said that this would make it possible to pay the talent in the industry what it deserves and then it can operate without any constraints to produce the best possible content.

 

Mr Lopez lauded the move to digitisation which would reduce the carriage fees being paid and increase the revenues for the industry. When asked what is the right ratio for advertising v/s subscription, Mr Lopez said that it is 50-50, as advertising alone can’t fund a large degree of quality content. According to him, a stronger content needs a dual stream revenue model.

 

A member of the audience questioned Mr Lopez about the government sanctioning digitisation for broadcast industry and how feasible is the government intervention, he answered that in a country like India, market forces alone can’t help a technology to be established hence government intervention was needed to push the digital solutions. But he was emphatic that now decision about the pricing should be left to the cable operators and consumers can choose the price level they want to pay.

 

Asked if better technology is a guarantor to better quality content, Mr Lopez said that there is no guarantee, but he reiterated that if the industry is freed from the price shackles, it will definitely produce better quality content.

 

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