Distribution: Partnering For Vertical Integration

Mar 24, 2003  •  Post A Comment

Being a producer that isn’t under the same umbrella ownership as major network, cable or satellite channels, in an ever more consolidated marketplace, can be a deadly experience. But through key alliances, MGM TV has turned relationships into riches, explained James Griffiths, MGM’s president, worldwide television distribution.
Instead of using sister companies as partners and launching platforms, MGM has developed loose but long-lasting alliances, creating what Mr. Griffiths called “virtual vertical integration.”
“We don’t own TV stations or a network or a [domestic] basic cable channel,” Mr. Griffiths said. “Yet with partners like Showtime and NBC Enterprises, we can successfully produce and distribute television.”
As an independent, the key to success is a keen eye on the bottom line and strong relationships. “It’s more important for us to connect the dots to be successful,” Mr. Griffiths said, “because we are not as vertically integrated as some of the other companies.”
“The business is becoming more consolidated every day, so we have to take it upon ourselves to find a way to get product past the gatekeepers and into the marketplace,” he said.
Originally armed with a library of movies and not much television product, MGM partnered with Showtime in the early ’90s on an output deal for new movies that has now been extended through 2008. The relationship also led to the series Stargate SG-1. That soon provided MGM with the ammo to beef up its distribution roots into syndication and other cable outlets.
Based on the 1995 MGM movie starring Kurt Russell, the series debuted on Showtime in 1997 for a five-year run. Under the original contract, MGM could also syndicate the shows after one or two seasons. Today, Stargate still reigns as one of the top first-run weekly hours on stations with a potential spinoff in the works.
After the series played on Showtime, MGM sold it to the Sci-Fi Channel in a five-year deal. The cable outlet then ordered another season of new shows. Today Stargate SG-1 ranks as one of the best performers in the Sci-Fi lineup. It averaged more than 1.3 million households when it first aired. With costs of the series running to $1.3 million, the three-pronged domestic distribution pipeline more than recouped the expenses for MGM, with international sales creating the icing on the cake.
“It’s become very difficult to create series in this marketplace, especially when we don’t own a domestic outlet,” Mr. Griffiths said. “Stargate SG-1 was a groundbreaking show for not only us but for the business. Before Stargate executives would have laughed at the thought of bringing more platforms for the series to air. Now it’s becoming the norm.”
Other MGM series to follow the Showtime-to-syndication-to-Sci-Fi connection included six years of The Outer Limits and three years of Poltergeist: The Legacy. MGM series fare now on Showtime, such as Jeremiah, Earthlings and Dead Like Me, could follow.
The relationship with Showtime has continued to grow, and MGM has struck another groundbreaking deal. The two parties have now entered into an arrangement in which MGM will have first option on giving theatrical distribution to Showtime original movies made in the $1 million to $2 million range. The first film discussed was The Mudge Boy, which opened the Sundance Film Festival, although that deal fell through.
MGM’s key third alliance is with NBC. When the alliance began and was announced at the 2002 NATPE conference, MGM agreed with NBC to distribute the studio’s nonscripted series for all territories outside North America, providing NBC with powerful international muscle and MGM with rights to series ranging from Will & Grace to Boomtown.
NBC Enterprises considered a number of distributor offers at the time, but MGM’s attention to its own brand convinced NBC the Lion would protect NBC’s brand as well, according to sources. In addition, MGM was willing to guarantee a gross of $550,000 an hour.
Last year NBC Enterprises opted to shift its barter sales activities from Tribune with the launch of the MGM/NBC Media Sales Group to handle series such as The John Walsh Show. Then the two companies joined forces for the launch of syndication hour She Spies last fall, with MGM distributing and NBC producing. That series was on not only the NBC owned-and-operated stations but also those of Hearst, which had a separate alliance with NBC.
“This alliance works because like any good partner, you have to communicate your needs in order to make them succeed,” said Ed Wilson, president of NBC Enterprises. “What started as a great strategic partnership continues to grow as we find ways of complementing our strengths and ensuring that both companies benefit.”
With Jim Packer’s overseeing North American Sales for MGM domestic distribution as executive VP, Simon Sutton as executive VP for international television distribution and Bruce Tuchman’s taking charge of MGM Networks, Mr. Griffith feels that smart decisions throughout the staff has kept MGM in the forefront of worldwide television. However, it will take a lot of work to keep it there.
“A lot of companies have chosen to get out of the TV business because they don’t own domestic outlets,” Mr. Griffiths said. “But for us, because our transactions are mostly external, its brings a lot of creative juices to the table to make things work. But that may be our best asset in the end; we are able to develop unique opportunities where others are unwilling to go.”