FX's President John Landgraf at TCA: "The Biggest Challenge We Face is Lost Ad Sales Revenue."

By TV / Video Download Archives

Pasadena, CA – Perhaps more than any other senior network executive who appears at Television Critics Association tours, FX Networks and FX Productions CEO John Landgraf always steps right up and tells it like it is. And he's always here, starting off his networks' days with press conferences in which he speaks with a candor that is simply not common among his peers. This is just one of many reasons why TCA members look forward to FX Networks' days at their twice-yearly gatherings. (You read that right. FX Networks has an entire day at each TCA tour; one which it never fails to fill with a compelling blend of panels for new and returning series on FX and FXX.)

Landgraf also consistently finds interesting new ways to discuss subjects that have been discussed before. For example, he began his session yesterday by talking about the ever-expanding competition all television networks face from each other and from streaming services and other entities. But the many other choices viewers have don't comprise his greatest concern.

"Increased competition is not our biggest challenge," Landgraf asserted. "Competition certainly raises the bar, but if we make a great show, people are still likely to find it and watch it.

"The biggest challenge we face is lost ad sales revenue."

This was quite an admission to the many critics and reporters in the room who rarely hear the truth about the damage that DVRs are doing to the television business.

"Sixty million U.S. homes now have DVRs, so as well as our shows are doing in Live+7, we and other channels are losing as much as 40 percent of ad sales revenue on some of our most valuable series," Landgraf revealed. "For example, 'Sons of Anarchy's' primary airing on Tuesdays at 10 p.m. averages over five million adults 18-49 in Live+7, but only two million of those viewers watch the show live and only three million actually watch the commercials. That's a lot of lost revenue for a show that's very expensive to make."

Landgraf was quick to characterize the situation as a challenge rather than a defeat. "We need to find new opportunities to mitigate those losses, and we're doing that," he continued. He went on to talk about FX Networks' new TV Everywhere service FXNOW, which was announced yesterday at TCA and is available to authenticated [multichannel video programming distributor] customers in approximately 50 percent of homes in this country.

FXNOW, Landgraf noted, will allow FX Networks "to begin rebuilding our advertising business." In addition to FX's original series, it will offer over 200 theatrical films that are not available on any other streaming video service and every episode of Fox's long-running hit "The Simpsons."

Perhaps one reason Landgraf isn't so worried about competition is that so many of his shows "seem to keep hitting all-time highs every year." He mused that "at some point it would seem that the pie we eat keeps getting sliced so thin that the slices should be too thin. This is something we think about a lot when we're developing shows. When I started in this business 10 years ago, we were in ad supported television. It still felt like, more or less, a disposable medium; in other words, the primary reason [we] were making the show was for the audience that would watch it the night it aired. Now I think we're making shows for posterity.

"It's not unlike a movie in that, yes, it does matter what the first weekend's domestic U.S. box office for film is," he continued. "But if a film is really good it has a chance of having a long creative and financial life. People can still be discovering it, enjoying it, and you can still be earning money based on it five, 10, 15 years after you make it. That's the thing that's most exciting to me about television. [It] seems like a medium that has a long life. Therefore, it's worth making things that not only galvanize an audience the night they air, but might be useful to someone 15 or 20 years later. And, of course, we own most of our programming, so we're benefiting from both those revenue streams."

The idea of making content for posterity and having to wait years to realize the full profit of that work is a new one and not without its concerns. That's why new technology like FXNOW is so important. "We're going to work hard to complement our linear channels with not only nonlinear services, but an advertising model built around those nonlinear services," Landgraf said. "When I look at the larger financial picture of a large business like the FX Networks, advertising is very important. Affiliate sales, meaning the subscription rates, that come to us are very important. But increasingly, ownership of content is a really important part of it, too."

There have been a "number of times" when FX faced challenges on the ad sales front and "ownership of content has bailed us out," Landgraf said. "It's a nice thing, actually, to have some sort of more certain long tail revenue that undergirds a more volatile thing like advertising sales. When I look at the picture of all those various components it makes me feel very bullish about the business, even though the advertising business is stressed right now [because of DVR-related losses]."

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