Market Insight

Sky signs multi-territory rights deal with Showtime

January 21, 2016  | Subscribers Only

Tim Westcott Tim Westcott Director – Research and Analysis, Programming, IHS Markit

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Sky has agreed a multi-territory rights deal for programming from US pay TV network Showtime. The agreement with Showtime's parent company CBS Corporation will give Sky access to new and future series across the UK, Ireland, Germany, Austria and Italy. The exact term and value were not disclosed.

Described by Sky as 'one of the most important content deals Sky has ever agreed', it is the second pan-European agreement with a major US supplier, following November's output and co-production deal with HBO. CBS said it was 'the largest and most expansive international deal to date for Showtime' and the first time it has sold rights to a single company across multiple European territories.

New programming will air on the flagship Sky Atlantic channel, which is exclusive to Sky's satellite and online platforms. Titles include Billions, which premiered in the US on 17 January with the best series debut performance ever for a Showtime original series. Other new series include the relaunch of David Lynch's Twin Peaks (due to air next year) and new seasons of Ray Donovan and The Affair. Sky customers will also have on-demand access to catalogue Showtime programming including Californication, The Borgias, Dexter and Nurse Jackie

Sky will have an exclusive option to take all new Showtime-distributed unscripted shows such as documentaries, late night and reality shows. Sky and Showtime already co-produce the gothic horror series, Penny Dreadful.

Our analysis

Sky's agreement with Showtime is significant in what it demonstrates about the pay TV company's business model and the way US programmers are licensing their programming to key suppliers. Since the 'new' Sky was formed by the takeover by BSkyB of its affliated companies in Germany and Italy in July 2014, the company has focused on finding synergies across the three platforms. While there are clear opportunities to harmonise Sky's service offerings, branding, technology and back office, the acquisition of programming rights seemed to be an area where Sky would not necessarily be able to capitalise on its new scale.

While it remains the case that premium sports and movie rights continue to be licensed on a territory-by-territory basis, Sky has now tied up access to the two leading US pay TV brands for several years to come across its entire footprint of 21.1 million retail customers. Sky's motivation for this kind of deal must be seen as countering the threat of over-the-top (OTT) operators; either Netflix (now available throughout Europe) and Amazon (which has launched its streaming video service in the UK and Germany), or operators launching their own OTT services (as HBO has already done in the Nordic region and is said to be about to do in Spain). There is really no other linear TV company acquiring multi-territory rights in the way that Sky does.

The other question is how a distributor like CBS benefits from a multi-territory deal of this kind. CBS says that existing deals will remain in place (Homeland and Masters of Sex are currently under licence to Channel 4 in the UK, for example), but it already has deals in place with Sky for other series (The Affair and Nurse Jackie with Sky UK and Masters of Sex in Italy). The US company clearly considers that it has more to gain by selling all of its rights to a single operator rather than trying to close deals on a territory-by-territory basis. One possible conclusion is that even premium US content has become a hard sell, due to the current plentiful offer of original scripted programming coming out of the US (which FX has recently claimed amount to an oversupply) and spending cutbacks being made by linear broadcasters. IHS TV Programming Intelligence estimates that Channel 4's acquisition budget in 2015 was 77% lower than its budget in 2010.

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