NATPE 2012 || In Conversation With Jon Feltheimer Emilio Azcarraga

Sure, it's pretty simple actually. We've put together a venture to co-finance, develop, and produce basic television product for the US market, English language product. We think it's a great opportunity for two partners who've been in business together this past year and actually for Emilio and Pepe and Fernando and I really for a long time, to create things that we think are going to work great in the US marketplace, using both formats, original programming from new writers, some perhaps Latino-inflected themed programming, but basically this is a mainstream product for the US marketplace.

Well, I mean, start with the Hispanic population in the US growing four times faster than the rest of the population. Voracious consumer of entertainment, two times more theatrical viewing than the mainstream audience, devours more DVDs, watches four and a half hours of television. Clearly this is an audience that we want to try to reach. And we've been doing it for a year with Pantelion. We've done six movies together, both English language and Spanish language. We've got two more coming out within the next three months. One is 'Casa de Mi Madre' with that famous Latino star Will Ferrell speaking Spanish, actually I don't know when he learned it, maybe a week before from what I heard. And we've got one starring Eva Mendes which actually is in English. So the Will Ferrell movie is in Spanish and Eva Mendes movie which is 'A Girl in Progress', and they're both coming out in the next three months. In terms of television, look at shows like 'Modern Family', 'Ugly Betty', and you say there is a great audience there. We're going to try to reach again the mainstream audience, but if you can actually get the Hispanic audience as well, layered on top, a feeling that there's something there special for them. We've seen that with a number of our movies, we've seen that with our action movies like 'Expendables', we've seen it with our horror movies. If you can do a great show, which I think we're pretty good at and I think obviously Televisa is pretty good at, if you can take our resources, put them together, and again add to what is a mainstream show, you can make sure that you're also catering to this terrific audience that's out there. I think we can have a lot of success. And one of the things I think is quite interesting is that it's going to be English language fair. You're not trying to do what Telemundo or Univision are doing, you're doing it in a way that reaches both demographics, and hopefully that's exactly right. I think there are a couple of great broadcasters obviously led by Televisa. Telemundo, I see now that Fox is going to jump into that fray with their RCN partnership. No, we're doing mainstream programming. We want to do hit programming. As Kevin Beggs who runs our television business said, 'Latino in feel but with US appeal.' I think that would be kind of a fun way to put it.

I think we've agreed that we can do scripted programming and non-scripted. We've got the first movie that we did for Pantelion was called 'From Prada to Nada', it was a really fun movie, and we're actually developing that as a comedy and we'll announce the broadcaster within the next few days. We can do pretty much anything. I think that we're going to start meeting with a number of writers, we're going to make some writer deals, we're going to make some script deals. I think there's nothing that we can't do in this partnership.

Challenge really is making hit programming. It's like creating magic. You just have to have a great script and you have to have the right cast for that script, and then you have to produce it well and then you have to go out and market it well. So the challenge is you're competing in a world of two or three hundred channels with a lot of programmers out there. You are competing with a lot of people for the attention of that audience. But the reason to have a partnership like this is to try to beat those odds a little bit, to take a company that has that reach with an audience with a company that actually has been pretty effective doing programming across cable and premium and their expertise in daily programming, which nobody comes even close to. Put all that together, put some money together. We're expecting to have a fund that we can support at least six to eight projects a year, maybe more than that. So we take our money, our resources, our programming expertise and the marketing reach. I think we got a shot. I really do.

I would say that one of the ideas that we had with Pantelion was that the Hispanic audience is very young, far younger. I think average age 27. And the thought is, just like an advertiser, if you can actually create a product for a young person and you create a brand for them that they will stay with you for a long time. So we've made a little money. Pantelion actually is profitable in its very first year. Again, we did six movies, I think that was pretty darn good. We have actually built, it's interesting nobody notes this, but we have actually built the only organization that's really built to do a pipeline of Spanish language or Spanish audience oriented product on a kind of a commercial basis. We're really the only organization out there that's really doing that. So the idea that we could start creating for that audience a reliable source of product and a brand that they can actually rely on now in television, I see it the same way. While we're going to go for mainstream audience, it'll be an audience of all ages. There certainly is an element of this I think that if we target that young audience, we can start creating programming that they know is for an affinity for them, that they can trust our brand together. I think we can kind of own them for a long time, and I think that ultimately is what we're after because we're both in this for the long term.

I think this is a big, bad, competitive world. And when you look at a piece of business and you think, well, there's a reason to mitigate your risk or you find a partner that has unique resources that you don't have, then there's a significant reason to partner. Or if they're people frankly that you really want to be in business with. And again, Emilio and Pepe and Fernando and their whole team, I've been in business with them for 20 some odd years. They are people that look you in the eye, they're tough but they're fair. So we have some other companies that we've been in business like that: StudioCanal in Great Britain and in the US, we're the distributor of their entire library. We have a joint venture in Great Britain. We're partnered with Sabon Capital Group and Astro throughout our channels in Southeast Asia. We've got a partnership obviously with Viacom and MGM for Epix, and we've got a partnership with Comcast and Sony for Fearnet. There was a reason for each of those partnerships. Each of the partners in each of those cases brought something to the party that was unique that we didn't have or we couldn't duplicate or replicate. So I think there's reasons to have partnerships. Partnerships are hard. You really have to have great relationships with the people that you're working with because partnerships are very hard because no two companies have the same overall agenda. So yes, I believe in partnerships when it's right.

Not really, no. I've toyed with the video game business a little bit. It's a rough business. I think we'll just leave that alone and license to those companies. You talk about a young demo in the appeal of the Hispanic demo, the gaming demo is hugely alerting for that reason. Yeah, again, I think we can license. I don't know how Milo feels about it, but we can license that. Right now it's getting just as expensive, not more expensive, to make a video game than it is to make a movie. So some of these moguls, you know, you could spend $100 million on. So that's not for me, at least for the short term.

I think it's going to be a great acquisition for us. The stock seems to be reacting extremely well. I think you know, when we set out to do this 10 years ago, we wanted to do something that was significant and frankly something big because you really can't compete in this world of entertainment with all the consolidation that's going on without it. This transaction enables us to do a lot of things. To start with, we now will have, I hope, I believe March 23rd, I think we'll have the two largest young adult franchises with Twilight and Hunger Games. We consolidate the two largest international sales organizations, Summit and Lions Gate, so we'll have a kind of a dominant position in that area. We'll have because of Breaking Dawn, tremendous visibility in terms of cash flow. It was just actually a really smart transaction. We picked up some great executives as part of it. Our approach is always the best and the brightest. We've done this a bunch of times. We're not parochial about it at all. Whoever is the best person for a job is going to get the job. And I think if you look at the way my partner Michael Burns engineered the transaction, basically we didn't delude ourselves very much. We put out very little stock. The debt is basically non-recourse to the parent company. So all in all, it was great timing for us, great opportunity for us, and I think it's going to work out very well.

I feel the same way. You know, one of the other things that we did this year was actually Emilio and I created a scholarship program for USC because we thought it was important actually to develop talent not just in front of the camera but behind the camera. So every year we're doing a scholarship for two students at USC in the film school to again try to develop this entire community to be able to make film, to be able to make television. Again, I think this is part of creating an infinity group, and again this is no small affinity group. This is 50 million people. And again, the film business Pantelion is quite different from our television but that really is targeted for that underserved 50 million audience. Now clearly they watch English language feature films as well, but we're actually creating with Pantelion both English language and Hispanic, but we're very targeted. These two releases we have coming out are about 350 screens, they're not 3,000 screens like Hunger Games is going to be close to 7,000 screens. So we're really working to be almost a full service company or partnership for the community.

For me, it was Jim Maimo who used to run Telemundo when I ran the Sony TV group. He came one day and said he wanted to have lunch and he said to me, 'Here's what I want to do. I want to make films for this audience that just doesn't have enough films targeted. There is a segment of the Hispanic population that goes particularly even to specialty films that are very upscale, but he felt that there was something missing from his days at Telemundo. He had looked at that audience carefully and he said, 'I want to do this.' And I didn't say how much and I didn't say how many, I said yes. And we did a couple of movies and actually they worked out pretty well. But I realized we didn't have a business, we just had a movie every now and then. And the opportunity to take that to the next level with Emilio with Televisa, a company that again there is no broadcaster, no programmer in the world that has the kind of influence, the kind of loyalty with an audience that Televisa has. So the opportunity for us to actually make it into a real business, I think that was the inflection point.