With a cast anchored by film actress Thandie Newton and an edgy plot fit for a cable thriller, the producers of TV crime drama “Rogue” feel they have a hit on their hands.
Especially tuned-in to the success of the show is DirecTV Inc. of El Segundo, which is co-financing “Rogue” and is part owner of the series. The 10-episode first season will debut exclusively on DirecTV’s Audience Network channel early next month.
It’s a bold experiment for DirecTV, which backed “Rogue” after looking at data collected about viewing trends in its core 35-54 viewership demographic. It is the first series both commissioned by and developed exclusively for its platform, which reaches about 20 million homes in the United States.
If the experiment pays off, the satellite company will look to more original programming to help it weather a rapidly changing TV landscape where viewer habits are fickle and choices are many.
“It’s all about differentiation,” said Chris Long, a senior vice president at DirecTV who is overseeing the initiative. “We need to keep giving (subscribers) reasons not to leave.”
DirecTV, which had free cash flow, or cash flow from operations less capital expenditures necessary to maintain growth, of $2.3 billion at the end of last year, is nonetheless employing the strategy cautiously.
Each episode of the series, which is set in the Bay Area but shot in British Columbia and edited in the U.K., cost roughly $2.2 million to produce. After accounting for Canadian and British tax credits, DirecTV and the L.A. television arm of U.K. independent producer Entertainment One each kicked in between $800,000 and $1 million an episode.
“Rogue” will be carried on DirecTV’s Audience Network channel as part of its basic subscription package, with revenue from international licensing deals and DVD sales defraying production costs.
While there is no guarantee it will recoup production costs from licensing the program, the company nevertheless sees upside from a branding perspective and the value that comes from exclusively presenting a hit show.
Driving the effort is an attempt to meet the growing challenge of drawing new subscribers amid a glut of home entertainment options to a service that can cost as much as $92 a month.
“The whole programing and distribution landscape is evolving pretty quickly,” said Matthew Harrigan, an analyst who follows DirecTV at Wünderlich Securities in Denver. “They’re looking for differentiated programing. It’s for marketing cachet.”
Data driven
DirecTV has taken incremental steps toward developing an original series in recent years.
One big move came in 2008 when it got exclusive rights to air new episodes of critically acclaimed football drama “Friday Night Lights.” DirecTV also took over exclusive first-run rights to legal series “Damages” in 2010 after cable network FX did not pick it up for a third season.
Where “Rogue” is different, said Long, is that it was developed from the outset with DirecTV’s audience in mind.
Of its 20 million subscribers, about 15 percent have DirecTV set-top boxes that are connected to the Internet, allowing the company to monitor and gather data about viewer preferences. After poring over customer surveys and data on viewing habits, Long identified one-hour dramas as a sweet spot for DirecTV’s core viewers ages 35 to 54.
Such data-driven programming decisions are becoming the new programming model for nontraditional broadcasters. Netflix Inc.’s original offering “House of Cards” was commissioned after the company used customer data to evaluate its chances of success. That research determined that subscribers had preferences for the program’s lead actor, Kevin Spacey, and movies from the show’s director, David Fincher, and they even liked the original British version of the show, according to a report in the New York Times.
“If the box is plugged into broadband, we do pay attention to it,” Long said. “Everybody wants to talk to their customers.”
Fight for subscribers
By offering original programming, DirecTV, the largest satellite TV provider in the country and the fourth biggest public company in Los Angeles County, is hoping to differentiate itself in a saturated pay-TV market at a time when traditional cable and satellite providers are struggling to adapt.
While DirecTV added subscribers in the United States last year, its rate of growth slowed dramatically. Its 199,000 new subscribers were 70 percent fewer than the amount it added in 2011. Its primary competitor, Dish Network Corp. of Meridian, Colo., lost subscribers in 2011 but gained subscribers last year.
The declines are fed by the growth of Netflix, the streaming service offered by Amazon.com Inc. and other Internet content sites that are investing millions of dollars to create original programming – much of it being done in Los Angeles. Netflix is spending a reported $4 million for each episode of its original shows and Amazon Studios is reportedly spending about $1 million an episode for its own original content initiative, according to CAA TV literary agent Peter Micelli, as reported by Variety.
Meanwhile, DirecTV is using “Rogue,” which was shot in British Columbia and edited in the U.K., as just one of many features to differentiate the service for potential subscribers. It also heavily promotes its premium NFL Sunday Ticket package, which includes live broadcasts of all Sunday National Football League games. Compared with the cost of acquiring rights to sports, developing original content within the budget range of “Rogue” is a far cheaper strategy, Wünderlich’s Harrigan said.
To that end, Long sees an opportunity to grow the Audience Network with more originals. He said he’s now deep in negotiations to put another series into production and hopes to produce at least two more in coming years.
Even though the channel is not as widely known as other outlets for drama, Long said that if content is good enough, it can get discovered regardless of where its shown.
“If you create great enough content, it doesn’t matter what channel it’s on,” Long said.
