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Executive turmoil threatens future of reality TV powerhouse Endemol


By Wade Paulsen, 12/30/2003 

Endemol, the Anglo-Dutch reality TV giant best known for its shows Big Brother and Fear Factor -- but which is also the largest independent producer of TV shows in the U.K. -- is on the verge of disintegration after open warfare broke out between the corporation's owner and the creative team.

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The problems at Endemol date back to the halcyon days of the Internet bubble. In March 2000, Endemol's founders-owners Joop van den Ende and John de Mol (who also named the company after themselves) sold it to the Spanish telephone monopoly Telefonica for 5.5 billion euros (which was also about US$5.5 billion at the time). At the time, Telefonica CEO Juan Villalonga was building his vision of a phone-cable-Internet powerhouse, and he wanted Endemol to provide multiplatform content for Telefonica's Internet subsidiary Terra (which also owned U.S. Web portal Lycos, among others).

About four months later, however, Villalonga was fired by the Spanish government, which feared that his string of mergers and acquisitions would put Telefonica outside government control. As a result, the multiplatform initiative withered. While sales of such Internet-only exclusives as live feeds from the worldwide Big Brother shows did indeed generate some traffic for Terra, Endemol was never able to explain its vision of a multimedia future to Villalonga's successors.

Since then, given the combination of its own unclear vision and the resulting popping of the Internet bubble, Telefonica been largely liquidating its non-telecommunications related assets in order to, among other goals, generate the cash needed to pursue its initiatives in 3G wireless systems. Endemol, meanwhile, has been expanding its UK television assets. Using Telefonica's cash, it enbarked on a significant spending spree, acquiring full ownership of its UK subsidiary in 2000, rival British producer Brighter Pictures in 2001, comedy producer Zeppotron in 2002, and interactive programming producer Victoria Real in 2003 among its numerous deals. However, with no support for multiplatform programming at Telefonica, problems always seemed to be around the corner.

On December 4, according to a Daily Variety report, the problems arrived. Telefonica CEO Cesar Alierta appointed Joaquin Agut, the head of Terra, to be the new CEO of Endemol -- despite the fact that Endemol already had a CEO, respected industry veteran Aat Schouwenaar. In addition, Alierta gave Endemol management, including the company's co-founder and main creative force John de Mol, only one hours notice of his action prior to announcing the move publicly, a move which seemed deliberately planned to put the Dutch in their place.

According to van den Ende, de Mol was furious and "in a fighting mood" after the announcement. On December 19, he struck back, as Reuters reported. De Mol and Schowenaar announced their plans to leave Endemol within the next six months, with Schowenaar leaving before April and de Mol departing on May 1 (although he said he would be willing to stay until December 31, 2004 if "mutually agreed upon" to "facilitate a smooth transition").

Although both had employment contracts with Endemol, which in de Mol's case would have kept him on board until October 2005, an Endemol spokesman said the company also had a contractual agreement, signed at the time of Endemol's sale to Telefonica, that all Endemol CEOs would be mutually agreed upon. Thus, Telefonica's breach of this agreement breached the contracts of the Endemol employees, allowing them to opt for early departure. In addition, under this interpretation, other Endemol executives, such as the heads of its regional units, would be free to depart -- leaving Telefonica with the revenue stream from Endemol's prior creations (Big Brother, Fear Factor, Fame Academy, etc.) but with no new product and no creative team, crippling the rumored plans of Telefonica to sell the company to Pearson, the parent of Endemol's main U.K. reality TV rival FremantleMedia (Pop Idol).

We congratulate Telefonica on its soon-to-be-successful destruction of Endemol. We imagine that congratulatory bottles of champagne have been sent to Cesar Alierta from other reality TV producers such as Mark Burnett, Bruce Nash, Simon Fuller, Mike Fleiss, Rocket Science Laboratories and Stone Stanley Productions, who must be pleased that a primary competitor of theirs is biting the dust. We also suspect that Mr. Alierta is very glad that he lives in Spain instead of the U.S., since American shareholders can sue corporate officers who wantonly squander corporate value to satisfy their own petty jealousies.

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