The Reality Factory FremantleMedia didn't invent reality TV, but it's minting money with 263 shows in 37 countries, including megahits like American Idol and The Apprentice. Here's how the U.K. media power came to rule the world's airwaves.
By Paul Sloan

(Business 2.0) – Gavin Wood sensed it was time to strike. A parade of male contestants had spent the morning warbling on the stage at Kuala Lumpur's Panggung Bandaraya theater, straining to find the melody to "Can't Take My Eyes Off of You" and flaunting clumsy dance steps. Wood, a TV producer who flew in to oversee the launch of Malaysian Idol, leaned over to the judges and tossed out a suggestion: Why not put all 30 guys onstage together and tell them they're blowing the opportunity of a lifetime?

Wood was going for a classic reality-TV moment--a dose of humiliation that, if truly successful, would lead to tears. Roslan Aziz, a highly respected local record producer, was the last of the three judges to give the verdict.

"You have the best piano player in Malaysia, a perfect stage; what else do you need?" Aziz asked, raising both hands. While not nearly as biting as the original nasty Pop Idol judge, Simon Cowell, Aziz was blunt. He went on, delivering a line that Wood had whispered in his ear moments earlier. "Someone in this theater is going to be the Malaysian Idol," he told the contestants. "And I think it's going to be one of the girls."

The young men bowed their heads in shame and shuffled off the stage single file. It was the kind of public scolding that doesn't happen in Malaysia, so when it airs on local television, it's guaranteed to grip the audience. "In this country, you cannot put things negatively," Aziz explained during a break. "Hopefully this show will help get us out of the big cage we've been living in so long."

Remarkably, Wood and the other producers who traverse the globe training local production teams have managed to make Idol a colossal hit in every country they've taken it to. The company behind it all is FremantleMedia, a venerable London-based TV powerhouse that helped create Pop Idol in Britain in 2001 and is now rolling out the show in its 30th country. There's Belgium Idool, Portugul Idolos, Deutschland Sucht den SuperStar (Germany), SuperStar KZ (Kazakhstan), and, of course, the big daddy-o, American Idol, for which Fox Entertainment has paid an estimated $75 million to date, industry insiders say. The Idol phenomenon is a key reason Fremantle's revenue is up 9 percent to more than $1 billion since the show launched. Idol, says Fremantle CEO Tony Cohen, "has become a national institution in lots of countries."

The show may be crass and occasionally cruel, but it is undeniably brilliant. And it's the ultimate testament to a singular business achievement: Fremantle, better than any other media company, has figured out how to create truly global programming. That's partly the result of the creative minds at Fremantle; it has some of the best in the business, people who have a gift for developing shows that huge populations with different backgrounds and circumstances find utterly compelling.

Yet Fremantle's success has just as much to do with the systematic method it's devised to exploit those flashes of creative genius. Call it the Fremantle Way, and it holds lessons not just for show business but for all business: It allows the company to take products of mass appeal, customize them for places with widely varying languages, cultures, and mores, and then milk the hits for every penny through tie-ins, spinoffs, innovative uses of technology, and marketing masterstrokes. Many companies in varying industries have managed one of those feats, sometimes two; that Fremantle has so skillfully executed them all makes it a rarity, and an exemplar.

It's not all about Idol, either--though that show's popularity is epic. Fans cast more than 65 million votes for the American Idol finale in May; that's two-thirds as many people as voted in the 2000 U.S. presidential election. In the Czech Republic, more than a third of the nation's 10 million people voted on the Cseko Hleda SuperStar finale. A blizzard of phoned-in votes for Finland's Idol finale crippled part of the country's telecom system.

But Fremantle is taking that same blend of reality, multimedia, and cross-cultural marketing to build out an even grander global product line. How Clean Is Your House?, a program that follows two British women as they attack the filthiest dwellings imaginable, may sound far-fetched, but it's a smash in Britain and will make its U.S. debut on Lifetime this fall. CBS recently snapped up the pilot for Liar, a show developed by Fremantle in which the audience tries to determine which of six contestants is telling the truth. Liar already airs in more than a dozen other countries.

Fremantle has rights to produce Mark Burnett's hit The Apprentice in 11 countries, and it's spreading The Swan, a show where women subject themselves to a plastic surgery makeover in hopes of winning a beauty pageant, around the world. And don't forget the old chestnut, The Price Is Right, one of dozens of game shows the company owns, which has been reliably pumping out profits since 1956. Localized versions have been adapted for 27 countries. In all, Fremantle produces 263 shows airing in 37 countries.

Of course, hits fade, even hits of Idol-like proportions. Alan Boyd, the company's president for worldwide entertainment, says a sensation like Idol comes along at most once a decade. That also explains why Fremantle is trying to keep its machinery for cranking out new Idol versions in far corners of the world running with maximum effectiveness.

How? Rule 1, Boyd says, is heed the bible. The bible, in Fremantle's case, is a set of rules that apply to all aspects of any particular reality show. "We tell them, 'Idol works if you don't deviate,'" says Boyd, a wry Scotsman who's sipping a cappuccino at the Four Seasons in Los Angeles before the recent American Idol finale. "If you deviate and it goes wrong, we will kill you."

Like many great business ideas, Idol began with a dream and a small sheet of scrap paper. Simon Fuller and Simon Cowell--the Simons, as Boyd calls them--marched into Boyd's London office in February 2001 to make the pitch. Fuller, who owns 19 Entertainment and came up with the original concept, was a music manager who had created the Spice Girls. Cowell was a record exec with Bertelsmann Music Group. The two men were looking for ways to create big acts.

Calling on Boyd was a logical choice, and not just because BMG, where Cowell worked, is part of the same corporate family as Fremantle. Fremantle grew out of Pearson, a giant European publisher with titles including the Financial Times. Pearson branched out into television during the '90s, cobbling together an international network of broadcasters and production houses, including Britain's top TV studio and a U.S. company with a huge library of game shows. Pearson ultimately sold the television properties to German media giant Bertelsmann. In October 2001 the TV business was rebranded as FremantleMedia. Parts of what is now Fremantle have been making television shows for decades; Boyd is himself a well-known British TV guru who, among other things, has produced big splashy shows like the U.K. equivalent of the Academy Awards.

Fremantle's library of titles is vast. Besides The Price Is Right, it includes Family Feud (which it adapted for 33 countries) and The Honeymooners (adapted for eight countries). The shows generally look the same as they did in America, but Fremantle casts them with local talent and gives them a distinctly local flavor.

The company also does drama. In Europe and elsewhere, Fremantle produces a range of serialized programs aimed at young audiences that it adapts for different countries; these provide steady cash, and the company is now planning to move these types of shows to the United States.

When Fuller and Cowell came to visit Boyd, he was instantly struck by their passion. The three men hashed out the concept, and Boyd jotted down ideas on a piece of paper he still carries around with him. The dream was to create a talent show that played out like a drama over a series of weeks and culminated with the excitement of a presidential election. "It will be like Gone With the Wind," Boyd wrote, thinking of a fabled moment when entertainment created intense national fervor.

One of the beautiful things about the concept is its Tom Sawyer-like effect on the music end of the business: The customer (a TV network) would pay for the privilege of doing the expensive dirty work--in this case, creating and marketing a pop star. After the idol was anointed, the star (and sometimes the runners-up) would sign a recording contract with BMG. American Idol alum Clay Aiken's 2003 smash debut album, Measure of a Man, has sold 2.6 million copies, generating $40 million in revenue. The debut single of the latest Idol winner, Fantasia Barrino, has gone straight to No. 1 on the Billboard chart. So much for the failure of corporate synergy.

A marked-up piece of paper, of course, isn't enough to shop around to broadcasters. And a basic question remained: "How the hell do you make this work?" Boyd recalls thinking. "How do you audition 100,000 kids? How do you even manage to look at all the film?"

Boyd's team began putting together a pitch sheet, figuring out the logistics, and hunting for a buyer. The BBC turned it down, but another British station, ITV, took it. And as Boyd's team began, they wrote down every detail to create the production guidelines--the bible.

The bible tells production crews, step-by-step, how to replicate the show. During precasting, for example, one camera should follow each contestant. That way, the bible says, there's an opportunity to create "montages based on the fact that a lot of contestants all sang the same song badly, performed strange dance moves, and tried to look like Britney Spears." Later, when contestants are divided into groups of three and given an hour to prepare a song, "the cameras can pick up these rehearsals, as contestants find any available space to practice, including the toilets."

Despite Boyd's declaration that no one messes with the format, Fremantle does allow some slight modifications. For instance, Sunil Kumar, a production manager with the local network that licensed Malaysian Idol, wants to hang batik drapes on the set to create an Asian feel--something Fremantle may very well approve. "If the bible says one thing and they say, 'We want to do something else,' I have to look at it and say, 'Does it affect the overall format?'" says Wood, Fremantle's man on the ground in Malaysia. "Ultimately, you have to allow Asian sensibilities to mold into the brand."

As the show has traveled, producers around the world have made small changes--sometimes as seemingly trivial as using an extra camera at a certain moment or suggesting dialogue for the host. They submit every tweak to headquarters in London, where it's added to the bible and sent out to the team of so-called flying producers. Sharing each experience--good and bad--is Fremantle's way of keeping the program fresh but still consistent.

With the British show in development, Fremantle execs began to plot out how to capitalize on the Idol brand. Simon Spalding, Fremantle's head of licensing, ensured that the company had rights to images of the top contestants. "Then we sat down and said, 'Assuming the show is a success, how might people want to be involved in the program?'" Spalding says. His team sought out partners for tie-ins--karaoke products, apparel, games.

The work on the first production was painstaking but critical to making a show that would translate globally. One key to Idol's success, Boyd says, is that the team built the show thinking only about making great entertainment, and then figured out how to make it into a bigger business. "You must create a successful show built on creative spirit," he says. "First create the quality, then create the brand. That's the only way it will last."

Even so, Idol was a tough sell to the most important market in the world: the United States. ABC wouldn't take meetings. The folks at Fox listened but were reluctant. But then, according to industry execs, Elisabeth Murdoch, a London TV producer and the daughter of News Corp. chairman Rupert Murdoch, told her father about the popularity of the show in Britain, and the top boss asked Fox execs about the status of bringing Idol to the network. Fox bit. Idol first aired in America in June 2002 and swiftly became a smash.

As the show took off, Spalding's team sought out more sponsors and tie-ins. In general, the pitch is to help a company connect with the coveted 18- to 49-year-old demographic. All told, Fremantle's licensing department has sold $50 million worth of products tied to American Idol alone. At this point, Spalding says, companies come to him, though not all succeed. "If there's not some link to the brand or there are too many products, people think you're just trying to make a fast buck and the show loses credibility," he says. Idol fragrances are top sellers at J.C. Penney, an Idol gift set with a lyric-inscribed shower curtain and a microphone-shaped soap-on-a-rope is in the works, and Mattel is launching an Idol Barbie doll. But Fremantle nixed proposals for Idol pasta and an Idol condom.

Also crucial to building the brand--and generating revenue--has been the voting itself. In much of the world, the show was designed to encourage people to vote with text messaging, something that had never caught on in America and was foreign to Fox execs when Fremantle and 19 Entertainment brought the show to them. Incorporating SMS (short message service), as it's called, helped lure a younger audience and let Fremantle peddle other products, such as cell-phone games and downloads of clips from backstage. In many countries, SMS accounts for the bulk of the votes cast.

Outside the United States, SMS is built into the business model in a way that adds revenue when more people vote. Fremantle figured out how to use SMS to create huge amounts of traffic and, hence, cash flow. In some countries, for example, SMS users pay a premium--sometimes as much as 60 cents a vote. That fee is split among the telecom carrier, the broadcaster, and Fremantle.

After the first season of American Idol, Fox also joined the SMS trend. The network saw text messaging as a marketing opportunity, however, and sold the sponsorship to AT&T Wireless for an undisclosed amount. But American broadcasters have not embraced the revenue-sharing model, something people in the industry expect will still happen. And the American Idol setup remains rudimentary in the United States because only AT&T Wireless customers can vote via SMS.

Still, Idol and the AT&T Wireless deal have kick-started the overall acceptance of text messaging in America, according to research firm Yankee Group. The number of text messages sent during the past American Idol season almost doubled from the 2003 season, to 13.5 million, and AT&T Wireless says 40 percent of all customers who voted by text message had never used SMS before.

Regardless of how people vote, letting the public dictate the outcome is a critical element of the show's formula. It has stirred the kind of passion Boyd was after from the beginning--on occasion, a little too much passion. Last August, the semifinals of Pan-Arabic SuperStar ("idol" has troubling connotations in Muslim countries) took place in a Beirut theater. Competitors hailed from 15 countries--Iraq, Jordan, Libya, Saudi Arabia, and Syria, among others. Fremantle flying producer Sheldon Bailey says the shows generally have a feel-good atmosphere because the sometimes-feuding populations are brought together by their youths' shared love of performing native songs.

Not this time. The three semifinalists were a girl from Syria, a girl from Jordan, and a boy from Lebanon. The Lebanese audience was telling the boy that he was a lock. But then the votes came in, and he was drummed out of the competition. The boy was stunned. The theater fell silent. Suddenly, a wave of people jumped out of their seats and rushed the stage. The girls scurried away, and burly security guards tried to hold people back. Somebody cut the broadcast signal. "Everything went to black," Bailey remembers. "No one quite knew what to do."

Too bad. That would have made priceless reality TV.

Even with that snag, Pan-Arabic SuperStar remains a huge hit (crime drops when the show airs). But what happens if the Idol franchise falls? It's largely Daisy Goodwin's responsibility to create new shows that, if not Idol-like monsters, will be hot enough to keep Fremantle's run going if Idol loses steam.

Goodwin heads program development for Fremantle's U.K. production arm. Throughout Fremantle, the story of how she came up with its latest winner, How Clean Is Your House?, goes like this: She walked into Channel 4 in London to pitch programs, wiped her hand across an executive's desk, held up her suddenly filthy fingers, and said, "How clean is your house?"

The reality, alas, wasn't quite so colorful. Goodwin had been thinking about her generation of career-minded people who just don't know how to clean. When she was meeting with the Channel 4 exec, a man she knew to keep a spotless house, she brought up the subject and asked, "How clean is your house?" Sold.

The show follows two women, Kim and Aggie, and is part comedy, part how-to. The day after the women demonstrated that white vinegar could fight lime scale--the residue that builds up around bathroom faucets--supermarkets reported a run on the stuff. Fremantle is now feeding How Clean Is Your House? into its hit-replicating machine. It's working on local versions in six countries. In the United States, the show will feature the original British stars. Their first targets: American frat houses. The show will get the full Fremantle treatment. The company is in talks with potential sponsors and marketing partners; in Britain, Unilever's cleaning products unit has been a major sponsor.

Until four or five years ago, CEO Cohen says, most countries wouldn't take programs created abroad. "Everyone was very skeptical they would work in their country," he says. That started to change with the success of Who Wants to Be a Millionaire?, made by a rival U.K. production company. The Idol phenomenon sealed the deal. "Broadcasters have seen megashows scream across the world," Cohen says. "Now they're absolutely keen to know what's hot in the U.K., what's hot in Australia." To capitalize on that, Fremantle's North America division recently set up a development office in Los Angeles to churn out new shows.

The question Cohen is asked most often is how long Idol can go on. He maintains that if his people can keep the show true to its original dream, there's no reason it won't have the success of any long-running show. After all, there are still plenty of territories to crack, including Latin America and Japan. But the show could be tripped up, some Fremantle producers concede, if it fails to produce lasting pop stars and thus loses part of its purpose.

For now, Idol shows no sign of weakening. The third of 31 episodes recently aired in Malaysia--and captured 58 percent of the TV audience. Viewers have been riveted by such moments as those created by contestant 17,104, a lanky 17-year-old with oversize glasses who made it to the top 50. The music began, and 17,104 shuffled back and forth and belted out those familiar lyrics: "You're just too good to be true, can't take my eyes off of you ..."

The judges tried to refrain from laughing. They told him to stop. "You do know you're singing completely out of key?" one judge asked.

"Yes," the boy replied, smiling.

They gave him another chance. Ouch. Then the judges sang with him to help him find the melody. Finally, Roslan Aziz buried his shaved head in his hands and blurted at the smiling boy, "You can sing only by yourself. You cannot sing with accompaniment because you are totally tone-deaf." Painful? Yes. But also great TV, in any language.

Paul Sloan (psloan@business2.com) is a senior writer for Business 2.0.