Off-Net Strategies Are Tested
With fewer hits available, some nets will be paying top dollar
By Allison Romano -- Broadcasting & Cable, 10/12/2003 8:00:00 PM
At first blush, the CBS Thursday-night drama Without a Trace doesn't look like one of the hottest properties on broadcast television. Ratings and buzz are good, but the sophomore series is not yet a blockbuster on the order of CSI or Law & Order. Yet cable channels are salivating over the Jerry Bruckheimer-produced drama, which boasts two coveted syndication features: self-contained episodes and an investigative format. Few other shows follow that formula—and most of those that do start with the words Law & Order.
So industry executives expect Warner Bros.'Without a Trace to sell fast and possibly command more than $1 million per episode. Some of cable's biggest customers for off-net shows, including TNT and Lifetime, are said to be in the hunt.
The much talked-about pressure on the broadcast networks to find hits is pinching cable networks as well. Off-nets help drive cable ratings and give channels a platform for promoting their originals. "You need something with a certain amount of tonnage to anchor your prime time schedule," explains USA Network General Manager Michelle Ganeless.
These days, though, there are few sure bets on acquisition. "Off-network programs may very well boost [a channel's] performance like a Law & Order, but there just aren't that many examples," notes media buyer Aaron Cohen, of ad firm Horizon Media.
A batch of popular broadcast dramas are being readied for syndication, but each could have drawbacks for cable. Fox's 24, for example, is highly serialized. The WB's Smallville may be too youthful for many nets. ABC's Alias has a good buzz but so-so ratings in a tough Sunday-night time slot. A few new shows—many cable executives are eyeing Cold Case—look promising, but it is early.
This season's biggest off-net debut is Law & Order: Special Victims Unit on USA Network. (USA also repurposes the show shortly after it plays on NBC.) On USA, SVU is earning close to a 2.0 rating, giving the net a nice ratings jolt. The addition was long overdue: USA hasn't added a new off-net since JAG in 1997.
"We needed an infusion of new blood," said USA President Doug Herzog, "We've been doing it with one arm behind our back for a long time now."
USA also repurposes Law & Order: Criminal Intent, which will be ready for syndication after this season. With NBC acquiring Vivendi Universal Entertainment—which owns the cable net and the studio—USA seems a sure bet to land strip rights to the show, much to the consternation of executives from other channels.
"It is a shame that CI will never reach the market," said one network executive. "It could be a recording-setting franchise but will end up on USA, [which will pay] less than it did for SVU [$1.3 million per episode]."
And yet, despite the shortage of sought-after shows, pricing remains high; something is better than nothing. "Even marginal shows are getting decent prices," notes Lifetime General Manager Lynn Picard. A first-run drama can fetch from $500,000 per episode to more than $1 million (The record is CSI's acquisition in 2001 for $1.6 million per episode by Spike TV's previous incarnation, TNN.)
The market for off-net sitcoms is even tougher. There are no break-out hits like Everybody Loves Raymond or Friends. And cable networks have to wait three years to start running their comedies since series usually run exclusively in station syndication for three years. Will & Grace, for example, arrives on Lifetime in 2005. (As a result of that lag time, though, cable nets typically pay a lower price than station groups.)
Of course, cable executives still need programming to feed their 24/7 beasts. So, increasingly, they are getting creative with what they buy and how they make deals.
For example, TBS Superstation two weeks ago plunked down a hefty $700,000 an episode for HBO's Sex and the City. But the deal gives TBS exclusivity for 15 months until Tribune Broadcasting's syndication deal kicks in September 2005, reversing the usual course.
In some instances, one network will take the prime time play of a show, say; another, non-prime or daytime. Hallmark Channel and USA Network recently split a new deal for JAG with USA. TV Land and Oxygen share Roseanne.
TNT, a heavy consumer of off-nets, particularly likes this strategy. It has teamed with Sci Fi Channel to buy The X-Files and with Court TV on NYPD Blue. TNT Executive Vice President and COO Steve Koonin would be willing to sell another network the prime time rights for Judging Amy, which TNT plays in the afternoon. "Exclusivity is not always better," he explains. "We can take a show at a moderate price and split it, and we are both winning."
To lock up the backend, some networks are willing to buy before hot shows even accumulate enough episodes for syndication, typically 88 shows. And they will pay big for it. Spike TV airs CSI weekly to above-average ratings, but the real payday comes when it starts stripping the CBS show next fall. A&E, desperate for a big off-net series since losing Law & Order to TNT, has to wait until 2004 to get CSI: Miami weekly for a modest license fee and until 2006 for the strip, when the fee will rise to about $1 million per episode.
Studio executives are open to these creative dealings. Price is always the main driver, of course, but a net's demographics and scheduling plans factor in.
Says Steve Rosenberg, president of Universal Domestic Television, "You don't want to just sell it, take the money and run. You want it to build asset value. Maybe you'll sell a third or fourth cycle." For example, he points out, Universal is still selling Murder, She Wrote, which wrapped in 1996.
To make some deals, Warner Bros. Domestic Television President Eric Frankel will look at "creative windowing, barter inclusion and something you may start hearing more about: sponsorships." With barter inclusion, the syndicator gets ad time in the show as part of the deal.
Big nets like Turner, USA and FX dominate off-net buying. Smaller channels like WE: Women's Entertainment, Oxygen and the Hallmark Channel—all in about 50 million homes and not part of big media companies—are hungry to buy product but short on the necessary resources; the first cable run has been out of their reach.
"They are going to want to play with the established leaders," says Bob Cesa, executive vice president of basic cable sales for Twentieth Television. "The only way is to buy top-rated off-nets and produce first-run shows."
Oxygen, for instance, was in the hunt for Sex and the City but had to bow out when bidding got too high.
These nets are hamstrung, in part, by their smaller size. They get less in the way of ad revenue and subscriber fees from operators, and, particularly in deals that include barter ad time, that makes them less desirable to syndicators.
"We go as aggressively as we can on our economic model," says Oxygen programming chief Debby Beece.
Even so, she says her net keeps shopping. "If you want to be a successful network, you have to get the product that people want to see. There is only one path; you have to get in."
Not every middling network is clamoring for off-nets, though. When NBC acquired Bravo last December, the cable net had already acquired The West Wing for $1.2 million per episode, a lofty price for a very current and serialized drama. Bravo started airing the show in August, and, by Bravo's standards, the ratings are a healthy improvement.
Invest in originals
But network chief Jeff Gaspin isn't shopping for more. "You can certainly get higher ratings [with off-nets], but I am not sure the economics make sense, that the margins are there."
Instead, Gaspin would rather invest in originals: "It is so much easier to build a brand and to stand out with originals."
Several of those brand-building originals may create a new avenue for syndication: selling from cable to cable. USA's Monk, FX's The Shield and Lifetime's Sunday-night dramas are all definite possibilities to be sold into repeats, once they accumulate enough episodes.
Indeed, Sony Pictures Television is shopping Lifetime's Strong Medicine for syndication. Another Lifetime drama, The Division, will have enough episodes after this season. These shows would likely be sold to stations for weekend plays and could also go to another cable net, such as WE or Oxygen. (Lifetime actually has first look and could end up stripping its own show).
HBO could be another key supplier. Since HBO reaches about 35 million homes, a wide swath of viewers haven't seen its product. Several adult-oriented cable networks regularly talk to the pay-TV net about its products. HBO and Warner Bros. Domestic Television recently sold Sex and the City, and someday The Sopranos could find its way to syndication, although, with the mob drama confirmed to air through 2005, it is doubtful to go on the market any time soon. HBO has been reluctant to sell before it knows when its shows are ending.
On basic cable, the problem is delivery. Even cable's hottest shows draw audiences that are at least half the size of a so-so broadcast drama. And that could make them a harder sell.
Universal Television's Rosenberg maintains that cable shows need more exposure if they are to fetch more money. To drive awareness, he suggests that networks consider dual-platforming a show—think NBC and Bravo with Queer Eye for the Straight Guy or ABC's rerunning the first season of Monk in summer 2002—and scheduling multiple runs, as HBO does.
The hope is, he explains, "when it is eventually sold into the second cycle, you'll have a larger audience base to follow it into syndication."
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