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Quit Crying, Friends

When NBC's costly sitcoms go off, its profits will go up 1/18/2004 07:00:00 PM Eastern

At the critics press tour in Los Angeles last week, Jennifer Aniston cried about the end of Friends, and Jane Leeves got all teary-eyed about the last episodes of Frasier. But there's no need to cry for NBC, at least not yet.

The departure of the two shows frees up nearly $300 million in annual license fees. You can buy a lot of TV with that. Some of that money will go to the bottom line because, well, that's just the GE way. But a lot of it will go to finding the next new thing in prime time.

Don't feel too bad for the producers either. Warner Bros. has made a bundle on Friends. Sources estimate the show raked in $4.3 million an episode in license fees and barter advertising for its first off-network syndication cycle, which started in the fall of 1998 and extends to June 2006. That's a little over $1 billion for the 236 episodes of the show.

And the second cycle is already completely sold, at prices estimated to be in line with or a little better than cycle one. Combine that with another nearly $1 billion in network license fees over 10 years and other income from international sales and home video, and Warner Bros. has a $3 billion-plus franchise in Friends.

Paramount didn't get as rich off Frasier, but it did okay. Sources estimate its revenue take to date at about $2 billion, maybe a little more, or roughly two-thirds the dough that Friends
has raked in.

The departure of the two sitcoms has everyone wondering what NBC will pull out of its sleeve to replace the anchors of two of NBC's most important nights. But, from a bottom-line perspective, losing the shows is a huge financial bonus.

They're expensive: Friends
costs $10 million per episode this year, up from $7.5 million the prior year. Frasier
costs $5.2 million per half-hour, its three-year deal costing NBC $345 million.

Even with that price tag, Friends
remains profitable, sources say, with the show bringing in $15 million to $20 million this year. But this last season of only 18 episodes (four short of a series' typical 22) cost NBC $180 million, a payout that even TV's most profitable network wasn't willing to repeat.

While NBC was happy to have Friends
back, without the two-hour finale, scheduled for Thursday, May 6, the network would have lost money on the show this year. Advertisements for the event are already selling like hotcakes: 30-second spots in a one-hour retrospective are selling for $1.25 million each, 30-second spots in the finale for $2 million each (see related story, page 1).

Frasier, on the other hand, has been in ratings decline for the past two years. This year, the show will lose $50 million for the network, sources say. Like Friends, it will close with a one-hour retrospective followed by a one-hour series finale scheduled for Thursday, May 13.

Executive producers of both shows say they are trying to write final shows that feel like just another episode while sending the show's characters off in a way that will make the audience feel comfortable.

Either way, both events guarantee NBC huge audiences, a strong May sweeps and a solid close to the season.

They also allow NBC to start next season with a fairly clean slate. You'd think NBC programming executives would be bummed in Burbank. But they say they relish the opportunity.

"It does create opportunities," says Kevin Reilly, NBC president of programming, who gets the tough job of finding replacements for the shows. "There's almost this psychological effect with some of these monolithic hits that we've had: Their departure lets the creative juices flow again. Part of the history of NBC is that, when a crop of hits with great cultural impact and ratings success winds down, a new crop arrives. You almost have to clear those shows off before the next ones can come in."

Maybe you can't buy a hit. But, with the kind of money that the departure of Friends
and Frasier
frees up, a programmer certainly has the wherewithal to reach high to maintain NBC's potent Thursday night and shore up an otherwise weak Tuesday night.

Although NBC has other prime time strongholds—Monday night and any 10 p.m. hour in which Law & Order
or one of its spinoffs airs—Thursday night is the network's most profitable. The Today
show is actually the most profitable show on NBC, raking in $250 million annually, and The Tonight Show With Jay Leno
rounds out NBC's top-three profit centers. NBC also expects to make a killing on the Summer Olympics in Athens, airing Aug. 13-29, for which ad sales are already pacing higher than any Olympics on NBC so far, says Jeff Zucker, president of NBC Entertainment, News and Cable.

NBC's major problem is the threat to the fat premiums commanded by its entire Thursday slate. Morgan Stanley media analyst Richard Bilotti says NBC collects, on average, about 17% more per Thursday-night spot than the same ratings would generate on another night. Out of the $21 million or so in sales for the night, that's a $3.5 million weekly bonus.

NBC has been paying Warner Bros. for Friends, but most likely, NBC will own the replacement outright and be able to control costs. "If they do a good job and put a decent show in that becomes a modest hit" says Bilotti, "they can get $125,000 a spot."

To some extent, though, the network's overall financial stability takes the pressure off NBC development executives to find a new Thursday 8 p.m. ET hit immediately. Although the departure of Friends
feels like the dismantling of NBC's Thursday-night dynasty, the rest of the strong Thursday remains intact. Will & Grace
will continue at 9 p.m. Scrubs, moved to 9:30 p.m. after Coupling
failed, is maintaining 85% of the Will & Grace
lead-in against CBS's most-watched show on television, CSI. And ER
at 10 p.m. usually finishes the week at the very top of the 18-49 chart.

The question NBC faces is whether the rest of its Thursday-night lineup can hold up without Friends. CBS has been coming on strong on Thursday for the past two seasons and this season has beat NBC on its powerhouse night in the key adult 18-49 demographic for the first time in more than 10 years.

On Feb. 1, after the Super Bowl, CBS will launch Survivor All-Stars
and then move it to 8 p.m. ET on Thursdays. Because NBC has only 18 new episodes to air this year, with two counting towards the finale, the network is airing six episodes that Friends
fans choose as their favorites for the final six weeks prior to the finale. That will give CBS a good opportunity to take a chunk out of NBC's season-to-date 18-49 ratings, while Fox chips away on Tuesday and Wednesday nights with the return of American Idol
.

But maybe facing Thursday night without Friends
is good practice for NBC. Although the network has some high-profile projects in development, particularly Friends
spinoff Joey, so far, executives have no idea what's going to fill Friends' time slot. NBC typically has much better luck developing for 10 p.m., when the high-income, urban viewers NBC attracts tend to be home.

Additional reporting by Steve McClellan and John M. Higgins

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