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Is Network TV’s Model Lost? - Broadcasting & Cable

Is Network TV’s Model Lost?

Network television has some new hits, but costs keep rising and the financial model is still buckling. Studio heads say it’s the price of doing business, but how long can that last?
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The broadcast networks are embroiled in another expensive
and inefficient pilot season at a time when they can ill afford
it. Their share of ad revenue and ratings continues to fracture;
real profit from online streaming (on their own sites and
Hulu) has yet to materialize; the foreign market has softened; and DVD sales have plummeted.

They are also playing hardball for retransmission
dollars from cable and satellite providers as
they continue to endure proselytizing sermons
about cable’s greener pastures—dual revenue
streams, thinner episode orders and lower ratings
expectations. And media CEOs even talk
publicly about selling their broadcast businesses.
Disney-ABC chief Bob Iger admitted recently
that “there are no guarantees” about whether
Disney will keep ABC.

Even in a post-Jay Leno-to-primetime world,
there has been no shortage of lip service about
recalibrating the economics of the network television
business. And to be sure, the studios have
felt the hot knife of financial streamlining. But
while brutal layoffs have jettisoned worker-bee
staffers, top talent is still commanding premium
rates. For instance, Dick Wolf takes a $350,000
producer fee on each episode of Law & Order.

The network-studio relationship still comes
down to supply and demand. And the paradox
is that while the broadcast networks are strapped
for cash—a direct result of a fragmented marketplace—
executives believe that is exactly why
they need to keep spending to generate hits.

“As much as we all like to talk about managing
costs,” says one studio head, “costs will
continue to escalate because the consumer will
continue to demand a higher-quality visual experience
in a world of dispersed audiences.”

And that, aided by a healthy dose of inertia, is
how a broken model perseveres. So, for all the
talk of year-round development and reinventing
the business, things often end up looking the
same. And in 2010-11, the process is looking
like business as usual.

Trimming Where They Can
Audience erosion at the broadcast networks continues.
But while the networks’ share of the viewing
audience keeps shrinking,
the cost of making that programming
keeps inching up.
This doesn’t mean, however,
that executives aren’t trying
to rein in expenditures when
they can.

The downward pressure,
according to David Stapf,
president of CBS Television
Studios, “reminds us to maximize
production efficiencies,
which is a good thing. You
should constantly be looking
at your business, whether
you’re making refrigerators
or TV shows.”

Studios are wringing out
savings on a micro level.
They’ve mostly converted
from film to video, which
amounts to a savings of about $20,000 and
$30,000 per episode for comedies and dramas.

Productions are also using documentary-style
methods including hand-held cameras, which
negate the need for expensive and time-consuming
steady-cams, dollies and lighting. That,
in turn, makes for shorter days on the set.

Other cost-saving tactics include the use of
multipurpose sets; importing formats (fall contenders
The Quinn-Tuplets
, from CBS, and ABC’s
Generation Y are adaptations of series from Israel
and Sweden); and taking production out of Los
Angeles to the greener tax-credit pastures of Louisiana,
Michigan and New Mexico.
Studios are also cutting back on over-scale items
such as pre-payment of residuals and luxury
trailers for stars (the latter can save millions).

Studios are working as
well to secure international
co-financing to push costs
down. Fox Television Studios
has made this its business
model. The studio has
three shows bowing this
summer—NBC’s Persons
Unknown
, The Good Guys on
Fox and ABC’s The Gates.

“It’s not like we’re trying to
make shows for the cost of
your local high school play,”
says David Madden, executive
VP at Fox Television
Studios. “We’re trying to
make shows that will work
for broadcast networks on
cable budgets.”

ABC’s summer series
Rookie Blue, a co-production with Toronto-based Canwest and E1 Television,
skipped the expensive pilot process and went
straight to series. Scoundrels, an adaptation of a
New Zealand series from ABC Studios, needed
only a script adaptation. And because Scoundrels
went straight to eight episodes, ABC Studios has
something to take to the foreign market regardless
of how the show performs on ABC. You can’t
do that with a busted pilot.

And while this model for now is largely relegated
to summer replacement series, it allows
networks to keep spending big on big-budget fall
pilots while not closing up shop in the summer.

But there is evidence that the broadcast networks
are largely playing it safe this pilot season
while taking tentative steps at bulking up after
the anemic pilot tallies in the two years following
the WGA strike. An examination of series in
development reveals an emphasis on traditional
fare that has great back-end potential (crime
procedurals and multi-camera comedies, which
are cheaper than single-camera comedies). NBC
has the Rashomon-esque The Event, in which an
assassination attempt on the president is told
from multiple points of view, but in general fall
contenders are light on the kind of expensive,
high-concept shows that are ending (Lost, 24) or
failed to catch fire this season (FlashForward).

That the success of ABC’s Modern Family has
not spurred a rash of single-camera comedy imitators
in development this season is perhaps a
sign of the belt-tightening times. The success of
freshman procedurals The Good Wife and NCIS:
Los Angeles
(which sold in syndication for north
of $2 million per episode), combined with the
fact that several veteran crime dramas are showing
signs of age (the CSI and Law & Order franchises),
has likely juiced the networks’ already
hearty appetite for procedurals.

But making a hit series is capricious. Playing it
safe may mean never having to say you’re sorry
(to critics, viewers and network CEOs), but it
also drags down your odds of hitting paydirt.

“A ratings success on NBC trumps everything,”
says Marc Graboff, chairman of NBC
Entertainment and Universal Media Studios.
“That’s why we ultimately greenlit Parenthood.
That’s why we ultimately greenlit 30 Rock and
The Office. Yes, on paper, looking prospectively,
if they’re not hits, they’re not going to make big
back-end. But our primary focus right now is
turning the network around. So, for us, the ratings
potential for NBC is the number-one factor.
And then you hope that you have enough success
to generate an aftermarket.”

The pilot process is notoriously inefficient.
If a first-year drama costs $2.7 to $3 million
per episode, the pilot can run $7 million or
more. And if there is A-list talent attached or
complicated special effects, the cost escalates.
J.J. Abrams is directing the Warner Bros. pilot
Undercovers for NBC. The last time he directed
a pilot (ABC’s Lost in 2004), it cost $10 million.
Sources say Undercovers has a similar price tag.

Comedy pilots are cheaper, but at about
$3 million for a half-hour, they’re still not exactly
a bargain. ABC has 23 scripted series in
development this fall, CBS has 21 and NBC has
20. Fox, which along with The CW has two
hours a night of primetime to fill, has 19 scripted
pilots in development, including a handful
of sketch and animated comedies. The CW has
six scripted series in development, including a
remake of La Femme Nikita, which has already
been on the big screen twice (in France and the
U.S.) and the little screen once (on USA).

“People are still going to watch great television
shows,” says Barry Jossen, executive VP of studio
creative and production for ABC Entertainment
Group. “But we’re not going to be able to continue
making them at the same price point.”

Pilots, however, aren’t the only aged format
sticking around, as networks often still try to
hold onto that established franchise for just one
more year. For instance, NBC is still trying to
make the math work on what would be a record-
breaking 21st season of Law & Order without
a back-end commitment from TNT, which
pays $1 million an episode for rights to the show
in a deal that extends for several more years.

Spend Your Way to Success
Hollywood has always existed in a bubble
of gold dust divorced from the reality of the
wider world. And while efficiencies have been
achieved, the underlying model still tilts toward
excess. In an interview earlier this year, veteran
producer Thomas Schlamme admitted that the
hammer has not come down in the form of
“enormous financial restrictions.”

“But the need for success is greater, and the
patience to let something nourish or grow or
change and be something different is harder,”
added Schlamme, who is working on
the Matthew Perry comedy Mr. Sunshine for
ABC at Sony Pictures Television. “And it’s not
harder because the networks are
desperate, but because they have
to answer to a financial situation in
their corporations.”

But the bottom line about the bottom
line is simple: When in doubt,
network television will still try to
spend its way out of any slump.

“We all still do very well,”
Schlamme said. “These shows certainly
aren’t on a shoestring budget.
They’re very expensive shows, and
somebody has to pay for that.”

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