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Putting on the hits - Broadcasting & Cable

Putting on the hits

Cable networks look to attract niche audiences with originals that make a difference
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Over the years, the promise of cable television for viewers has been the ability to watch content more specifically geared to a person's interests. And the promise to advertisers is that those programs will allow for more-targeted advertising opportunities.

But the reality facing cable networks is that they have had a constant tug between offering original programming that plays to a smaller audience and offering reruns of broadcast programming that can more easily attract a larger audience.

A perfect example of this was demonstrated at the USA Network's recent upfront, which offered a dizzying array of original programs and movies meant to fill the hole created when the WWF franchise eloped to Viacom.

What was the first thing that USA Cable President Stephen Chao mentioned when he took the microphone to drum up business? Bravo's buying the off-network syndication rights to The West Wing. "That was enormous," he said.

With all the money being lavished on original programming by USA and every other cable network, the biggest scores are still in garnering known audiences for repeats of existing shows from the Big Three networks. It's hard to imagine why anyone would bother creating new shows when a smaller investment and lower risk can earn numbers just as big (or bigger) with reruns or broadcast premieres of major movies.

But, this week, the networks attack the summer with a new slate of originals. HBO will kick off another season of Sex in the City, MTV offers up some new programs, and, in fact, every major cable network seems ready to make a big play with originals this summer.

So there must be something in original programming for the cable networks, but exactly what that is is hard to define. Ratings, reputation, critical attention, awards, foreign sales, video deals and a library of repeats are some of the pluses. But what it comes down to, increasingly, is that original programming helps a cable network stand out from the enormous pack.

"You know NYPD Blue has a built-in audience, so, if you show reruns, you'll get an audience," says Michael Goodman, an analyst at the Yankee Group. "But there's a cap on that. If you want to grow your audience, it's all about compelling content. And if you're competing against USA and TNT, they're spending a fair chunk of change, and you've got to, too. The more money you lavish on something, the better it's going to look, and you can produce a fair amount. That stuff is important. But original programming carries with it a bigger risk."

There is the chance, also, that one of these originals can turn into a hit that encompasses every possible definition of success: a phenomenon big enough to carry the network, cement a reputation and give a healthy lead-in to experiment with other programs. Everyone is after the next South Park,
The Sopranos or Biography.

"One can do it for you," says new USA President Doug Herzog, who was at MTV when The Real World launched and at Comedy Central for South Park. "Two would be better; three would be nirvana."

His challenge in his new job is that USA has none. The series it launched last year, which included Manhattan, AZ and Cover Me, didn't go anywhere. Learning a lesson, Herzog has steered his new slate away from sitcoms or wry humor in favor of hard-core action like Mark Burnett's Eco-Challenge, John Woo's Red Skies and a martial-arts thriller called Kung Pow.

He has an idea of what will spell success for these programs. The two things that matter, he says, are "creating an identifiable brand" and "having that one hit program." Except he knows it's nearly impossible to define these things given that USA's brand is that amorphous "general entertainment" and the shifting ratings and economic landscapes make a "hit" harder and harder to define.

For some, this formula of success is rather simple. UBS Warburg media analyst Chris Dixon says it's an age-old financial dictum: "If it brings in more money than it costs to make, then it's a success." It doesn't matter what the margins are or if there are existential values involved. What matters, simply, is if a program beats the cost ratio, and that means it gets ratings big enough to bring in the advertising dollars to cover the budget.

The big difference Dixon sees between the broadcast and the cable worlds in this scenario is that cable actually has two sources of revenue—advertising and subscriber payments from cable operators—while broadcasters have only advertising. But the advantage that the big networks have is that, when they start a new season, they throw out a whole bunch of stuff to see what sticks. The cable networks have only a shot or two per season for a series and up to a dozen slots a year for original movies. They can't just manufacture in bulk and wait for hits, especially if they aren't growing their audience in the meantime.

So cable networks just take their best shot. And the result is often that they spend more money on this original programming than they could ever hope to make back in one shot from advertising revenue. Sometimes the difference is made up from foreign sales and repeats, but often the network eats the loss. Why would an industry operate like this? It's mostly because a network's own definition of success includes more than just immediate financial return.

"Our secret weapon is the brand," says Lifetime's Senior Vice President of Research Tim Brooks. "The broadcast networks don't have a brand; they have to attract viewers to a show, not a network. We have to attract viewers to Lifetime." And in doing so, the only way he really has to measure success is if a show furthers the development of the brand by fulfilling the definition of "television for women." Sounds easy, but it took Lifetime a couple years to figure it out.

"Prior to 1998, Lifetime hadn't had a hit original series. Some of them had done OK, but none had broken through," Brooks adds. "Any Day Now was the first one; it got some traction."

Launched the same season as two sitcoms, Maggie and Oh Baby!, Any Day Now's good press and steady ratings helped it avert cancellation. Now it's the tent pole for Sunday evening, where Lifetime is trying out two other hour-long series, Strong Medicine
and The Division, which have both maintained decent audiences even if they haven't had much cultural impact. "The Division is not a title that grabs you, and the cast is not the Second Coming," Brooks says. "But what drove so many women to check out that show? It was that Lifetime has a new series."

Over at the Food Network, almost every hour that's on the network counts as original programming. Next year will require 950 hours of new shows. The ratings however, are still low and inconsistent, and so, says President Judy Girard, the bottom line is the only way to evaluate its shows. "Over the long haul, ratings can never be ignored, but they're not that stable. You have to do specials by gut. The other measure is our Web site, and that's new. We get 2.4 million unique visitors a month, and they're very loyal viewers. They tell us what's successful and why and why not. It's a great tool."

As for Dixon's algorithm, she wholeheartedly disagrees. The Food Network often loses money, she says, such as when it takes its top chefs to Cannes or touring across Canada. "I've only ever been measured by whether the overall channel itself makes money. What's important is anything that helps us create a destination brand."

Showtime's new executive vice president of original programming, Gary Levine, doesn't think much about ratings either. He's new, of course, and so he hasn't been steeped in the numbers, but he also works for a pay-cable channel where ratings matter less, if only because it's hard to tell their immediate effect on the bottom line. There are too many other factors, not the least of which is digital cable's bringing in millions of new subscribers on package deals.

"Not having that next-morning-ratings desperation allows us to take lots of chances," Levine says. "We'll check the numbers, but we may already have a success on our hands if it attracted talent or if it provoked a controversy, if it got glowing reviews or looked like it's being hailed as an incredible achievement."

Levine's primary example of success is last year's original movie Dirty Pictures, about the museum curator who started a furor with the NEA over a Robert Mapplethorpe exhibit. "We won the Golden Globe for that last year," Levine says. "It's not blockbuster material. It's about a guy got caught up in this maelstrom. It's a perfect example of what Showtime can do in its filmmaking." Does he know what kind of ratings it got? No. He says, "This would be a raging success even if just you and I watched it."

When Bravo Executive Vice President Ed Carroll talks about his channel's artistic achievement, he sometimes sounds like he's talking about a community arts foundation instead of a for-profit business. He says his network puts more money than it could hope to get returned to film Broadway plays, dance performances, concerts and other events that fit in with Bravo's mandate to cover the arts world. The way it pays off is in cultural impact. "Inside the Actors Studio, in its seventh season now, continues to gain awareness every year," he says.

Figuring out what ratings mean in the cable world depends on which network you're talking about. Niche programmer Food Network is happy with a 0.7 or 0.8 in prime time and really happy when something like an Iron Chef special can earn a 2.0 rating. On TNT and USA, both general entertainment networks, the stakes are higher, and executives aren't satisfied unless ratings are above 3.0 in prime time and sometimes even higher for the movies and special events.

"We look at our competition in basic cable, at our own parameters of what we want," says TNT President of Original Programming Bob DeBitteto. "If you're just looking at ratings and what constitutes a ratings success, even broadcast has changed in last couple of years."

FX Network was sweating out just this sort of reasoning this spring, when the ratings were due for its third original movie, A Glimpse of Hell, which premiered in March. More than just being a test of how the network was doing in its quest to take on the big cable guns of TNT and USA, it was the first major project for Kevin Reilly, who came over from Brillstein Grey in August to head the original-programming effort. Could a $100 million budget and a little elbow grease really make FX a player? Could Reilly pull off a win opposite NCAA basketball and a first-run episode of The Sopranos? It depended on the rating.

The movie turned out better than OK. The 3.3 household rating, or about 2.7 million viewers, made it the most- watched program in FX history. While it doesn't approach the numbers bigger cable nets get for their best original programming (TNT's showcase Nuremburg got a 5.6 household rating last July and was the best-rated original in 2000), it shows significant growth.

"A 3.3 rating—that's great," says Michael Goodman, an analyst at the Yankee Group. "Clearly, it validates the idea of doing original programming."

The next stop for a network like FX is to take its success with an original that had repeats of NYPD Blue pumping up the audience and create more original programming. Repeats can bring in a steady audience. Then you keep putting on originals until something clicks; then you put on more originals, get better repeats, bigger movies and put on more series. In the meantime, cable and broadcast TV get closer and closer.

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