By the time The WB and UPN gave way to The CW last September, Time Warner's The WB had been labeled an outright failure.
The operation racked up a staggering deficit north of $800 million, with only a handful of profitable quarters, throughout its rocky 11-year history. Even so, it was the more successful of the two networks launched around the same time: CBS Corp.'s perennially unprofitable UPN approached what industry executives suggest was an eye-popping $1.4 billion in losses during the period.
By merging the assets and sharing costs equally in a 50-50 venture, including joint ownership of expensive programming from their studios, the two media giants promised to create a smarter business model that would make the new CW network instantly profitable.
But after six months, both profitability and strong ratings have been elusive for the fledgling broadcast network, which—unlike ABC, CBS, Fox and NBC—owns no stations in the nation's largest markets. As a startup, it has received a lower cost per point from advertisers in many instances, despite its lucrative adults 18-34 core audience. And it shelled out more than $40 million for a massive “Free To Be” CW branding campaign at launch last September. Some insiders say the marketing dollars could have been better-targeted at a time when younger viewers are more dedicated to individual shows than to entire networks.
While CW executives express optimism about the network's long-term prospects, an opinion shared by key affiliates, their attention is focused on containing programming costs like never before. The most obvious solution: Stick with what's working and add more low-cost reality shows to the mix. “Our No. 1 goal,” says CW Entertainment President Dawn Ostroff, “is to have shows that are hits, and any branding we do is a bonus.”
The CW has devoted about a third of its 17 fall pilots to reality. Exploiting the trend further, it plans a scripted comedy set behind the scenes of a reality series. Titled Dash 4 Cash, it comes from producers Kelsey Grammer and Steve Stark, with Betty Thomas directing.
Reality has been the network's biggest bright spot so far: UPN import America's Next Top Model and WB legacy Beauty and the Geek are the only programs to crack a 3 rating this season among adults 18-34. Midseason addition Pussycat Dolls Present: The Search for the Next Doll has also been hot, and wrestling fans are returning to a resurgent Friday Night Smackdown.
But the tactic of having more reality shows would be a departure from The WB's strategy, which relied mostly on scripted programming to bring about long-term profits for its sibling TV studio through DVD and domestic and international syndication sales. The WB had kept reality shows like Geek to a minimum, since their rerun value on cable is not as great as dramas and comedies.
WB had allowed its sibling Warner Bros. TV studio to amass enough episodes of Gilmore Girls and Smallville to collect $80 million in annual sales during the network's final few years—more than enough to offset $30 million-$35 million in yearly losses.
CBS and Warner Bros. are still planning to make a hefty investment in scripted programming this year, splitting the expense for eight of The CW's 11 drama and sitcom pilots.
It costs nearly the same to produce shows for The CW as for bigger networks, despite its narrower demo and lower ratings. Conventional sitcom pilots can approach $2 million, single-camera comedies run higher, and dramas average upwards of $3 million. First-year reality shows come much cheaper, often in the low six figures.
CBS, which runs the creative side of the network and owns 11 CW affiliates, stands to benefit more financially from an infusion of reality than Time Warner, which oversees network business affairs and distribution. Its stations will be able to collect higher ad revenues if the reality format remains as popular next season.
Without any TV stations, Warner Bros. is more dependent than CBS on its ability to extend as many scripted series as possible to four years, allowing it to reach the 100-episode mark that maximizes potential for off-network sales. But the studio could potentially wind up with fewer scripted series on CW's six-night, 13-hour lineup if reality gains a bigger foothold on the fall schedule.
“We're looking for an appropriate balance,” says Nancy Tellem, president of the CBS Paramount Network Television Entertainment Group. “We're not forsaking scripted.”
The move toward reality, with a CW programming executive now devoted to scouring the Web and film schools for new ideas, comes as ratings are lagging for its inherited scripted shows, particularly The WB's Smallville and 7th Heaven and UPN's Everybody Hates Chris and Veronica Mars. Its best performer among women, seven-season-old former WB drama Gilmore Girls, could fold this spring.
With the best-performing remnants of its two predecessors combined in the new network, advertisers had expected The CW to do better than a 1.4 overall ratings average among young adults during the February sweeps. It finished on par with the defunct WB's levels a year earlier but ahead of UPN's 1.1. While top CBS and Warner Bros. executives consider The CW a long-term investment, advertisers don't appear to be so patient.
“I view this as a transition year and [the 2007-08 season] as a make-or-break year for them,” says Shari Anne Brill, VP/director of programming for media buyer Carat USA. “A lot of people felt they have not been doing as well as they had initially hoped, but I did not expect much more, because many of their best assets are aging programming.”
Other media buyers say the network failed to launch enough strong new shows. Ostroff counters the criticism, saying that it would have been too difficult to start a network with unfamiliar programming.
“When you look at what we had to accomplish in eight months [from the time the network was announced], it's incredible,” she says. “No one realized we had to build a company, a distribution system and create everything new, from benefits packages to programming.”
CW ratings have gotten a boost from Nielsen's new “extended home viewing” system, which measures the college audience. Since Jan. 29, when Nielsen started keeping track, the network is up 23% in adults 18-24 and 36% among the younger women who flock to reality shows like Model and Pussycat Dolls. Double-digit increases over WB and UPN's year-ago performances have helped the fortunes of scripted drama One Tree Hill, which was on the bubble at The WB and now has a strong chance of returning next fall.
The CW set the mood for advertisers last week. At small development meetings with ad buyers at its Burbank, Calif., offices, it featured artwork produced by its core demo, an elaborate Gummi Bear exhibition and a hallway filled with plasma TV screens.
Ostroff talked up the network's six drama and five comedy pilots. Eight will be co-owned by CBS and Warner Bros., with NBC Universal Television Studio producing Aliens in America. She thinks that comedy, chronicling the relationship between an unpopular teen and a Pakistani Muslim exchange student, may have the best chance to become The CW's “generation-defining” comedy, the way Friends was for the MTV generation— something neither The WB nor UPN could achieve in their day.
ABC Television Studio, meanwhile, has two dramas in consideration at The CW: Paige Armstrong, a Rod Lurie saga about a twentysomething congressional aide who decides to run against her boss, and The Reaper, which takes a lighthearted approach to a devil's bounty hunter reclaiming souls that have escaped from hell.
But Ostroff was less talkative about The CW's slate of reality pilots after waging an aggressive effort to land their sought-after producers, whose work is in big demand by all of the broadcast networks.
Beyond watching programming costs more closely, the joint-venture partners expect big savings from lower overhead and various forms of reverse compensation that The CW has obtained from most affiliates.
CBS' Tellem and Warner Bros. Television Group President Bruce Rosenblum insist they are meeting the companies' first-year expectations and will see the network become profitable, particularly with new techniques like advertiser-sponsored serialized “content wraps” that resemble actual programming.
“The CW is the last free over-the-air broadcast network that will ever be created,” Rosenblum says. “We have built a distribution system that is even stronger than The WB ever had, with station groups like Belo, Clear Channel, Pappas and CBS.”
The CW signed every significant affiliate group it wanted except Sinclair, which secured some Fox affiliation renewals shortly after signing up for News Corp.'s UPN replacement, MyNetworkTV.
“Strategically, Tribune and the affiliate group as a whole are much stronger,” says affiliate board Chairman John Reardon, who as Tribune Broadcasting president/CEO leads 14 CW affiliates in markets including New York, Los Angeles and Chicago.
Reardon credits The CW with balancing WB's heavy female skew, adding African-American viewers, and lessening the average age of its audience by offering UPN's wrestling and the Monday-night sitcoms, as well as the cross-over demo appeal of Top Model.
Tribune has seen the most growth in the top markets. According to John Hendricks, the station group's ad-sales chief, Pussycat Dolls has improved its 18-49 average and late-news ratings. “Fox has American Idol,” he says, “but, in our world, we have Top Model, and we can use it as leverage to package all of our points.”