Studios USA will stay the course

Oct 29, 2001  •  Post A Comment

As Sony’s Columbia TriStar Television officially stepped out of the regular broadcast network TV development business last week, one other major independent, Studios USA, said it had no intention of doing likewise.
David Kissinger, president of the company’s USA Television Production Group, points to a number of factors that have kept Studios USA in the game while others have stumbled: A small baseline in investment and development, dual-platform opportunities in its cable outlets and the power of a breakout hit.
Specifically, USA has been blessed with the “Law & Order” franchise it produces with Wolf Films.
“Dick Wolf has given us the power to have a franchise that we own completely, and that has given us the leverage to not be forced into co-productions with network entities,” Mr. Kissinger said. “An independent’s goal should be to generate that kind of leverage. We’re extremely lucky to be the beneficiaries in a franchise of that magnitude.”
But Mr. Kissinger harbors no illusions about how tough the economics of producing network TV shows are for an independent. “It used to be that the hits paid for the failures,” he said. “But now, as the margins get smaller and your upside is cut in half, the economics of doing business become much more challenging. We’re extremely sober about being an independent in this climate but being independent may have also enabled us to weather this downturn better than some of the competition.”
Most industry watchers expect Studios USA and the Hollywood community’s other remaining major independent, Carsey-Werner-Mandabach Co., to lean away from the costly overall talent deals once common practice at the major Hollywood studios-and a practice in which Columbia TriStar became a leader this year. In fact, as the onslaught of massive advertiser revenue declines is also buffeting the four major network-studio conglomerates, it could be increasingly difficult for any of the marquee big-name producers to find similarly lucrative long-term production deals now that they are likely going to be released from Columbia TriStar.
“There are going to be very few, if any, opportunities for those producers [who have deals with Columbia TriStar] to hang their shingles at any of the major studios for the foreseeable future-to be bluntly honest,” said one rival major studio production head, who requested anonymity. As of Friday afternoon such marquee boutique producers as Brad Grey Television, Danny DeVito’s Jersey Television and Gavin Polone’s Pariah Productions had yet to receive word on whether Columbia TriStar/Sony will pay out its guaranteed production deals or seek to sell its interests in existing development projects outright to the networks.
Indeed, Jersey Television partners Michael Shamberg and John Landgraf had yet to hear from any studio executives on the future disposition of their development deal.
“We know that Tom [Mazza, Columbia TriStar Television network TV president] and Len [Grossi, Columbia TriStar Television president] are leaving, but there has yet to be any clarity about who is part of the process and how it is going to play out,” said Mr. Landgraf, who is president of Jersey Television. “They have been honoring our deal and we expect that they will make a good faith effort to resolve it, but I have no idea and prefer not to speculate on the disposition of our situation.”
Both Mr. Landgraf and Mr. Shamberg said they have not been contacted yet by Steve Mosko, who was appointed president of Columbia TriStar Domestic Television, which is the name of the reorganized Columbia TV group (Mr. Mosko was formerly president of the company’s syndication arm, Columbia TriStar Television Distribution). “None of us have met Steve, but I have a heard a lot of good things about him,” Mr. Landgraf added.
One rival studio production chief had a prediction on the fate of Columbia TriStar producers such as Mr. Landgraf and Mr. Shamberg. “My guess is that most of the [drama and comedy] scripts that are already commissioned by the networks will get made, but it will be on an a la carte basis,” he said. “We might even be interested in some of their development projects, but it will largely be the call of the [broadcast] networks and their willingness to take on production partners. The fate of those projects also hangs on whether Sony will simply buy its way out of producer deals or accepts a much smaller ownership percentage of the show’s back-end to get out fast.”
Though the company has denied it, certainly a major driver for Sony’s decision to get out of the deficit-intensive network TV business was the $111 million loss the company sustained during the second quarter of this year-even though 70 percent of that loss came from Sony’s electronics manufacturing sector. “When a company sneezes like that, it has a perilous effect on Sony’s lower-margin studio operations,” a network business affairs executive said.
Furthermore, Columbia TriStar’s barter revenues on the back-end, which were pulling in more than $300 million a few years ago, have shrunk to about half that, according to a rival syndication chief.
Despite widespread grumbling of vertical synergies, it’s a model that appears to be working. And many of the vertical players continue to supply rival networks as well as their own outlets.
For example, Fox currently has programming on each of the networks that will eventually translate to dividends for syndicator Twentieth Television.
“The appetite for shows continues to be strong,” said Bob Cook, president and chief operating officer of Twentieth Television. “The A-product is still going to leave the room whether or not cable networks and stations are cutting back. It’s still a supply-and-demand business, and most outlets can’t afford to let a rival have a strong show [without trying to get it themselves]. As for us, a `Malcolm in the Middle’ or a `Judging Amy’ can make up the difference for the shows that don’t hit the mark, especially if a Columbia isn’t in the mix anymore-it makes our product that much more valuable. Certainly, though, this company is in a unique position because we have a considerable broadcast group and cable outlets if the demand isn’t there.”
Indeed, one of the company’s cable outlets, FX, recently debuted back-end runs of “The Practice,” “Ally McBeal” and “Buffy the Vampire Slayer,” all shows produced by Twentieth Television.
The daunting specter of further layoffs and a significant reduction in overall producer-writer deals is also spilling over to the vertically integrated network-studio conglomerates, especially those more reliant on advertising revenue compared with somewhat more consistent cable subscription revenues. The trickle-down effect is being felt at AOL Time Warner, News Corp./Fox Entertainment Group, Viacom/CBS and The Walt Disney Co./ABC.
Word around Hollywood is that Warner Bros. Television is going to drop up to 10 overall development deals with producers. 20th Century Fox Television, which has basically frozen the signing of development deals and new hires in production, has already told its producers to cut 2 percent of their discretionary development and production budgets.
Over at Viacom, which reported a quarterly loss of $191 million, Hollywood watchers are also wondering if a major restructuring and downsizing of its CBS Productions, Paramount Network Television, Big Ticket Television and Aaron Spelling Television units is in the works.
“The question is what Viacom is going to do with all of this production overhead and some redundancies in the executive ranks,” said the network business affairs executive, adding, “There is going to have be cost cutting and restructuring at Viacom, because over 50 percent of their revenue comes from ad sales, and that may not rebound until late next year.”
Furthermore, industry watchers think the networks may also seek to streamline the number of pilots actually being filmed.
“For every 12 shows in development, the networks may say, `Let’s shoot 10 pilots and do two as presentations,”’ said the studio head. “The only prob
lem is that some presentations are fundamentally flawed, and making pilots is almost always the best way to evaluate the finished product. We are all trying to make sensible, prudent choices in altering the way we do business when it comes to long-term talent deals, but taking shortcuts in series development is only going to likely decrease the quality of what gets to the small screen.”
The newly formed Columbia TriStar Domestic Television unit will combine Columbia TriStar Network Television with the cable- and syndication-oriented Columbia TriStar Television Distribution under one flag led by Mr. Mosko.
As many as 70 jobs may be lost through the reformation.
“The world is changing, and the TV industry is changing with it,” said Mr. Mosko. “Because of this we now have to try to build a business more responsive to the buyer’s needs, and this shift will provide a smarter way of doing that. We will continue to develop programming for cable and syndication as well as for the networks, but we must carefully select each show we move forward with.”
Mel Harris, president of parent company Sony Pictures Entertainment, said, in a statement, “Steve’s had great success running our syndication and cable division, proving that you can provide programming that is both popular and profitable without incurring enormous financial risk. We’ll be following the same targeted approach for the broadcast networks.”
With nearly 80 percent of its television revenues coming from the back-end of off-net series, according to sources, the shift has raised questions with industry pundits about Columbia TriStar’s long-term viability in the TV wars. This, however, is a nonissue, according to Mr. Mosko.
“We now have the ability to pick and choose how our series are handled,” he said. “As for the back-end, we’ve proved with series such as `VIP’ that creating programming for syndication and cable can have an afterlife.” VIP started as a syndicated show and then was sold to cable network TNT. Likewise, “The Larry Sanders Show,” which had a long run on HBO, is now being sold into syndication.
The studio will hold on to current series, including “Dawson’s Creek,” “Family Law,” “The Guardian,” “King of Queens,” “Pasadena” and “The Tick.” One of the problems for the studio is that despite the successes of a series such as “King of Queens,” Columbia TriStar will only receive a third of the afterlife profits, after splitting the profits with CBS and Procter & Gamble.#