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Execs chart future strategy

Dec 17, 2001  •  Post A Comment

It has been a rocky year for the syndication business. The playing field continues to shrink, owing to the ongoing phenomenon of vertical integration, through which program distributors also have become TV station owners. The most glaring sign of the major change the business is undergoing is the plight of the annual convention of the National Association of Television Program Executives, which, having lost most of its major exhibitors, suddenly finds itself in search of relevance.
With these and other issues on the table, Electronic Media convened its annual syndication roundtable to review the state of the syndication marketplace and prognosticate about the road ahead. Participating were Dick Askin, president of Tribune Entertainment; Roger King, chairman and CEO of CBS Enterprises and King World Productions; Chris Lancey, president and CEO of Western International Syndication; and Ned Nalle, president of Universal Worldwide Television.
Representing Electronic Media were Chris Pursell, senior editor, and Chuck Ross, editor.
The future of the NATPE convention was addressed by these players in Part I of our roundtable coverage, which appeared in last week’s issue. In the edited transcript that follows, the conversation begins with a discussion of the controversial use of the Time Machine, with which some stations shorten program length using computer technology to make room for additional, unauthorized, commercial spots.
Electronic Media: We’ve written a series of stories lately about stations using a device called the Time Machine to essentially squeeze a TV signal so extra local commercials can be added to shows. A number of our sources at TV stations have said this is being done particularly with syndicated programming. Roger, we understand that you’ve heard this as well about some stations. Have you cracked down on some of the stations that are doing this on `Wheel of Fortune’ and `Jeopardy!’?
Roger King: I absolutely have cracked down on it. It’s against my contracts. I’ll tell you something funny: On `Wheel of Fortune,’ that wheel’s gonna really be spinning if you keep compressing it down. You won’t be able to see the numbers. I’m serious. You think I’m kidding? And I’ve been in markets where they squeezed two minutes in and Alex Trebek sounds like a woman.
EM: So have you been able to stop these stations?
Mr. King: Yeah, I’m stopping them all, as many as I can. When we find out, we go right into the station and tell them it’s not good television. Again, it gets back to the viewer, who will eventually give up on you if you continue to do this kind of thing. And for every action there’s a reaction–that’s physics. So when a station uses one of these devices, one of these lexicons, you blow up the [closed captioning for the] hearing impaired–it goes between the signals–you blow that out?
It’s also cheating. How’s that for calling a spade a spade? In a half-hour show, we give 51/2 minutes of ad time to the station and a minute and a half for us. We never set it six minutes. We never set it 61/2 minutes. So that’s my answer.
EM: Have you noticed whether stations have used the Time Machine on any of your shows?
Chris Lancey: It hasn’t been an issue so far, but it’s clearly being focused upon, so we’ll see down the road.
EM: Have the Tribune stations used these devices?
Dick Askin: Not to my knowledge.
EM: Have you had that difficulty with any other stations?
Mr. Askin: No. That hasn’t been an issue for us so far.
EM: Roger, for most of your career as a syndicator, you didn’t have a station group in the fold. Now you’re part of Viacom and are married to a big station group. Is it better that way?
Mr. King: Well, my marriage is a little different. We sleep in separate bedrooms. And we go on the same road that my other friends here go on. We look at the old-fashioned way of business as always the best way of business. Unfortunately, there are a lot of groups that buy now, so some of the local markets have that as a powerful influence. But the best way to sell television shows is still local point of entry.
We might go into CBS, ABC, NBC and sell a show. We don’t go in and say, `Here’s the show, CBS.’ I think that’s the worst way of selling a television show, because some stations, some markets, are different, and they don’t need the show that works in New York and Pittsburgh. So we really do sell to the best station, best time period and most money. That’s always been the philosophy that we’ve had. Is it going to be tougher in this environment? Yeah. Talk about changing business. Unfortunately, America determines things based on cost. Europe doesn’t. But America does. And you’ve got to put it on the screen. And you’ve got to put asses in the seats, as they say. And so your show has to be top quality–you can see the difference between a good television show and a bad show. And no, it’s not only money, but you’ve got to spend the money and put on something of quality.
Unfortunately, there’s a lot of crappy shows on television. The audience is not watching a lot of what’s on, and they’re not watching for a reason. There are more points of entry, so we have to even be better in broadcasting–quote Roger King. We have to compete with cable. There are markets–I’m not going to pontificate here–but there are markets where cable beats the broadcaster, where cable is No. 1 in time periods. Cable has always been looking for the next Oprah Winfrey. If cable ever gets their hands on someone as big as Oprah, the broadcaster better watch out.
So my suggestion for these changing times is that you put it on the screen. Whether you like Roger King or you don’t like Roger King, you know Roger King’s philosophy is the best one, because we believe in quality and we spend the money. We’ve changed the industry, and I think we have to continue to change. And that’s the end of my speech. That’s the way, I believe.
EM: I’m not sure how anyone follows that. Dick, Tribune also has stations, but the company’s philosophy about the station-syndicator relationship is different than Roger’s.
Mr. Askin: Yes, our mandate is different. It’s really to initially develop programming for our station group. Then we try to place shows after they’ve really been given the first shot. They are our largest client and the incumbent, and that is a philosophical difference from the way King World does it. And certainly King World has been the most successful company in first run in the history of the business.
EM: So it really depends on the cards you’re dealt.
Mr. Askin: And your heritage.
EM: Ned, is Universal disadvantaged somewhat by not having a station group?
Ned Nalle: Do I wish we owned television stations in the United States so that the successful programs we have on could leverage the equity value of the television station? Absolutely. That has been part of our international strategy, to start and launch channels. But we don’t have any in the United States.
EM: Chris, as a smaller syndicator without a station group, you must be feeling pressure these days.
Mr. Lancey: We go out to the marketplace and we have to go on the strength of our product. We certainly watch our competitors and try to learn from them. I think everyone has tried to learn from King World how to do it better. And we had a tremendous amount of respect certainly for Universal at the time when they launched `Xena’ and `Hercules.’ That was a nice model.
Not to be flattering everyone in the room, but it is really a business where if somebody does it right, you really have to pay attention and you have to follow a little bit of that path. And that’s what we do. So we go after the highest-quality product that we can afford to go after, and then we pitch it to the stations as quickly as possible so that we can secure the best time periods. It’s a fairly simple process when you come down to it. And without stations, you have to do it the old-fashioned way.
It’s very difficult for anyone who owns stations and just has carte blanche to put shows on stations to really find that unique, that sort of needle-in-the-haystack k
ind of show that’s going to become `Oprah.’
Mr. Askin: It’s probably simplistic to think that distributors who have relationships or ownership positions with stations just put out their product to the stations. That really doesn’t happen in today’s marketplace. I mean it certainly doesn’t happen with a Tribune. I know it doesn’t happen with NBC. It probably doesn’t happen with Fox, either. The reality is that all of the distributors who have these companies that are vertically integrated may have the first shot, but at the end of the day the distributor has to sell its product to the stations–and then the product also has to work for the stations. If it doesn’t, in a lot of ways it’s a double-edged sword. You may be subject to cancellation on a quicker basis than you would in a normal arms-length relationship. So the in-house distributor or the vertically integrated companies these days really don’t have the luxury of being able to jam product on the station group. The stations are just too sophisticated.
Mr. Lancey: Please don’t take it personally, that you’re jamming product on the Tribune stations.
Mr. Askin: No, I’m not taking it personally.
Mr. Lancey: Good. That’s not my intent. But it’s clear that the corporate executives at the very top would like to see synergies between your division and the Tribune stations. And when I go to a Tribune station, they openly say, `Yes, we are working toward creating those synergies,’ and I understand that–and you should be. That’s all I’m saying. That’s a great advantage in the marketplace, and I don’t think it can be argued against.
Mr. Askin: Oh sure. There’s definitely an advantage. But at the end of the day, the programming has to work for the stations. I really think that’s the defining point.
Mr. Lancey: Well, I think shows get on the air pretty consistently with a major station group attached to the syndicator that might not survive the test of a normal, national, non-associated pitch rollout. I think that happens consistently, and I think that it’s just the advantage that you have–or maybe not you, but maybe Fox has or maybe CBS might have. And I think historically we could probably all talk for a good period of time about the shows that have come and gone in that way.
EM: And is that good for the viewer?
Mr. Lancey: Well, obviously not, but it’s the way companies create synergy between distribution and the station group, and I think that it’s necessary for their corporate structures to do those things. Roger clearly has functioned without a station group for most of his career, and he has the biggest shows on television in first-run syndication. So the test of the market is the test, and that’s where we define our companies–and that’s where we fail or succeed.
EM: Is Katie Couric the next big thing in syndication?
Mr. King: I don’t think so. Going from the `Today’ show’s, 7-to-9 a.m. safe haven into the syndication market would be very dangerous for her. It’s a lot tougher. When you get into syndication there’s a lot of competition, and there’s no guarantee that a show will go on for more than 13 weeks. So I don’t know why Katie Couric would quit a job that’s for five years vs. a possible one year and off the air.
EM: So what you’re saying is that she’s already turned you down.
Mr. King: (Laughs.) Yeah. What I recommend she do is renew her contract, because if she gets into syndication, she’ll be off the air in two years. That’s what I’m saying. It’s really hard.
EM: Ned, is she the next big thing in syndication?
Mr. Nalle: Since I’m not negotiating with her, I have nothing to say.
EM: Then you’re a perfectly objective source.
Mr. Nalle: Look, what someone like Katie Couric might bring to syndication is that the audience knows who she is. After that, the show’s gotta work.
EM: Right. Dick?
Mr. Askin: I think there are many ways that she can parlay what she has into a model that doesn’t have a lot of risk by staying at the network and building on the `Today’ show. For example, getting into nightly news. I think she can have anything she wants just by staying there and just redefining her position. I don’t know why she would want to jump into syndication.
EM: Chris?
Mr. Lancey: I agree. She’s got a good thing going, and it’s a very rough-and-tumble business in syndication. I don’t know why she wouldn’t just grow her position at the network.
EM: Any predictions when the ad market is going to recover?
Mr. King: We’re having a banner year at King World. And the ad market will come back, I guarantee. Sixty-five percent of my billing comes out of license fees, so we’re having a good year. And I did over a hundred million dollars in license fees on `Dr. Phil.’ Yes, I’ll tell you the number–a hundred million dollars the broadcasters paid.
And the advertising business is not that bad. I mean, it didn’t go to zero. Yeah, it got hit and we’re gonna have to live with that. The advertising business is gonna have to live with this war, and America’s gonna have to live with the war. So it will come back–that’s the plan. So everyone should have a merry Christmas and a happy new year and not worry about it.
EM: Thank you, Roger. Ned?
Mr. Nalle: I think our outlook is to be nimble. I don’t think the worst news has been wrung out of the system yet.
EM: When you say the `worst news,’ what do you mean?
Mr. Nalle: Actually, I have a partner who sells advertising for me [Dick Askin], and I won’t speak for him because he might be in the room, but I just don’t think the worst news is out of the system yet with respect to advertising spending.
EM: OK, Dick, you’re the partner. How say you?
Mr. Askin: I think there really is a sizable question what type of year 2002 is going to be. We’re assuming that it’s probably going to be more of the same. You can hope for a better upturn of the economy, but you can’t plan for it. You have to plan for the market you’re in. We’ve had a very good year this year mainly by building new businesses and getting into some ventures that we haven’t had in the past, so 2001 for us, really all in all, has been a pretty good year. But I think that as you look forward to 2002, the business will definitely come back. The question is when. And right now we’re not planning that 2002 will be the renaissance of the glory years of the television business. Hopefully we’ll be wrong, but I don’t see recovery until late 2002–but it could be into 2003–and you have to be prepared for that.
Mr. Lancey: Our business philosophy has always been to run very lean and to put as much money as possible into programming, so in a down market we continue to run lean and we see–regardless of when it turns, if it turns, or how it turns–the prospect of new business and growth regardless of whether the market’s up or down. It’s a nice position to be in.
EM: Roger, do you agree with Dick’s assessment that we’re looking to maybe 2003 before the ad market rebounds?
Mr. King: Dick, I love you buddy, but I guarantee you’re wrong.
Mr. Askin: I hope you’re right.
Mr. King: Well, thank you, but let me tell you why I think you’re wrong. The longest recession I think has been 11 months. This goes back, I think, 30, 40 years. You know, I think that we got all hit with a `perfect storm’ here. The economy was spiraling down, and then we ran into 9/11. I think that convergence was the perfect storm, and I think it’s starting to clear up. Is it over with? No. But our country was a little na ‘ve. Now, what I’m about to tell you will affect the advertiser. Our country was sitting with its head in the sand and didn’t see anything coming. I don’t know if you all travel–I think some of you do. If anyone’s been to Israel or France, you go down the street and you see missile launchers and armies go by, and then you come across a cafe that’s been burned out. That’s what other countries have been dealing with. Well, welcome to the world.
So, with that I think the economy will come back. I think it’s starting to show some signs, and I think in three to six months you’re gonna see an improvement. I really do think we’re gonna
see an upturn. I think by September 2002 it will be back. Is it gonna be all the way back? No. But I think it will be back. That is the opinion of the management of King World.
Mr. Nalle: We hope you’re right that advertising spending doesn’t lag behind the recovery.
EM: Let’s talk about the formula now for launching shows. It used to be January was so great for syndicators because then you had a chance to look at the November sweeps and see what time slots might become available. Now distributors are saying maybe we should have a market in September. Yet we’re also seeing shows cleared in July. What is the time frame now for determining that? How does the formula now work for launching a brand-new show?
Mr. King: No. 1, I’m not going to bring a show out in January ever again. It’s too expensive and too dangerous. Hell, I have to start renewing the show in March and April. I have to renew producers and directors and talent. So what I’m trying to tell you is that I’m going to stay longer with a show. `Ananda Lewis’ probably will be around a year or two. My best guess is it’ll be on the air in the 2002 because I’m a pig. I want to have all the shows. No, that’s a joke. Hey, this is all personal material here, guys. And I’m going to make an announcement I think you all will appreciate. Next year’s head show will be the `Roger King Show.’ Wouldn’t that be a bitch? Renewing and seeing me on the air?
But with `Ananda Lewis,’ I see a spark. I see something there. And that’s what you have to do, be able to see something, even with a 1.5 rating. You’re going to have to be patient.
EM: Is that the formula, Dick?
Mr. Askin: It really depends on the show itself. We just canceled `Talk or Walk’ after 13 weeks. Quite frankly, we looked at the viewing patterns. It was not gaining audience, it was not holding its lead-in, and it got hurt–as did all the new projects–in the upfront. Our stations were really having problems with its performance and I came to the conclusion, along with our station lineup, that who’s kidding who? The show was not performing, so rather than cast a blind eye to it and hold the station lineup hostage to a show that I myself had lost faith in, I acknowledged it, pulled the plug, and we’ll move on. You do take risks, but we all look for certain glimmers of hope, and we didn’t see enough glimmers. And in an environment like we’re in right now, I think you have to address it.
EM: Chris, Roger mentioned that one has to spend more money and stay with a show longer. As a smaller syndicator, is that the right formula?
Mr. Lancey: Well, as long as it’s not our money. We’re in a slightly different business than the strip people. We do weeklies almost exclusively. I applaud the people who are spending big money like Roger and Dick and the rest who are putting strips on–that’s a very expensive and dicey process. We reach out to the international community I think far more than other syndicators for original programming. Now certainly the big syndicators take their library product and their off-network product and they drive it into the international marketplace and make lots of money. What we do is we try to bring that money back into the first-run area. And quite frankly, most of the budgets of our shows–for instance the dramas that we do–most of those budgets come from foreign broadcasters. And though that business has been beat up a lot, we still have great faith in that business. If we keep working very hard to put quality on the screen, I really do think that there’s going to be more “Baywatches,” more “Star Treks,” more “Xena” and “Hercules” types of shows. “Stargate” is a very well-produced show that seems to have good local ratings.
There are shows out there that are well done that people are responding to, and really that’s our mission–to go out and find the money wherever the money is, whether it’s through foreign governments–through subsidies and production–whether it’s simply through broadcasters, or whether it’s through domestic advertisers who come in early and help with the development process like Ford has. That’s where we look. We think Roger’s right–we have to spend more money on programming. But we think that there’s a way to go about it so that the market benefits and the companies stay around to do it over and over again until we produce hits.
EM: Ned, what do you think about Roger’s formula?
Mr. Nalle: I don’t think that the viewers, when they look and decide what they’re going to watch, check out anyone’s budget or chain of title. They don’t care who owns the show and how much money you spend on it. They care whether they’re entertained.
But I think that there’s some sound advice in spending the money wisely. And one of the trends that we applaud is trying the off-Broadway run of something before it goes to Broadway. So this year, when we launched a new show called `The 5th Wheel,’ we had a talent we really believe in that we found last year doing stand-up comedy. Her name is Aisha Tyler. And we made an innovative deal where we allowed the E! channel to book her to host `Talk Soup’ during the spring and summer prior to the premiere of `The 5th Wheel.’ It enabled her to get her sea legs, as it were, so that she could learn in New Haven, so to speak, before we moved her to Broadway. Television acts like an X-ray machine. You can tune in episode one and you can pretty much conclude whether the host has his or her chops or not. We wanted to put the best possible talent in front of the camera on episode one, so that’s why we trained her.
EM: That sort of segues into the whole issue of repurposing and regional rollouts and such.
Mr. Askin: You’re definitely going to see a re-examination of the current model. When you talk about daytime, producing for a 1 rating or a 1.2 or a 1.5 is not a business. I don’t care how high your CPMs are. So unless the show is repurposed, or somehow you can reduce the production costs down to a minimal number, you’re in trouble. When you’re talking about first-run syndication, either strip or hour–the hour really–the model for the past four or five years is [to] heavily co-finance on the international side. But now the international side is running into the problems, but it’s still a pretty good model. When you’re talking about daytime strips, I think you have to look at either repurposing, windowing or changing the repeat original schedule or some type of co-production, a production partner or an international partner or whatever. But you just can’t use the traditional approach if we’re going to spend $300,000 a week, do [all those episodes] and only do a 1 rating. That’s a recipe for catastrophe.
EM: Roger, is Dick right about this?
Mr. King: Well to some degree he is. I disagree with his concept on daytime ratings for sure. But there’s no question, unfortunately, that our universe is getting smaller. So you have to be able to develop something, and sometimes you have to start at a 1.5 rating or a 1.2 or a 1.3 and stay on the air longer. These broadcasters can’t constantly go after 1 ratings and keep trying these things and keep failing. So R&D is a great idea. For example, using smaller markets to develop shows. That’s where Oprah Winfrey came from, it’s where Phil Donahue came from, and most of the successful shows in daytime started out that way–a lot of them.
EM: And Fox is doing this regional rollout of its `Good Day’ show after having success here in L.A.
Mr. King: I think Fox is right on target. They have a good idea. I’m not sure about the format of the show, but I think that’s a good idea, to test-market television. Obviously, Dick, you didn’t like what you saw with your show. So that’s why you pulled the plug. You didn’t see a future, but if you saw some future, I think you’d put more money into the show. I can tell you one thing, `Dr. Phil’ will cost $35 million to $40 million a year counting promotion. That’s a fact. So you know with those kinds of budgets, you know we’re going to have a top-quality show–hence, I’ll be able to renew the show for more money, and in the future they’ll become oil wells, a
nd that’s my opinion.
EM: Chris, you’ve had some slow rollouts recently–what’s been your experience?
Mr. Lancey: The slow rollout process is a very difficult one. Its costs a lot of money, and if your show’s marginal, or in my case more of a difficult sell in a poor advertising market, then the equation for a slow rollout just doesn’t work. And so you really do have to pick your ideas very carefully, and they have to be very high-quality ideas that meet the audience’s needs and the advertisers’ needs, or you’re just not going to make it.
EM: With the exception of Tribune, we don’t seem to be seeing a lot of the action hours like we used to. What’s going on?
Mr. Nalle: We started the push on action business in the early ’90s, and the reason we did that was as a response to the fact that networks, when they bought dramas, were only buying the talking-head dramas. And those talking-head dramas didn’t necessarily travel over the Atlantic or the Pacific. So we saw an opportunity in the marketplace, on the Tribune stations, where they weren’t programming their network five nights a week. We had `Hercules: The Legendary Journeys,’ and then we seeded `Xena’ in `Hercules.’
Then everybody else came out with their clone, and that was the time for us to not do that again and find the next opportunity. Now, I believe there’s a market for an action-adventure program, but it’s got to be differentiated, it’s got to serve a new purpose. Audiences will tune in at the very beginning, but when shows look the same, they say, `Oh, it’s one of those; I don’t really have to watch it.’
Mr. Askin: We’re pretty bullish on the action hours. We have a unique platform with our station group. They need the product. They know how to schedule it, they know how to promote it, and it works. And we currently have four action hours on the air right now. When `Final Conflict’ goes off, we’ll be replacing it with another one. And it has proven to be a very good model for us. It’s profitable in the front end, and then when you sell the back end to a cable network, you increase the profit–or in a couple of cases you help the foreign partner recoup his position. And I believe that what we’re seeing right now is kind of a logical market effect. If you go back four years ago, at one point there were 17 action hours on the air. And Chris and I talked about it. I said, `How can the marketplace carry 17 action hours?’ And the answer was it couldn’t. And you had distributors who were comping New York stations for a million dollars a year to get a 2 a.m. clearance. That, again, is not a business. So, I think it is cyclical, and it comes down to supply and demand. Right now the market can probably handle 10 hours, some first run and some off-net. And any more than that, even if it’s off-net, it doesn’t guarantee you a successful rating.