Reality Gets Reworked for Prime

Aug 16, 2004  •  Post A Comment

Now that reality programming has grown into a full-blown prime-time genre, network executives and producers are working diligently to fine-tune the ways the genre fits into the prime-time economic model.

Three seasons ago, reality programming served predominantly as an inexpensive, quick fix for a network looking to jazz up its summer ratings or to plug midseason holes. Last year the networks launched the fall season with six reality shows.

This fall the number of shows has more than doubled. Reality has matured to the point where it appears on virtually every network schedule, often in crucially important time periods, and for the first time reality-competition will be included as a category during the Primetime Emmy Awards telecast. The former oddity is now critical to a network’s overall performance.

“The genre is here to stay,” CBS Entertainment President Nancy Tellem said. “The focus is building franchises. It isn’t cheap anymore to do reality.”

Cost isn’t the only new challenge. Finding that elusive back-end, the dilution of reality audiences and the thinning of the production talent stable are all issues producers and networks are trying to sort out.

The standard network license fee for reality programming has stayed relatively the same from last season to this season, with networks paying about $700,000 to $800,000 per episode, according to industry sources.

But among the more established reality players or projects that have interest from several networks, per-episode license fees in the $1 million to $2 million range are becoming more common.

From the perspective of license fees, reality is still a bargain. For a new hit scripted series casts often try renegotiating their contracts immediately, which increases costs. Series regulars are usually given a standard five-year contract, so even with sizeable built-in pay bumps through the first few seasons, studios and ultimately networks have to pay up if they want to go a sixth year and beyond. No matter how expensive the license fee is for a top-rated reality show such as “Survivor,” it will be a long time before it costs CBS anywhere near what it cost NBC and Warner Bros. to negotiate extra seasons of “Friends” or “ER.”

Network executives are quick to point out, however, that it would be mistake to write off scripted shows with pricey casts as a waste of money. At the end of the day a hit comedy or repeatable drama returns plenty to the network and studio in terms of reruns and syndication, to say nothing of ancillary products, spin-offs and DVDs.

In the meantime, top-tier reality producers are demanding more from the networks. David Goldberg, president of Endemol USA, which produces “Fear Factor” and “Extreme Makeover,” said that costs are rising and the days when reality was defined by “no-name casts, affordable hosts and advertiser problems” are long gone.

Inflation has hit different kinds of reality shows in varying ways. “Recently, one big reason for the cost increase is the rash of personality-fronted shows,” he said, referring to hits such as NBC’s “The Apprentice” and Fox’s “The Simple Life,” which live or die thanks to the presence of talent, who can’t easily be replaced.

“They are demanding six-figure salaries-their people are asking for and getting executive producer fees,” Mr. Goldberg said of talent like “Apprentice” star Donald Trump and “Simple Life’s” Paris Hilton. “Also, as the reality genre grows in stature and success, the people who make these shows are demanding better compensation. And the problem is the [license fees] aren’t going up, so the production company is paying the price.”

Increased competition for the next hot concept, along with the overall proliferation of reality projects, has helped boost production costs. Producers and their staffers who are fending off multiple job offers are looking for a bigger financial payoff.

“Certainly there is a trend as things get more popular, every PA, every cameraman, every producer-director wants and can command higher recompense,” said David Lyle, the former president of “American Idol” and “The Swan” producer Fremantle North America who is in the process of forming his own production company. “But the basic premise is still true that reality is cheaper to get on and cheaper to get off than other television. It is terribly responsive to scheduling needs.”

At least one network executive thinks there is a supply-and-demand issue with behind-the-scenes talent but sees it playing out not in terms of costs, but in scheduling.

“There is a limited pool of producers available, and we fight every day for the best producer,” said ABC’s Andrea Wong, executive VP, alternative programming, specials and late-night. “We’re still trying very hard to keep costs under control and are amazingly successful at doing it. For me, the bigger challenge is getting the best people rather than the best prices. For me, it’s, `Are they available?”‘

Cost may be a bigger issue among the top echelon of creatives, who command premium fees. From the second tier down, however, plenty of producers are trying to come up with cheap concepts that work within the networks’ current budgets. Many producers develop for the cable networks and are creating shows on budgets that are in line with the much lower license fees cable can afford. According to the broadcast networks, these producers are welcome to pitch their ideas. In other words, the barrier to entry, at least when compared with getting into the scripted business, is still low. In turn, this keeps prices down.

“Everyone still has a chance,” Ms. Wong said. “There are certainly the Mark Burnetts and Mike Fleisses of the world, but it’s hardly shutting out independent companies.”

Danger of Dilution

All that opportunity comes with a risk to the genre itself, some insiders say, pointing to the sitcom business a decade ago as an example. At that time in the interest of churning out entries in the hot comedy genre, networks were giving showrunner stripes to comedy writers with little or no experience. The talent pool got diluted, and the same could happen to reality, Ms. Tellem said.

“We’re less dependent on reality than other networks,” said Ms. Tellem, who argued CBS wasn’t likely to fall into the trap of greenlighting a reality project or producer not ready for prime time. “But there is an obligation on all of us to develop that second-tier producer.”

Along with the question of costs comes the inevitable discussion of license fees. Unlike the model for scripted programs, reality shows have not been deficit-financed by production companies and by all accounts are not expected to be any time soon. But if the price of production continues to rise and networks manage to keep license fees down, reality producers still will have to face the challenge of finding a back-end model that works for them.

The track record for reality in a traditional syndication is neither long nor impressive. In 2000 the MTV reality pioneer “Real World,” according to Nielsen Media Research, eked out an 0.7 average in households for two seasons. Sister program “Road Rules” entered the market in 2002-03, garnering a 1.1 household season average.

For the 2003-04 season, “Road Rules” household number shrank to 0.6. Not surprisingly, the conventional wisdom among industry insiders is that serialized off-network reality programs are not particularly marketable in syndication.

Back in 2001 at a National Association of Television Program Executives panel, reality producers and agents agreed that syndication wasn’t a very viable option. But prospects may have finally changed with the advent of close-ended reality formats, which allow for a story line to be encapsulated in one episode. “Fear Factor’s” debut performance on basic cable network FX this summer so far has been relatively encouraging (TelevisionWeek, Aug. 9).

From most reality producers’ point of view, deficit-financing will never fly because the vast majority of reality production companies are too small to wait long enough for the big payoff. Instead of syndication, producers have been covering gaps b
etween license fees and rising production costs by selling shows’ formats to foreign territories and developing integrated marketing deals with advertisers.

“Possibly some of the ancillaries will be useful in getting the prices down,” Mr. Lyle said.

Repeatability isn’t just attractive to producers. Networks that once used reality to fill a hole at a specific time in the season are realizing close-ended reality shows can be as useful as comedies when it comes to getting decent ratings from the repeats.

ABC has been enjoying the rerun success of “Extreme Makeover: Home Edition” this summer. The fact that it can be shown more than once, however, doesn’t mean the network is mandating that each episode of all its reality shows be closed-ended. But if a format does allow for repeats, all the better, Ms. Wong said.

“Great shows in the first run are most important,” Ms. Wong said, before turning to the issue of repeatability. “We do develop with an eye towards that. It’s not the No. 1 priority, but a big priority.”

Mr. Goldberg, who produces two of the most successful closed-ended reality series, doesn’t think the search for reality repeatability will end serialized shows.

“People see the value of the self-contained hour,” he said. “But I think as `The Apprentice’ and `American Idol’ and `Survivor’ proved, these ongoing series are still incredibly viable, and nobody is turning their nose up at them.”

For now, networks and producers have been able to handle the challenges that come with the success of the reality genre. But if the importance of the reality genre continues to grow, by all accounts the number of people clamoring for a piece of the financial action is only going to increase. A change in the current system is inevitable, insiders say.

“I’m sure the market will correct itself,” Mr. Goldberg said. “I’m just not sure when and who will be affected most.”