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Pay-to-Play Fracas Goes Prime-Time

Feb 7, 2005  •  Post A Comment

Viacom-owned CBS got into major tussles last week with The Walt Disney Co.’s Touchstone Television and News Corp.’s 20th Century Fox Television over the issue of coproductions, just as the network was announcing the last of its drama pilot pickups.

The unofficial practice of content providers such as Touchstone or 20th sharing ownership in their projects in exchange for network pickups-whether to pilot or to series-is hardly new; however, last week’s negotiations played out more overtly about ownership than in the past.

Traditionally, coproductions came about when the second studio had something integral to add to the project, such as an actor or a director who was tied up with that second studio. In the case of the 20th and Touchstone pilot pickups at issue last week, Viacom’s Paramount Network Television unit brought nothing new to any of the four projects in question.

To be sure, other networks leverage their size; many take stakes in programs developed by other companies. ABC, NBC and Fox, for example, have interests in the majority of scripted shows on their schedules. CBS, however, is the only broadcast network whose parent company has a stake in the back-end of virtually every scripted series on its current prime-time schedule (Viacom has no stake in Warner Bros.’ “Two and a Half Men”).

The dominant network, CBS has the most power to wield, but it certainly is not the only TV company doing so. Already, powerful multiple system cable operators have begun taking stakes in cable networks seeking carriage on their system. Television station groups that serve as the launchpad for first-run syndicated shows also have been able to leverage revenue sharing into clearance deals.

All of this raises the question of how good industry consolidation really is for the business, as companies face the choices between doing what they have power to do versus doing what might be best for the creative product.

Prime-time coproductions do have their benefits. Even if a coproduction does not add creatively to a project, it does have the potential to help get a show to syndication. If a network has a stake in a show, it also has incentive to nurture and keep it on the air long enough to rack up the number of episodes necessary for an off-network run.

“`[Star Trek:] Enterprise’ is a pretty good example where there was a broader corporate benefit for a show that lasted 98 episodes,” said Carolyn Finger, VP, TVTracker.com.

Then again, if a network gets to the point of owning everything on its schedule, ownership represents no more incentive for any one show over another.

But if a studio is not willing to concede to a coproduction, it may not get a show on the air that could wind up being a hit for both the network and studio. It’s possible that Paramount-produced hit “Medium,” for example, would not have made it onto NBC had that network insisted on a coproduction that Paramount wouldn’t agree to.

A true coproduction, Ms. Finger said, means the network’s studio can help take on the financial responsibility of shows that have to be deficit-financed for years before they see some, if any, return on the investment.

“It’s a two-way street, because you have a studio like Warner Bros., and they are producing a lot of programming, but they are assuming a lot of risk,” she said. “There are certain circumstances where it is advantageous for a vertically aligned studio to come in and amortize that risk.”

Networks such as CBS claim they face significant risks as well. Take the case of CBS’s flagship franchise “CSI,” which was originally produced by Touchstone, but the studio decided to pull out before the show even made it on the air, fearing prohibitive production costs. “CSI” became a runaway hit, benefiting CBS, but if the show had failed it could have cost CBS dearly.

“One corporation oftentimes assumes 100 percent of the risk in production, distribution, and broadcast,” Ms. Finger said. “In a business with 85 percent failure rate, the long-term benefits of vertical integration remain to be seen.”

Coproductions also can help networks hold on to their hits. “If the show is a success, they don’t get killed in renegotiation,” said Bob Gumer, a partner in the Kaplan Stahler Gumer Braun Agency, who added that the last thing a network wants is to lose a hit show to another network when it is at its zenith. That could have easily befallen NBC in the late 1990’s, when the network found itself paying record fees for additional seasons of Warner Bros.’ “ER.”

Mr. Gumer said the network coproduction question is going to intensify, particularly at CBS, where Viacom co-President and co-Chief Operating Officer Leslie Moonves has said he expects Paramount to be more aggressive. That means outside studios will likely face even more competition when it comes to getting their projects picked up.

“It’s a continuum,” Mr. Gumer said. “Every year the networks who order them are more aggressive about doing it, and more bold about doing it.”

In the past, CBS has taken its stakes in outside suppliers’ shows via a coproduction with its former CBS Productions unit, which since last development season has been folded into Paramount Network Television. Viacom coproductions going forward will be done through Paramount.

Last week CBS gave the green light to 20th Century Fox Television’s untitled David Diamond and David Weissman project, and to “The Unit,” from David Mamet and Shawn Ryan. But the pickups came with a request: CBS asked 20th to make both projects coproductions with Paramount. Viacom then would be a profit participant in potential syndication of the projects. It is not yet clear how Paramount will participate in covering the production costs.

Sources said executives at 20th said they were not surprised by CBS’s request. With shows on four networks, 20th was in a better position to negotiate with CBS than most other studios. The company decided to split the difference with CBS, giving Paramount a coproduction on the Diamond and Weissman project but keeping “The Unit” all to itself. The bargain appears to have worked, at least for now. Both pilots have been confirmed as firm go’s by CBS, while the exact syndication, production and deficit financing deals have yet to be worked out between 20th and Paramount. Both Viacom and 20th Century Fox declined to comment for this story.

The CBS-20th tussle certainly isn’t the first time a major supplier and a network have clashed over this issue. More than five years ago, Warner Bros. found itself in conflict with CBS, and the studio threatened never to do business with the network again. Within half a pilot season, both companies were working together, and today Warner Bros. product such as “Cold Case” and “Without a Trace” appears on CBS and are coproductions.

Sony Pictures Television, which is unaligned with any network, has three drama pilots on the network development slates (two at NBC, one at CBS), all of which are coproductions.

Ms. Finger said that of all the networks, CBS has been the most successful when it comes to pursuing coproductions.

“They are very open in the development phase to ideas from anywhere, but historically as they move closer to production, they have attached CBS Productions,” she said. “And the reason why that’s making news now is their in-house studio no longer exists, and it comes down to whether Paramount is able to do it.”

CBS-initiated coproductions going forward have the potential to inflate the apparent activity at Paramount, whose series output in recent years has not been voluminous relative to other conglomerates’ production units, such as Warner Bros. or 20th.

“Paramount is in essence CBS Productions, only more active in production,” Mr. Gumer said. “It used to be CBSP was the financial entity, but now it is both that and an active developer.”

Touchstone Television has two drama pilots at CBS that the studio and other industry insiders considered “license-fee-contingent,” or pilots that would get picked up only after the finances had been worked out-mainly, from CBS’s standpoint, coproductions with Paramount.

At the beginning of last week, w
hile Touchstone was confirming the two pilots had been picked up despite the financial contingencies, CBS would not officially count “Quantico,” an FBI-themed procedural, and an untitled project from John Gray about a paranormal investigator, as pickups. By the middle of the week CBS confirmed the pilots had been picked up without coproductions, but Touchstone was indicating the financial details had yet to be worked out. Both CBS and Touchstone declined comment.