Sillerman Wants Bigger Pie Piece

Mar 28, 2005  •  Post A Comment

Robert F.X. Sillerman believes there is a great injustice taking place in the world of television.

As he sees it, the creative people behind a lot of television’s most popular programs are getting only table scraps while the networks are reaping most of the benefits. With his recent purchase of one of the production companies behind “American Idol,” he is hoping to change that model.

“In the television business, there haven’t been many alternatives for wide distribution, and consequently access to eyeballs [is controlled by] a gatekeeper relationship,” said Mr. Sillerman, who controls a company called CKX.

It’s an arrangement that stands in stark contrast to how Mr. Sillerman did business during his days as the owner of leading live-entertainment company SFX Entertainment. In the world of live concerts, a performer collects 80 percent to 95 percent of concert ticket revenues, because, as he put it, “[The artists] had plenty of alternatives in where they went. They didn’t have to play in a particular location.”

Providing that kind of choice to producers of television programming is at the heart of Mr. Sillerman’s foray into television through his $161 million purchase of 19 Entertainment, the company behind the “American Idol” and “Pop Idol” franchises.

While he has no plans to upset the arrangement 19 Entertainment has with Fox for “American Idol” or with other networks overseas for their versions of “Pop Idol,” Mr. Sillerman said he is keen to explore ways to alter the economic model behind television programs so creators and producers get a bigger cut of the revenue pie.

To that end, he said, he is examining ways to reduce the risk by partnering with others to help fund a project and building a fan base for a program by launching on wireless networks and over the Internet and building enough critical mass to then make the transition to television. Likewise, Mr. Sillerman said, he is looking for opportunities to bring to alternative formats television shows that have failed to attract large enough audiences for cable or broadcast but have loyal followings that are likely to follow their favorite program to the Internet or cellphone.

“Just as in the music business, [television] consumers are demanding that entertainment be uncoupled, and we believe that in the coming years it’s going to be easy to imagine people watching video entertainment on cellphones, hand-held devices, game devices and computers,” Mr. Sillerman said.

While his prediction is nothing new, it is particularly notable that Mr. Sillerman, who late last year purchased much of the Elvis Presley estate, is making such a bet in an area that until now he had few dealings with.

Mr. Sillerman is best known as a radio and concert-venue pioneer, creating SFX Broadcasting through his purchase of 71 radio stations throughout the United States and eventually selling the company for $1.2 billion in 1997 to private-equity firm Hicks, Muse, Tate & Furst. Three years later Mr. Sillerman sold his live-entertainment business, SFX Entertainment, to Clear Channel Communications for more than $4 billion.

In December Mr. Sillerman, through CKX, acquired an 85 percent stake in Elvis Presley Enterprises for $100 million and plans to take the company public as well as explore ways to extend the Elvis brand through museums, stores and other sites in the United States and overseas.

In his television venture, Mr. Sillerman said he thinks he can develop an economic model that enables a television show to be financed by partners willing to help underwrite production and by relying on CKX’s ability to raise capital. What shape those partnerships take remains to be seen, but one potential example could be a wireless provider kicking in capital to help launch a show that will be seen on its customers’ cellphones.

Mr. Sillerman said that at present 19 Entertainment has six projects in various stages of development, and he promised that these projects would be the first to use the new economic model he is envisioning. He noted that some of the projects wouldn’t seek a broadcast partner.

Even so, Mr. Sillerman said, there are no plans to abandon cable and broadcast altogether.

“Network television continues to be an important-maybe the most important-part of mass daily entertainment consumption,” he said. “But there are now alternatives, and the recognition that those alternatives can eliminate risk for the networks and the studios and provide better economics.”