Networks look for possible upsides

The nation’s major television networks say they are prepared to withstand a strike by the Writers Guild of America lasting three to four months. Some industry executives even believe a strike, although potentially damaging to the business, could carry some side benefits.

If a strike were to extend into February, it would disrupt the TV pilot season, the three-month period when studios make dozens of new shows as part of an expensive annual competition to win a coveted spot on the prime-time schedule of the five broadcast networks.

The television companies collectively spend more than $400 million a year on development and pilot costs even though only a fraction of these shows achieve long-term financial success. TV executives have long complained that the frenetic competition for actors, directors and sound stages doesn’t translate into higher-quality television, just higher costs. Some hourlong pilots cost more than $7 million.

So for some TV executives, blowing up pilot season is not such a bad idea.

“Maybe the strike is giving us an excuse to shake it up,” Fox Entertainment President Kevin Reilly said at a recent industry luncheon. Changing the way shows are hatched, he said, would be “the only good thing that could come out of a strike.”

Writers are to begin picketing today outside studios here and in New York.

As soon as the guild’s signs go up, production costs will start to come down, if only temporarily. That would give companies like NBC Universal, whose fourth-place network is struggling to stay profitable, a short-term lift.

Writers Guild leaders point out that these media companies are hugely profitable, earning billions of dollars a year, and that writers just want a more equitable slice of the pie.

“This is a strike for future generations of writers,” said Carlton Cuse, an executive producer of “Lost.” “It’s just a critical point in the evolution of the business.”

There are huge risks and downsides for the companies. Now that writers have gone on strike, the networks could see more viewers drift away, perhaps never to return.

Some shows would immediately feel the sting. Late night shows such as “The Tonight Show With Jay Leno” and Comedy Central’s “The Daily Show With Jon Stewart” would switch to reruns because so many of the jokes are written the day the shows air.

The networks have enough fresh prime-time episodes to last at least through November. Networks typically air reruns and specials in December, when people are getting ready for the holidays. There are likely to be even more December repeats so that the networks can hold onto precious originals.

In January, the broadcasters would run out of new episodes of such favorites as “Desperate Housewives,” “CSI: Miami” and “The Office.”

Several marquee shows, including Fox’s “24” and ABC’s “Lost,” were set to return in January and February, respectively. But “24” will have only eight or nine of the season’s 24 episodes made, while “Lost” producers will have finished half of the 16 episodes ABC ordered.

Privately, network executives talk about shows stashed in their “back pocket.” In many instances, the networks have asked their news divisions to deliver news magazines and have ordered a raft of reality shows to plug the gaps.

“The good news for us is that there is always a need for our business,” said Chris Coelen, chief executive of RDF USA, which provides “Wife Swap” for ABC and “Don’t Forget the Lyrics” for Fox.

NBC has been getting ready with an unscripted show called “Baby Borrowers.” CBS has ordered a legal show with former prosecutor Marcia Clark and is casting for a new edition of “Big Brother,” which typically runs in the summer. Fox is working on “Smile You’re Under Arrest.”

“It could look like summer in winter,” said Tim Spengler, who oversees media buying for Initiative, a New York advertising firm that represents such major clients as Home Depot and Bayer.

The last time writers stopped working was in 1988. The industry has experienced seismic changes since then. Back then, the Big Three networks -- CBS, NBC and ABC -- were king, entertaining nearly 80% of all U.S. television viewers. To make up for the shortage of shows during that five-month strike, CBS ran movies and ABC dusted off old “Mission Impossible” scripts.

The nascent Fox network experimented with “America’s Most Wanted” and “Cops,” that are still reliable mainstays.

“If it weren’t for the strike, “Cops” might not be on the air today,” said the show’s producer Morgan Langley.

There were 17 ad-supported cable channels in 1988. Today, there are more than 100 channels. Video games, DVDs and the Internet also have taken away viewers. Digital video recorders, which allow viewers to record shows and fast-forward through commercials, have cut into ratings and jeopardized ad dollars.

Ratings have fallen precipitously. In 1988, the top series -- “The Cosby Show,” on NBC and “Roseanne” on ABC -- were seen by about 25% of the U.S. homes with TVs. These days, TV’s biggest shows, “CSI: Crime Scene Investigation” on CBS and “Grey’s Anatomy” on ABC, are on in about 13% of households.

The five networks are owned by conglomerates that also control a lot of the production: Walt Disney Co., News Corp., CBS Corp., Time Warner Inc. and NBC Universal, which is part of the industrial giant General Electric Co. Most of these companies are not heavily reliant on the networks to buttress their bottom lines and therefore could weather a strike better this time.

The lone exception is CBS, which nearly two years ago was separated from its sister company, Viacom Inc. CBS is made up of radio properties, a billboard division, Showtime cable channel and Simon & Schuster publishing, but the broadcast network is the heart of the company. CBS relies on advertising for most of its revenue.

“As CBS’ central asset is its television network and production studio, a strike would have a disproportionately negative effect on the company,” according to a recent Lehman Bros. research report.

Last week, CBS Chief Executive Leslie Moonves sought to allay Wall Street’s fears during a conference call to discuss the company’s earnings: “We have a full slate of new first-run programming ready to go, both now and at midseason. We would anticipate no material impact on the company for the remainder of the television season.”

CBS’ comedies and dramas repeat well, maintaining about two-thirds of the audience of their first run. That should help CBS with its advertisers.

CBS might be hamstrung on a separate front. A group of WGA members, news writers, editors and others who work for CBS News and some local stations, have been working without a contract and plan a Nov. 15 strike authorization vote.

Fox Broadcasting, owned by Rupert Murdoch’s News Corp., is in the best position for a strike. The network programs seven hours fewer a week than its rivals. It will air the popular college football Bowl Championship Series during the holidays and its juggernaut, “American Idol,” returns in January.

Analysts also believe that ABC could suffer in a strike. The Disney network’s top shows, including “Desperate Housewives” and “Grey’s Anatomy,” don’t repeat well. To help keep its ratings strong, ABC has ordered more reality shows than usual. ABC can also dip into Disney’s library of movies and old TV shows.

“Disney’s decision to increase television production while simultaneously scaling back film production would also increase the effects of an extended strike,” Lehman’s report says.

It is unclear how NBC might fare. The network is off to a lackluster start this season, with its new shows sputtering. NBC plans to run more reality shows, including “Amnesia” from Mark Burnett and a remake of the 1990s show, “American Gladiators.” It also plans to air on NBC some of its sister cable network’s shows, such as “Project Runway” or “Law & Order: Criminal Intent.”

“In 1988, the television ratings dropped by about 8% and that figure could double 20 years later,” said Spengler, the ad buyer.

If the ratings fall short of the guarantees to Madison Avenue the networks made in June, when they sold the bulk of their ad inventory, advertisers would receive additional commercial spots to make up for lower ratings. Advertisers also could cancel their orders if they didn’t want spots to appear in a replacement show. Such cancellations could take a bite out of the networks’ profits.

RDF’s Coelen noted that reality shows became a permanent part of the television fabric after the last threat of a writers strike in 2001. Networks saw reality shows as cheaper alternatives to scripted shows.

Coelen predicted that a strike could force networks to expand beyond home-grown scripted shows and reality formats to become a bigger buyer of shows that have worked overseas.

“A strike would be a bad thing for the whole industry, but if there is one silver lining, it might make people think in a more creative and different kinds of ways,” he said. “And that could be healthy for the business.”

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meg.james@latimes.com

Times staff writer Maria Elena Fernandez contributed to this report.