Michael King isn't kidding when he declares that King World Productions, which until a few years ago was best known as the TV syndicator of the ancient "Little Rascals" movie shorts, aims to be "the most important supplier to television stations in every time period. We would like to be the ultimate distributor in the world."
This is the same company that King, at the age of 25, operated out of a brother's kitchen in 1973 after the death of his father, Charles, who founded King World nearly 20 years before.
This is the same company that two years ago had a mere 15 employees--and six of them were Kings.
But this same company is now one of the hottest firms in the $1-billion television syndication business. King World employs more than 70 people, has moved its headquarters to New York from Summit, N.J., and has added offices in Beverly Hills, Chicago, Nashville and Toronto.
At the hub of that success is "Wheel of Fortune," a wildly popular game show produced by Merv Griffin Enterprises and distributed by King World. Since September, 1983, King World has spun the top-rated night-time "Wheel," which also has aired during the day on NBC since January, 1975, to produce a fortune of its own.
Largely on the strength of "Wheel of Fortune," King World's net income soared 418.5% from the year before to $3.4 million and revenues leaped 255.8% to $29 million in the fiscal year ended Aug. 31, 1984.
Analysts say results for the fiscal year that just ended should also take a healthy jump, estimating earnings at $1 per share for fiscal 1985, up from 37 cents per share the year before. Per-share earnings should rise to $2 in fiscal 1986 and to more than $3 in fiscal 1987, based on new programs that King World will distribute in future seasons, they say.
King World made its initial public offering of stock only last December at $10 per share and followed in July with a two-for-one stock split. Its shares, which are traded in the over-the-counter market, have recently hovered around $20 per share, compared to a split-adjusted $5 per share only 10 months ago.
"It's been one heck of a year," said King, who is company president and is based in the Beverly Hills office. King's older brother Roger is King World chairman and its top salesman. A non-family member, Stuart Hersch, joined the company in late 1983 as chief operating officer.
"I think their prospects are terrific," said Barry A. Kaplan, an analyst with Bear Stearns & Co. "They've got this big hammer in 'Wheel of Fortune' and 'Jeopardy!', " another Merv Griffin game show that was revived in syndication last season and is currently the third-highest rated syndicated program. "Stations are willing to take a look at what they have to distribute," Kaplan said.
Entertainment analyst Lee Isgur of Paine Webber called King World "an absolutely intriguing company" that provides investors an opportunity to invest in the lucrative TV syndication market.
"Normally these companies are owned by a single individual and they run it as a private company and you never get a chance to invest in the thing," he said. King World's future earnings are easy to predict because every year the company amasses millions of dollars in revenues that it can't record until the shows that generate the funds go on the air, he said.
As a syndicator, King World buys the rights to distribute a television program and then lines up television stations to air it. Stations pay the producer and distributor with cash and advertising time, which King World then resells.
The proceeds from the cash license fees paid by the television stations and the advertising time are then split between King World and the producers of the show. Syndication of first-run programs has become big business in recent years because of the tremendous increase in the number of independent television stations--to about 240from 75 a decade ago--and the fact that fewer network shows run long enough now to make their reruns good candidates for syndication.
King World now syndicates four shows produced by Merv Griffin Enterprises, including "Headline Chasers," a new game show that premiered in September. This season, King World also started distributing a late-night music show called "Dick Clark's Nitetime."
Classic Film Library
King World also owns a library of such classic films as "Joan of Arc" with Ingrid Bergman and "Anna Karenina" with Vivien Leigh, a collection of detective movies such as the Sherlock Holmes series starring Basil Rathbone and Nigel Bruce, the "Topper" television series of the early 1950s, among other holdings. And, of course, the "Little Rascals" series.
"Sometimes you get caught up in your work and you watch 'Little Rascals' and it just brings you back down to earth," King said.
King World has been so successful because "they do more than just go into a station and just sell a product," Isgur said. The company researches extensively "to try to find out what is the best station and what is the best time period," he said.
Once the show is on the air, King World backs it with promotion, he said. King World and Merv Griffin Enterprises this season are spending $5.2 million to promote the Griffin shows; one current "Jeopardy!" promotional spot briefly features Michael King as a machine-gun-toting hit man.
"They're very aggressive and go after what they want," Isgur said. "I think that Michael King and Roger King eat up the business. Roger King doesn't like being alone and doesn't like when he can't be selling.
"They're much more than a straight order taker, so they get paid more than ordinary distributors," Isgur said.
Commands High Fees
King World often commands distribution fees as high as 50% of a show's revenue while other syndicators usually get between 10% and 30%, Isgur said. However, many distributors charge producers for various expenses--a practice King World doesn't follow--which brings the syndication cost to 20% to 40% of revenue, he said.
"American Bandstand" host Dick Clark said he chose King World to distribute his new late-night music show because "they're very fast moving and aggressive and polished and professional.
"They've been at it a long time and they have excellent station relations," Clark said. "They not only distribute but they promote and they do their job well."
But the road from "Rascals" to "Wheel" was not always smooth. "Little Rascals" is all King World had in 1973, when other producers dropped the company after Charles King's death.
"They weren't going to deal with a bunch of greenhorn kids," King said. "It was real tough."
King World then was grossing $150 a week ("and there were some who thought that was too much") and Michael King found himself parking cars on weekends to supplement his income. But the King family had grown up in the syndication business, discussing impending transactions with their father over dinner.
"We went over every deal," King said. "I remember specifically telling my dad that I didn't think some of the deals were so good at (age) 14, and he told me to go outside and rake the leaves."
Experience Paid Off
That experience came in handy. Sales grew, other family members eventually joined King World, and the syndicator signed in late 1977 with Colbert Television Sales to be the sub-distributor for the "Joker's Wild" and "Tic Tac Dough" game shows, which are produced by Barry & Enright Productions.
King says that King World had sales of $20 million from "Rascals" and $70 million from the Barry & Enright shows in the years before "Wheel of Fortune."
In December, 1982, King World paid a $50,000 advance to Merv Griffin Productions for the syndication rights to "Wheel." The nighttime "Wheel of Fortune," a glitzier version of the aging daytime network show, debuted in September, 1983, and took off in the ratings to become the highest-rated syndicated television show in history.
"What a deal," gloated Stuart Hersch, King World's chief operating officer. "We paid a $50,000 advance to Merv and 'Wheel of Fortune' will earn hundreds of millions of dollars."
But in King World's closet hides one flop of a show, a magazine-formated program on soap operas called "Soap World" that preceded the "Wheel" deal. From it King World learned some valuable lessons with which it fashioned the unorthodox selling strategy that helped push "Wheel of Fortune" to the top.
"Soap World" was "a concept that I came up with and I thought it was absolutely brilliant," King said. The half-hour daytime show, which premiered in the fall season of 1982, was designed to capitalize on the popularity of soap operas.
King said the company made a mistake by taking one minute of national advertising time as part of its licensing fees. For commercial time to command decent fees from advertisers, a show must be on enough stations to cover at least 70% of the country.
Sold to Anybody
To reach that magic 70% figure, King World sold the show to any television station that would put it on any time spot, King said.
"We put it on stations that had nothing to do with soap operas," he said. "In Los Angeles, we were on KTTV coming out of 'Tom and Jerry' (a children's cartoon show)."
"Soap World" lasted just 26 weeks, spawned six imitators and ended up costing King World more than $1 million, King said. "It was emotionally and physically draining as well as financially draining," he said.
A year later, the relationship ended between King World and Colbert Television Sales, which is part owned by Barry & Enright.
And so in late 1982, King World was looking for a new project. Company research convinced the Kings that "Wheel of Fortune," which had aired on NBC daytime television for seven years, was "the greatest opportunity we had ever had in our life," King said.
During its years on the air, the network had moved "Wheel's" time slot five times and the show leading into it was changed seven times, Hersch said.
"That's the kiss of death, and yet the viewers consistently found it," he said. "Our research showed that this show was a winner if placed in the right environment."
Unusual Selling Strategy
King World persuaded Merv Griffin Enterprises to let the company pursue an unusual selling strategy: King World demanded no advertising time as part of "Wheel's" licensing fees and it bypassed stations in the top three markets--New York, Los Angeles and Chicago--in favor of smaller markets where the company knew it would have a better chance of placing the show on the stations it wanted at the time period it wanted, Hersch said.
King World promised to sell the show to enough stations to clear 40% of the country, "then if it starts to work, we're home free and we could roll it out," Hersch said. "It was like we had a crystal ball."
"Wheel of Fortune" began airing in September, 1983, on 59 television stations covering 43% of the country. Ratings soared and King World was able to negotiate bigger and better deals for the show.
In September, 1984, "Wheel" was on 181 stations. King World was then taking 30 seconds of commercial advertising time per show and had increased average licensing fees to $92,000 per episode from an average of $32,700 the year before. This season, the price has risen to $160,000 per episode.
Also that season, Merv Griffin revived "Jeopardy!," a daytime game show that ran on NBC for nearly 11 years until it was canceled in 1975. King World syndicated the new version to 115 stations and "Jeopardy!" leaped in the ratings to become the third-highest rated syndicated show after "Wheel of Fortune" and "MASH."
Aren't Greed Shows
Murray Schwartz, president of Merv Griffin Enterprises, said the two game shows are so popular because "these are not greed shows, these are thinking shows."
"Wheel of Fortune" is a cross between the child's game of hangman and the more adult pursuit of roulette. The show, hosted by Pat Sajak and Vanna White, features three contestants who spin a large wheel to determine their potential winnings as they try to guess the puzzle--usually a phrase, like "thrill of a lifetime," or a title, a person, a place or a quotation.
"Wheel's" devotees include Occidental Petroleum Chairman Armand Hammer and rock star Mick Jagger.
"Jeopardy!" hosted by Alex Trebek, bills itself as "your daily dose of trivia with a twist." Contestants are given an answer and then must figure out what the question is.
Schwartz insists that the current popularity of game shows is not new, but "our timing and understanding of the marketplace was very important. We felt there was room for game shows again."
People watch game shows to escape, he said.
"There is so much unhappiness now in society, and disease and terrible news," he said. Viewers want to "play something and have a good time doing it and maybe get a little glamour."
Distributes Other Shows
King World also distributes Merv Griffin's talk show and a new daytime game show by Merv Griffin Enterprises called "Headline Chasers."
The life span of a game show is typically five to seven years, Hersch said. For "Wheel" and "Jeopardy," "it's hard to predict, but the minimums seem very much within our reach and if those minimums are achieved this company will have a tremendous amount of cash for other ventures."
Game shows are conspicuously absent from King World's coming syndication plans.
"You can't beat 'Wheel' with a game show," King said. "We are going to let the other game shows go against 'Wheel.' "
Heading the list of the shows King World will distribute next season is a daytime talk show starring Oprah Winfrey, whose current local Chicago talk show dominates the ratings there.
"The Oprah Winfrey Show" will be "an exciting alternative to Phil Donahue," King said. "She's commanding huge licensing fees."
King World also will syndicate two half-hour music-related shows that will air back-to-back in the late-night time period.
"Rock 'N Roll Evening News," produced by Andy Friendly Productions in association with A&M; Records, will be a half-hour program devoted to rock news and interviews. It will be paired with a talk and variety show produced by Motown Productions that will feature comedian David Brenner and musician Billy Preston.
Seeks Other Ventures
King World also is looking at a variety of ventures on which to spend its growing cash hoard.
The company is interested in film production and is working with an unnamed "major producer" on a remake of "Little Rascals," that is scheduled to hit theaters in May, 1987, King said. King World already has made one "Rascals" movie, a film compilation called "Rascal Dazzle."
King World has diversified by building a merchandising division, creating a company to resell its advertising time, and increasing its emphasis on international sales, Hersch said. King World recently sold the format rights for its game shows to Romania, Czechoslovakia, Hungary, East Germany and Poland; "They bought the most capitalistic form of entertainment around," he quipped.
King World also has been considering purchasing television and radio stations, film libraries and magazines, but has yet to buy anything.
"This whole industry is in a state of chaos and by that I mean everyone is overpaying for everything," Hersch said. "We haven't made an acquisition because we're not going to overpay."
The Kings definitely are not interested in selling control of the company either. Michael, Roger, Richard and Diana King and their sister Karen Rabe, along with Stuart Hersch, control more than 60% of the company's stock. (A sixth King, Robert, was bought out and left King World in 1984 after a disagreement about the future of the company.)
"Why would we (want to sell)? I sort of like it the way it is," Michael King said.
"After the dust settled and after the euphoria (of going public) ended, we realized that we love this business. It's kind of neat being in charge of your own destiny."
KING WORLD PRODUCTIONS AT A GLANCE
9 months ended May 31 Year ended Aug. 31 In millions of dollars 1985 1984 1983 1982 1981 1980 Revenue 43.46 29.04 8.16 4.18 4.25 3.56 Net Income 4.60 3.37 0.65 0.32 0.83 0.66