GROWING DEFICITS MEAN CHANGES FOR TV DRAMAS

The prime-time television business, stretched increasingly thin between the conflicting needs of the networks that broadcast shows and the production studios that make them, is starting to crack at the seams. The victims could be future hourlong dramas from the makers of shows like “Magnum, P.I.,” “Hill Street Blues” and “Trapper John, M.D.”

The problem is the widening gap between what the networks are willing to pay for dramatic or action series and the actual cost of producing those same shows.

Faced with deficits of $300,000 to $500,000 per episode--mounting to $30 million or more before a series’ accumulated episodes can be sold at a profit--the film-and-TV studios for the first time are starting to say “no” to network deals.

Universal Television recently turned down a deal that would seem to be a TV executive’s dream: a commitment from NBC to air 14 hours of “The Ultimate Adventure Company,” a high-ticket, high-action show from “Magnum” executive producer Donald Bellisario, planned for the 1986-87 season.

Also potentially in limbo, sources say, is the new Chicago-based cop show from “Miami Vice” executive producer Michael Mann, which he hopes to call “Crime Story.” That one, too, has a high price tag that is several hundred thousand dollars per episode above what the networks typically pay.

A near-casualty was “L.A. Law,” the new ensemble show from “Hill Street Blues” co-creator Steven Bochco, also due for a fall start on NBC. Twentieth Century Fox Television President Harris Katleman said that he gave the green light for production only after the network upped its “license fee,” the amount it pays the studio for the rights to two broadcasts of each episode.

“Making television programming at the prices the networks have been paying is not as good a business as it used to be,” said Universal TV President Robert Harris, who confirmed that the heaviest impact is in one-hour series.

“The deficits we’re asked to take are so high that, even with a hit show, your chances of coming out are very slim,” Katleman agreed. He added that he is also holding back on two pilots for new series requested by the networks, pending the negotiation for higher license fees.

Officials at other studios expressed similar sentiments, though some asked not to be quoted by name because they are in the middle of delicate and highly competitive negotiations to sell shows for the networks’ fall season.

NBC executives contacted declined to be interviewed for this article, because of those same negotiations.

But at CBS, entertainment president B. Donald (Bud) Grant said that the networks cannot afford the 15% to 20% increases in upfront money the studios are asking for. “Over the last three years, I think all three networks have kept costs under control. I don’t think you can say the same thing for the studios.”

Grant said that, in at least one instance, the gap between what CBS was offering and the studio wanted was so high, “I said, let’s forget it.”

At the core of this mounting rebellion by producers is the dual nature of the television business. On one side of every deal is one of the three networks--NBC, CBS or ABC. They make money by programming shows that will draw audiences of a size and makeup desirable to sponsors, who pay hefty sums for commercial time (in some cases $225,000 for 30 seconds of air time.)

On the other side are the producers--the major studios plus a handful of independents like Lorimar-Telepictures and MTM Enterprises. Given their weekly deficits, they make money only if they can sell a complete package--100 episodes of a single series is ideal--in “syndication” to stations that air reruns of former network shows during the day or late at night.

The networks say the reason they don’t put up all the money for a show to be produced is because the Federal Communications Commission prohibits them from sharing potential long-term profits.

But there is a built-in glitch in the system: Networks like hourlong dramas because they provide easy-to-program blocks that hook viewers for twice as long as a sitcom. Stations building their non-prime-time viewership, however, favor the half-hour series.

The studios until now lived with that problem, knowing that a single hit could make up for all the deficits. But they now fear that, because of a glut of one-hour shows, huge syndication windfalls could have peaked with “Magnum, P.I.,” which drew about $1.8 million per episode , total, from all U.S. stations.

The evidence from the television syndication convention that the National Assn. of Television Program Executives held last month in New Orleans strongly supports that notion.

--”Cagney & Lacey,” last year’s big Emmy-winner, has been sold in only 10 of the more than 200 potential TV markets, according to Scott Towle, president of Orion Television Syndication.

--Larry Gerbrandt, an analyst with Paul Kagan & Associates, a Carmel-based media consulting firm, points to “Falcon Crest” as one of a handful of popular series that is being bartered to independent stations--that is, given to them in exchange for commercial time instead of sold for cash. “It’s a sign that the market is weak,” he said.

--”St. Elsewhere,” which draws a “high demographic” (i.e., high-income) audience that has made it profitable to NBC in first-run broadcasts despite so-so ratings, is not selling well in syndication, Gerbrandt and others said.

--MCA, parent company of Universal-TV, is reediting the hourlong “Knight Rider” into complete half-hour episodes, a sure sign that full hours weren’t selling.

In contrast, “Family Ties,” “Webster” and “The Cosby Show” all are expected to bring in $1.5 million or more per episode.

“Magnum’s” Bellisario said that the syndication convention actually triggered Universal’s stand on its deficits.

Both Universal and NBC, he said, had instructed him to use exotic locales around the world and have lots of action and adventure in “Ultimate Adventure Company.” Bellisario cast Australian newcomer Jack Healy to co-star with Sterling Hayden and Bo Svenson in a show about a team that would fulfill anyone’s fantasy adventure trip.

But when the show was budgeted, he found that “this was going to be as high as ‘Magnum’ in it’s seventh year.” That means in the neighborhood of $1.5 million per episode, reflecting the fact that star salaries and production budgets continually increase.

Bellisario came up with some cost-cutting measures that seem like they could become a model for an industry plagued with rising production costs. He applied for waivers from the Directors Guild of America and the Screen Actors Guild that would allow him to shoot location scenes for several episodes at one time. He also worked out a plan with Tom Naud, developer of the Introvision system, by which actors on a sound stage could be made to look like they were in exotic locales.

Further, NBC granted Universal the rights to market the two-hour “Ultimate Adventure” pilot as a videocassette prior to its network debut.

“I was looking at every manner possible to make this show economically without losing any quality,” he said. The budget was down “20% to 25%.”

The deficit per episode was down to that of most other series, but Universal now considers even that too high.

Harris emphasized, however, that Universal still is willing to deficit to some degree. Industry observers said that $150,000 per episode is a figure that the studio would find more agreeable.

Bellisario, like other industry observers, believes that the networks and studios need to look together for solutions. A consensus of industry executives contacted suggests some possible remedies:

--The networks may have to increase license fees to make it financially possible for the studios to subsidize the high-style shows the networks want--especially considering how many flops they lose money on before getting a durable hit.

--The studios will have to take a harder line on their own budgets. Insiders suggest that 20th Century Fox did exactly that with the new Bochco show before looking to NBC for more money.

--L.A.-based unions will have to become more flexible. Fox’s “Popeye Doyle” pilot shooting in Toronto and Universal’s “Island Suns” in Hawaii are two examples of productions that are saving money by leaving Hollywood, where the unions are much more strict about the days of the week allowed for production, missed-meal penalties and the number of drivers assigned a production. “The unions have to change,” Bellisario said. “The below-the-line production numbers are astronomical.”