TV’S LOWERED EXPECTATIONS

Tim McDonald, whose Virginia-based TVX Broadcasting, will soon own more TV stations--12--than any one company has ever owned, didn’t even bother to bring a checkbook to the National Assn. of Television Program Executives convention, the annual TV program marketplace that ended here Sunday.

Walking across a hallway high above the 200,000 square feet of exhibitions--set up by companies selling old and new TV shows of all shapes and sizes--McDonald gave a terse answer when asked what he would buy this year: “Nothing,” he said.

“Prices are going to fall seriously and quickly, and anyone who buys before prices fall is crazy.”

McDonald’s choice of patience over purchase was just one of many signs that the TV business is in a state of change--one where long-held assumptions about what works and what doesn’t are getting thrown out the window.

Production companies, including the major film-and-television studios, once counted on any series that survived a five-year run on the networks and tallied 100 or more episodes to reap big profits in syndication--the sale of the reruns to individual stations for non-prime-time play.

But the message of lowered expectations blew across the trading floor like a stiff wind following recent announcements that MCA and Lorimar had overestimated TV sales profits by a combined total of $87 million.

Technically, MCA and Lorimar wrote off $50 million and $37 million, respectively, as reserves against bad debts, a not-uncommon business practice.

But beneath the financial jargon, these companies’ actions signified that the current perceived trend in viewer taste had finally hit TV producers in their pocketbooks. Hourlong action shows and those with continuing storylines--even series that were bona fide hits on the networks--are not commanding the prices they once did in the afterlife of syndication.

So part of the profits anticipated for the sale of reruns of “Knight Rider,” made by MCA’s Universal Television division, and Lorimar’s “Falcon Crest” had to be reassigned to the loss column.

With many “off-network” shows such as these starting to look like damaged goods when they begin daily reruns, producers are turning to alternatives for the syndication market: comedies, relatively inexpensive talk and game shows, even brand-new half-hour adventure series.

The latter category was represented by at least four new shows that were hawked on the Convention Center floor since last Wednesday: revivals of “Sea Hunt” and “Rat Patrol,” a Dirty Harry clone series called “Get Calhoun,” and the irrepressible Mr. T, late of “The A-Team,” in “T and T.”

Each of those shows, if they are bought by enough stations--a big if-- would be produced directly for the syndicated market, bypassing the major networks.

The half-hour action series are gambling on the flexibility of the 30-minute building block and their use as a counterprogramming tool against comedies.

In the area of cost containment, they also have a potential edge over network shows: “We know we’re going to do 22 episodes,” said Dick Cignarelli, executive vice president for domestic distribution at MGM-UA Television, producer of “Sea Hunt” and “Rat Patrol.” “We can plan ahead. It can mean more efficient shooting.”

The same economies of scale could apply to “Star Trek: The Next Generation,” even though it is an hourlong series. At an anticipated budget of $1.2 million an hour, this Paramount TV offering for next fall is expected to have network-quality production values and is certain to sell sufficient markets to get on the air.

It also offers Paramount an opportunity to recoup that money more quickly than if it were to go on a network. The reason is that the new “Star Trek,” like many of the “first-run” syndicated series shown off at this year’s program convention, is offered to stations on a barter deal.

That is, the station agrees to put the show on the air but, instead of paying for it, it shares the commercial advertising time with the producer, in this case Paramount.

A first-run barter show that becomes a hit reaps the rewards of high ratings, which translate directly to higher ad rates.

(Those rewards are potentially higher than what would be reflected in a network’s yearly increase in the negotiated fee it pays producers for rights to their shows.)

The best-selling programs in the “strip” market--shows that can be stripped in to air every weekday at the same time--were shows that don’t need to be as pricey as an off-network hit. These included the game show “Win, Lose or Draw,” a sketch-pad version of charades that features celebrity players like Burt Reynolds and Tony Danza; a revived “Truth or Consequences”; and “The Will Shriner Show,” an hourlong daytime talk-humor show that brings to mind “Late Night With David Letterman.”

“Rather than cutting costs,” said Jamie Bennett, programming vice president for Walt Disney Co.’s syndicated television division, “we’re choosing programs that have economics that fit their time periods.”

Station owners--whose representatives made up the bulk of the program convention’s 7,800 attendees--took up the cry for lower program prices on several levels.

In Tampa, no station agreed to meet the minimum bid required for rights to “The Cosby Show,” which goes into syndication in 1988 and heretofore has set record sales figures.

Fox Television, the seven-station group owned by 20th Century Fox parent Fox Inc., announced a ceiling of $375,000 total per episode from all seven stations for any off-network sitcom. That price would scarcely bring the Fox stations shows like “Webster” and “Silver Spoons,” both of which took in more than $100,000 per episode in some individual markets.

“What you see in all these things is the gradual realization that the business has gotten out of control,” said Derk Zimmerman, president of the Fox stations (including KTTV Channel 11 in Los Angeles).

As Zimmerman explained it, the high prices for network reruns, with benchmarks set along the way by the likes of “Happy Days” and “MASH,” persisted as independent stations assumed that double-digit growth in ad revenues would continue. “They pushed their business plans to the wall,” he said.

But ad revenues decelerated, in part because of a lower inflation rate and partly because of the many big corporate mergers, which are thought to diminish competition among brands. Too, ad sales generally are thought to “soften” in years between presidential elections and the Olympics.

At the same time, many new independent TV stations were started. In some markets, there weren’t enough ad dollars or viewers to go around.

“Suddenly everything went to hell in a hand basket,” said industry analyst Paul Kagan. “UHF stations in major markets couldn’t pay all their bills as of around mid-1986.”

Independent station groups such as Grant Broadcasting in Chicago and Chattanooga-based Media Central filed for bankruptcy, leaving companies like MCA and Lorimar with bad debts to write off.

Dick Robertson, a member of the office of the president, Lorimar Telepictures, insisted that the stations in financial trouble “represent less than 5% of the business.” But he also acknowledged that the programs themselves were often part of the problem.

“The product sold to these stations was product that couldn’t sell to the top stations. ‘Dallas,’ for example, had trouble selling and in fact sold in Chicago to Milt Grant.”

Don Menchel, president of MCA Television, sees his company’s write-offs as representing a “temporary glitch” in the industry.

What those kinds of answers indicate is that producers will continue to make series like “Dallas” and “Miami Vice”--another expected tough sell for MCA when it hits the syndication market.

They’ll willingly lose hundreds of thousands of dollars on each episode during their network runs in the hope of making a killing in syndication.

But they’ll also look to other ways to hedge their bets. They’ll shoot in Canada, as Stephen J. Cannell is doing to trim the budget on “Stingray,” which recently returned to NBC.

They’ll hone their foreign marketing strategies, as New World Television says it did to up its profit potential on “Crime Story.”

They’ll ditch high-priced action scenes and find other ways to make series compelling.

And they’ll tailor specific shows to specific markets, as Lorimar is doing with “Suddenly Sheriff,” the first-run comedy for the fall that will air not on the NBC network but on its owned-and-operated station group, plus other stations.

They’ll also cut back on star perks, as Michael Landon’s production company does on his “Highway to Heaven,” where guest stars all get the same small dressing rooms, regardless of stature.

The major studios and production companies may not have to do an awful lot of the above to continue making an awful lot of money. Smaller companies, however, may have to drop out of the race--at least until current economics change.

“Good programs are an annuity and good programs are not in any financial difficulty,” said analyst Kagan. “Fringe television programs are, and that’s really an economic revolution.”

Program Marketplace Is Changing--Long-Held

Assumptions Are Getting Thrown Out the Window