Networks Place Bets on In-House Production : Independent producers fear they’ll be the losers in competition for air time with the Big Three’s own shows

About 50 people are squeezed into the conference room of a nondescript, two-story building in Burbank for the Friday morning staff meeting of NBC Productions.

Brandon Tartikoff, who heads both NBC Entertainment and this, the network’s in-house production company, sits at the head of a boardroom table and signals when it’s time for the next person to report on the status of a TV project. Coffee, juice, bagels, muffins and fruit are laid out on a table nearby.

“Jackie Collins turned in her Bible last night,” a producer tells Tartikoff, explaining that the best-selling author has finished her outline for a miniseries.

“We believe we have a backup airfield in Australia if Thailand doesn’t work out,” says someone else, who is working on logistics for a TV movie called “Last Flight Out,” about civilian evacuation before the fall of Saigon.

The process looks like it’s going to take some time. There are three prime-time drama series in production--”Hardball,” “Mancuso FBI,” and “True Blue.” (A fourth, “Shannon’s Deal,” has since been picked up as a mid-season replacement, as has a comedy, “Regular Joe,” with Robert Mitchum.) There’s also the daytime soap opera “Generations,” the Saturday morning comedy “Saved by the Bell,” a miniseries and a couple of movies. NBC also makes a series for Disney, “A Brand New Life,” which appears on the network as part of the “Magical World of Disney.” Thirteen other series are in earlier stages of development. The company is also talking cable deals, co-productions and an occasional feature film.

One by one, the producers, writers and staffers working on in-house projects for NBC update the status of matters ranging from title sequences to script changes and publicity campaigns. Lori Openden, head of casting for both NBC Entertainment and NBC Productions, occasionally pipes in with suggestions.

The variety of projects and the sheer number leave the impression that this production company, with its annual budget of $200 million, is not much different from any other go-go production company.

And that makes a lot of people in Hollywood very nervous--particularly the studio executives and independent producers who now make a living selling programs to the networks. They fear that the networks will increasingly buy from themselves rather than from outside suppliers.

Less than a year from now, in November, 1990, the three major TV networks will be free from the government rules that have restricted the amount of programming they can produce for themselves. While no network executives expect to fill their entire schedules with home-grown shows, they do plan to exploit their new freedom. In-house production is in high gear not only at NBC, but also at CBS and ABC.

ABC recently beefed up and renamed its own in-house production company and brought in former entertainment division president Brandon Stoddard to run it. The fledgling company has at least 20 projects in development, including a TV movie that will glorify George Bush’s war years. The company also has been busy making pricey deals with writers and producers. Among those under exclusive contract to ABC Productions is Ron Koslow, creator of CBS’ “Beauty and the Beast.” He has two shows in development for ABC.

While ABC Productions’ main objective is to supply programming for ABC Entertainment, the company is free to sell a program elsewhere if the entertainment division doesn’t buy it. The in-house company also can produce programs for outside companies that approach it with an idea first. Stoddard startled the TV industry earlier this year when he announced that he had a project in the works for rival NBC. Since then, NBC has given ABC Productions the go-ahead for a two-hour movie script that will serve as the pilot for a drama series. Stoddard’s team also has projects in the works for HBO.

CBS Entertainment has two self-produced programs on the schedule this season, “Wolf” and “Rescue 911.” Despite the fact that “Wolf” is one of the lowest-rated shows on television, it has been given an order for additional episodes. The action series has been pulled temporarily from the lineup but will return after undergoing changes to lighten its dark and sinister tone. Also in production from CBS is the mid-season replacement series “Bagdad Gas & Oil.”

Coupled with the three prime-time programs produced by CBS News (“60 Minutes,” “48 Hours” and “Saturday Night With Connie Chung”), the network began the 1989-90 season filling 23% of its prime-time schedule itself.

Unlike NBC and ABC, CBS is concentrating its in-house efforts exclusively on itself. “When you’re sitting in the No. 1 position, you can afford to fool around a little bit,” says Norman Powell, head of in-house productions for last-place CBS. His job now, he says, is to make shows that will “move us up to second place” and then back into first place. “Then you can start to say, ‘Where is the in-house business going in the ‘90s or after the turn of the century?’ ”

All this network activity is troubling for the TV producers outside the networks. They expect to have an increasingly difficult time getting their series, movies and specials on the network schedules when the programs they are competing against for time slots are made by the networks themselves. Fewer shows on the air means fewer opportunities to reap the enormous profits that come from syndicating a successful series. NBC’s top-rated “Cosby Show” has earned more than $600 million in syndication so far, for the Carsey-Werner Co., the production company; Viacom, the distributor; and Cosby, the star. But even a modestly successful sitcom can earn $100 million.

“They’re saying ‘We want a piece of your pie,’ ” complains David Salzman, president of Lorimar, which has been particularly successful landing its series on network schedules (“Dallas,” “The Hogan Family,” “Paradise”). “It’s just not right.”

Independent producers are concerned that they’ll either have to work for the networks, giving up the ownership of their programs, or be forced out of business.

“By expanding in-house, the networks intend to leave the independent producers in the outhouse,” snipes Leonard Hill, a TV producer who heads his own company.

Network executives have repeatedly said they do not favor their in-house productions when it comes to selecting shows for their schedules. Good business sense dictates that they air the best shows, regardless of whether they make them themselves, they say.

But those on the studio side scoff at that notion. “That’s bull,” says Jack Valenti, chairman of the Motion Picture Association of America and the studios’ point man in the programming wars. “Before a show goes on the air, nobody knows if it’s going to be a hit. If you had two shows (one produced in-house and one produced outside) and they seemed about equal, which would you put on the air?”

One TV executive says he was told by CBS that the network maintains two budgets for buying TV movies--one to buy movies from outside suppliers and one to fund those developed by its in-house production unit. If true, that means the network has a quota on the percentage of outside programming it uses. (CBS declined to comment.)

So far this season, the network’s shows have not fared particularly well. NBC pulled the tepidly rated “Hardball” off the schedule for retooling, replacing it on Fridays with another in-house production, “True Blue.” Nor is “Mancuso, FBI” topping the Nielsens. The program is ranked 65th out of 82 shows on the three major networks. At CBS, “Rescue 911,” a cheap-to-produce reality show, is getting low ratings. But CBS executives praise it for getting higher ratings in its tough Tuesday time period than the network has seen there in ages.

Until the 1970s, the networks were free to produce as many shows as they wanted, share ownership of programs with the studios that made them and syndicate the shows within the United States.

And they did. In 1967, according to the U.S. Justice Department, CBS either owned or had a financial interest in 68% of its prime-time programs. ABC had financial interests in 86% of its programs while NBC was owner or partial owner of 68% of its programs.

But a tangled web of Federal Communication Commission rulings, Justice Department lawsuits and legal wrangling throughout the 1970s, focusing on alleged anti-competitive behavior by the networks, left the Big Three stripped of these lucrative practices. Among other things, the networks were accused of bullying their suppliers into giving them a percentage of future syndication profits, without sharing any of the networks’ initial advertising revenues.

The networks were barred from syndicating programs within the United States and limits were placed on the number of entertainment programs they could produce themselves. They are still prohibited from syndicating programs domestically, although they are fighting to regain that right.

But under terms of consent decrees the networks signed with the Justice Department, they have been allowed to increase their in-house production gradually, with the amount of prime time they are allowed to fill each week growing to three-and-a-half hours in 1987 and five hours this year. The restrictions will expire next November.

The studios and independent producers are worried that the networks will return to their old domineering ways. But as the networks tell it, the television business has undergone radical changes since the ‘70s--changes that have made the development of in-house production crucial to their survival. The days when the networks routinely attracted more than 90% of the TV audience are over, they point out; now the networks’ combined average hovers around 67%. With more options available to viewers--such as cable, videocassettes and independent stations--the networks’ ability to generate profits is waning. To stay competitive, they say, they must expand beyond their core business of licensing programs and selling advertising time on them.

Also drastically changed is the role of the studios, which own broadcast stations and cable networks and make programs for them. Network executives point to the Walt Disney Co. and its Disney Channel; Paramount and MCA’s joint cable venture, the USA Network; the Time-Warner merger that has created a company with extensive TV operations, including HBO, and 20th Century Fox, which has its own “network,” Fox Broadcasting. But the three-night programming service is not legally considered a network, so it is not subject to the same government restrictions as ABC, CBS and NBC.

All these companies are in both the production and exhibition businesses; the networks contend that they should have the same rights.

Tartikoff says he can no longer trust that program producers will supply NBC with their best offerings. He still feels snookered by Time Inc. over the circumstances that resulted in HBO’s special on the making of Sports Illustrated’s swimsuit edition. Both HBO and Sports Illustrated are Time companies.

“The HBO swimsuit special, which was one of HBO’s highest rated events, was originally pitched to Sports Illustrated by the NBC sports department and then sold to me (in the entertainment division),” he says. “Then, when the Time people found out about it, they said ‘Why are we doing it for them? We should do it for ourselves--for HBO.’ ” (HBO confirms this story.)

But the networks’ motivation for producing shows in-house goes far beyond ensuring that their schedules are filled adequately. There are the financial rewards to be considered. Although prohibited from syndicating their shows within the United States, the networks can sell programs to outside distributors for a flat fee. And they are free to syndicate their programs internationally.

Besides earning revenues from selling their own shows, the networks can save money on renegotiating the licensing fees of successful programs from outside producers. “We just went through the renegotiation of ‘The Cosby Show,’ ‘Golden Girls’ and ‘Cheers,’ ” Tartikoff says. “Our licensing costs for those three shows went up astronomically.” By owning more of their shows, the networks figure they won’t be subject to such sharp increases as often.

Studio executives and outside producers say that the networks are now learning firsthand about the difficulties of controlling production budgets. They gleefully point out that one of TV’s biggest production nightmares--”Moonlighting”--was an ABC in-house production. The one-time hit was notorious for being over budget and behind schedule.

But in a sense, “Moonlighting” is a perfect example of why the networks want to produce more programs themselves. Despite all the problems with the one-hour drama, ABC says it made piles of money on it because the network was able to run each episode numerous times without having to pay the extra fee that outside producers would have charged. Under standard licensing arrangements, the networks buy the right to air a program only two times.

Network executives working on in-house productions also say they are tired of giving away million-dollar ideas. During a press conference to talk about ABC Productions, Stoddard lamented that “one of the greatest mistakes I’ve made in my life is that I gave away the idea for ‘The Love Boat.’ It was close to a $100-million mistake.”

Says NBC’s Tartikoff, “We are the network that in some form generated the concepts for such successful series as ‘The A-Team,’ ‘The Cosby Show,’ ‘The Golden Girls,’ ‘Knight Rider,’ ‘Hunter,’ ‘Empty Nest,’ ‘Miami Vice.’ ” Now, he says, “instead of just willy-nilly going out into the community and giving these ideas out to the Viacoms or the Paramounts or the Stephen Cannells, we can cull through the ideas and see which are achievable through NBC Productions.”

The same thing goes for actors developed in-house, says Tartikoff, who notes the number of stars whose careers were launched on NBC’s “Saturday Night Live.” “In the late-night area, we’ve been giving it away for so long it’s a crime. We’re going to try to at least get a taste of what we give away for nothing. We’ve kept Paramount, Universal and Warners in the chips for years with the kind of people that came out of the show.”

The battle for the airwaves is, at its essence, a backstage fight over power and profits that is unlikely to effect viewers any time soon. It’s more about foreign syndication deals and licensing fees than it is about the kinds of programs the audience will see.

Nonetheless, both sides say they are the ones who can ensure innovative, quality programming for the future.

Studio executives and producers insist that the greater control each network has over what gets on the air, the more homogenized TV will become. “More and more of what you see on television will be dictated by three people,” warns the MPAA’s Valenti. “It’s dreadful for consumers.”

Producer Hill likes to tell the story of Norman Lear, who radically altered television in the 1970s with “All in the Family.” Lear originally developed the show for ABC. But when that network turned it down, he sold it to CBS.

“Had ABC owned either Lear or the underlying project,” says Hill, “Archie Bunker would have been aborted.”

Tartikoff sees the quality control angle another way. He points to the financial problems studios are having with adult dramas and suggests that they might just stop producing them one day. The once lucrative syndication market for one-hour dramas has withered and so might the incentive to produce them, the NBC president theorizes.

He cites the case of “St. Elsewhere.” MTM, after six season of producing the show, told network executives in 1988 that if they wanted the series for a seventh season, they would have to pay 150% of the license fee they had been paying. NBC refused and MTM stopped making it.

“It hurt on a lot of levels,” says Tartikoff. But he says it made him realize there “may come a point three years out, two years out, where the intelligent adult drama may become an endangered species. And if you know there is an audience that wants to see an ‘L.A. Law’ and wants to see a ‘China Beach’ and wants to see a ‘Mancuso FBI’ or a ‘thirtysomething,’ then to (paraphrase) Blanche Dubois in ‘A Streetcar Named Desire,’ you can’t be dependent on the kindness of strangers.

“You’ve got to be out there saying that if the audience wants an ‘L.A. Law’ and 20th Century Fox doesn’t want to do it anymore, then you better have an arsenal of producers a fingertip away who can get you that kind of program. We make a profit on those programs and there’s got to be a way to deliver that kind of product if (the audience) wants to see it.”

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