The Great TV Movie War of 1990 : In pitched battle for viewers, cable and broadcast outlets are splurging on rights to a dwindling supply of theatrical features

Hollywood studio executives shook their heads in disbelief four years ago when maverick cable entrepreneur Ted Turner plunked down more than $1 billion for the dusty, largely black-and-white MGM film library.

Why would anyone spend that kind of money on a collection of mostly forgotten (and seemingly forgettable) movies, many of them locked in storage vaults since ending their theatrical runs 30 or more years ago?

“Nobody wonders anymore,” says Mel Harris, president of Paramount’s television division. Turner’s shrewd purchase of more than 3,300 MGM, RKO and pre-1950 Warner Bros. pictures--a roster that includes films like “Casablanca” and “The Wizard of Oz”--has made his movie-dependent TNT and TBS cable services “enormously successful.”

So successful, in fact, that the value of virtually all theatrical films traded in the TV marketplace has skyrocketed.

“The whole environment has become much more competitive,” declares Brad Siegel, head of programming for American Movie Classics, a basic cable channel that is scrambling to outbid TNT and scores of other film-hungry services for the few remaining unlicensed movies.

Siegel says AMC recently paid “mega-millions” for a couple of movie packages from Paramount and the Samuel Goldwyn Co., but that acquisition is puny in comparison to other deals that have rocked the industry.

Last April, CBS spent an estimated $70 million for the right to air 10 recent Universal films, including “Field of Dreams” and “Born on the Fourth of July,” before they are released to pay cable.

Such mainstream cable services as Lifetime and USA Network are reportedly paying as much as $2 million each for less-prestigious titles jumping in front of independent TV stations like Los Angeles’ KTLA Channel 5, KCOP Channel 13 and KTTV Channel 11.

Turner recently added 1,000 Columbia films (including such hits as “Tootsie”) to its current 6,000-title collection.

“We go through about 230 movies a month,” explains Terry Segal, TNT’s 37-year-old vice president and general manager. “That’s more than any other channel.”

Less than two years after sign-on, TNT has found its way into the living rooms of about 40 million cable subscribers, exploiting the seemingly insatiable American appetite for Hollywood feature films.

“In an atmosphere where the viewer has more and more channels to choose from, a TV service looks for value-added programming,” explains Paramount’s Harris. “Theatricals always provide that because they aren’t just any two hours that you happen to stock on the schedule. They are two hours upon which millions of dollars were lavished on creative talent, production, promotion and marketing.”

In other words, dropping a few million dollars for the right to air a good Hollywood movie may often prove more cost-effective for a broadcast or cable network than spending the same amount of money producing a movie, special or series of your own.

“There’s a glut of made-for-TV product on the market,” grouses one major buyer. “With few exceptions, it just doesn’t hold up as well when it’s repeated.”

Although nearly every entertainment-oriented TV service now invests heavily in the making of its own feature-length productions, the industry consensus is that movies with “marquee value” have reached a new peak of popularity among viewers.

“There are only a finite number of (theatrical) films out there and the demand for them today is unquestionably greater than I’ve ever seen it,” says Jonathon Sehring, vice president of programming for Bravo, one of some 20 around-the-clock movie channels.

As cable audiences continue to grow, at the expense of the broadcast networks, the Big Three have begun to reconsider their voluntary abdication of blockbuster theatrical premieres to pay TV. CBS’ surprise deal with Universal broke pay cable’s decade-long stranglehold on big-event movies and has been interpreted by one analyst as “a slap in the face” of HBO and Showtime, both of which had unsuccessfully negotiated for the same package.

“A lot of people are going to be watching what happens when CBS airs those movies,” predicts Warren Littlefield, Brandon Tartikoff’s recently promoted successor as president of NBC Entertainment. “(Theatrical films) once were a staple of our long-form package, then they got so ridiculously expensive that we and the other networks turned our backs and said, ‘Why bother?’ But now maybe we’ve come full circle.”

If the first-run movies garner high enough ratings for CBS, the current bidding war between basic cable channels (those that carry advertising) and independent stations (those not affiliated with ABC, CBS and NBC) could soon expand. Intensified competition for the painfully small number of top-quality films underscores how desperate cable operators and broadcasters have become in their courtship of today’s increasingly fickle viewers.

“CBS and Jeff Sagansky (president of CBS Entertainment) have shown that they are completely committed to attracting viewers back to network television,” reasoned Sid Sheinberg, president and chief operating officer of Universal parent MCA, when the precedent-setting movie sale was announced.

Left unsaid was the fact that MCA had complained to federal regulators last February that HBO lost interest in buying the same movies once its parent, Time Inc., merged with Warner Bros., which in turn set up an exclusive movie distribution agreement with HBO. Also unmentioned was the sudden reality that basic cable services like USA Network and Lifetime--long dominated by cheap reruns, tacky wrestling and other unimpressive fare--are now outbidding independent stations for high-profile pictures after they end their premiere runs on network and pay TV.

The change in distribution doesn’t sit well with the scores of independent TV stations for whom movies are a daily staple.

“I’m very upset,” says Gary Cozen, general manager of Pittsburgh’s WPGH-TV, reacting to a decision by New World Pictures to delay distribution of its latest “B” movie package so that those same films can first appear on USA Network and Lifetime. “I think (the cable services) are buying these movies as loss-leaders to create some sizzle. The distributors have no loyalty except to what is most financially beneficial to their own company.”

Cozen, whose station is a Fox affiliate, disputes studio claims that there’s no longer a strong market for films among independents, pointing out that he airs as many as seven movies each weekend.

“Independents now have to be very selective and quality-oriented in the pictures they buy,” says WLWI-TV Boston program manager Bill Butler, who schedules about 18 movies a week and has over a thousand titles licensed at any given time. “The thing that’s thrown a wrench into this whole thing is that the talent residuals for broadcast syndication are much higher than they are for cable. So the studio gets to keep much more of its license fee when it sells to cable.”

Not only do studios pay significantly smaller residuals to Hollywood labor unions when a movie is sold to basic cable for a comparable price, that money often stays within the corporate family.

MCA and Paramount jointly own USA Network, for example, and Time-Warner has a stake in several pay and basic cable networks. The Disney Channel remains the exclusive outlet for much of the Disney studio’s theatrical product. Further complicating the equation is 20th Century Fox, which began diverting features to its 132-affiliate Fox network this fall.

“Our syndication division will release our theatrical pictures into either broadcast syndication or to basic cable, wherever they can get the best price,” says Fox Broadcasting President Jamie Kellner, “(but) after they play their network run on Fox.”

While studio officials downplay the significance of such vertical integration, recent developments have networks and individual broadcasters fuming.

Under federal regulations now under review (and from which Fox is temporarily exempt), ABC, CBS and NBC aren’t allowed to make any money when movies and series they produce are sold on the domestic syndication market. NBC’s recent promotion of Tartikoff to what is effectively the position of studio chief is said to signal that network’s intention of going head-to-head with Fox and other major studios no matter what the Federal Communications Commission or Congress decide.

“As a new medium, cable was given all sorts of incentives to get it going,” notes Steve Bell, vice president and general manager of movie-dependent Los Angeles independent KTLA. “Now it’s wound up biting us in the ass. . . . I think the future is what worries us.”

In effect, says Bell, cable services like TNT (which now controls at least 6,000 features, shorts and cartoons) have become the equivalent of coast-to-coast independent stations, usurping a role stations like KTLA have played in their local markets for more than 30 years.

“Basic cable is finally strong enough to afford better product,” explains Neil Hoffman, vice president of programming for USA Network, which recently paid as much as $2 million a title for packages from Disney, Fox and Orbis. “In effect, we are buying out the syndication window from broadcasters.”

Whether they’re doing business on cable or over-the-air, what every programmer really wants these days is “exclusivity”--industry jargon for the right to show a strong film when nobody else has it. But, like the broadcast networks before them, even cable giants are balking at the astronomical prices many studios are now demanding for that privilege.

“HBO passed and we passed (on Universal’s CBS package) because the films were overpriced,” maintains McAdory Lipscomb Jr., Showtime’s senior vice president of corporate affairs. (HBO declined to comment.)

“Universal probably left between $2 million and $4 million per title on the table by having sold its films to CBS instead of going through the traditional distribution route,” says Lipscomb, referring to the usual practice of releasing a film first to home video, next to pay cable, and only then to ABC, CBS or NBC. “Universal is probably going to be back on our doorstep after the CBS window because now they have to make up some of the revenue they didn’t get the first time around.”

Universal didn’t respond to requests for comment on the agreement, but CBS programmer Peter Tortorici, who negotiated his network’s end of the deal, says it’s too early to tell if the deal will spark a rush on “A” titles.

“If we get a terrific viewer response,” he predicts, “the repercussions could be very far-reaching.” ABC Entertainment President Bob Iger confirms his network also wants to license box-office hits ahead of cable and that preliminary negotiations are under way between ABC and unnamed suppliers. This after such well-worn films as “Bull Durham” and “Innerspace” turned up on its 1990-91 roster.

At NBC, Warren Littlefield still sticks to the conventional wisdom that “a strong made-for-TV movie will generally outperform most of the theatricals a network can buy . . . although there may be a trend coming back toward looking at them in our asset column.”

Littlefield isn’t alone in his conclusion that it may be wiser to take the $6 million to $8 million the studios are asking for “network exclusive” movies and spend it on production of original TV features, which typically cost $5 million or less.

“We now do about six to eight films of our own each year,” says Showtime’s Lipscomb, adding that about 30% of his service’s lineup is now original. HBO produces even more of its own material in an effort to further differentiate itself from the competition and, like Showtime, woo subscribers who find uncut, commercial-free movies much less of a novelty than during those heady days before VCRs became as popular as toasters. In-house production has been made easier through the merger of HBO-parent Time Inc. with Warner Bros. and Lorimar, as well as Showtime-parent Viacom’s formation of a film unit that plans to make at least one new movie every month.

Cable services have been further spurred into original production through the realization that they can no longer get away with repeating movies as often as they used to.

“We do six plays a month, or eight on rare occasions,” Lipscomb estimates. “But if HBO, Cinemax and The Movie Channel are showing the same movie, people have the perception it’s showing all the time.”

Although this is still exactly what happens, as with last June’s release of “Ghostbusters II,” pay cable executives insist they are now seeking non-duplication deals that would minimize the overexposure problem, which has plagued advertiser-supported cable services to a lesser extent.

“We may run a film three times within two weeks at different times of the day,” says USA’s Hoffman. “But then it is rested for several months before it goes back on the air.”

Smaller services, however, feel they have little choice except to run their movies as often as possible.

Brad Siegel, programming vice president for American Movie Classics, says he only “rarely” chooses not to repeat a film as often as contract terms allow.

“Now that the value of movies has been proven and more exhibition windows are available, the studios are not that anxious to tie up their films on one cable network for very long,” says Siegel, therefore a channel like AMC must get as much mileage out of an acquisition as it can.

“Studios have gotten very savvy about how they release their inventory,” agrees Jonathon Sehring, Bravo’s movie buyer. “When a group of two or three hundred films comes out of broadcast syndication, the studio may sit on it for a couple of years while deciding what to do. They’re much more aware of the competitiveness of the product.”

While this “seller’s market” has made things tougher for all-movie channels like Bravo and AMC, it’s prompted more diversified services to get into the picture-making business themselves.

“We are now making an average of two brand-new movies a month,” says Neil Hoffman, USA Network programming chief. An important advantage of custom-made films, he feels, is their potential for earning cable networks significant profits through release overseas in theaters or home video.

The women-oriented Lifetime Network, which recently paid an estimated $1.7 million per title for separate film packages from Paramount and Warner Bros.--including “Married to the Mob,” “The Accidental Tourist,” “Tequila Sunrise” and “Dirty Rotten Scoundrels”--is producing six movies a year at a cost programming chief Pat Fili admits is “somewhat more” than what a studio acquisition costs.

“Believe it or not, made-for-cable programming usually gets better ratings for us, as well as the other networks,” insists Fili, Lifetime’s senior vice president of programming and production. “But theatricals give you a kind of halo effect that surrounds your other programming, so we need them too.”

And despite its notoriously huge library, even TNT plans to double its production of original movies to four a month in 1991 and has inked such filmmakers as Steven Spielberg to production agreements.

“We want to create events in prime time that will compete with the broadcast networks,” explains Scott Sassa, TNT’s executive vice president and the man who designed FBC’s original marketing plan.

(Turner, who now shares control of his four channels with Time-Warner and several of the nation’s biggest cable operators, has also been in on-and-off negotiations to add the United Artists film library to his collection.)

Yet even the most successful cable entrepreneurs agree that their best made-for-TV movies will never attract as many viewers as blockbusters like “Gone With the Wind” (owned by Turner) or “Batman” (licensed for a reported $30 million by CBS for broadcast in 1992). The biggest stars still have little interest in doing TV movies, and neither cable nor broadcast networks can back their productions with the $15 million marketing campaigns that typically launch Hollywood features.

“Economically, we need both,” sighs USA’s Hoffman. “Theatricals bring a different kind of value. With a tremendously recognizable name in the right picture, people will sit and watch the same movie again and again. A good movie is worth its weight in gold.”