Networks Push for Cheaper Shows : Entertainment: Squeezed by lower ratings, sluggish advertising and spiraling expenses, television is turning to lower-cost programming.

At a recent breakfast for top executives of Columbia Pictures, CBS Entertainment chief Jeff Sagansky let it drop that as much as one-third of the network’s schedule in the near future would consist of low-cost shows such as the documentary-style “Top Cops” and “Rescue 911.”

“The revenue is not there to support 22 hours of film and tape productions (a week) as it has been in the last 10 years,” Sagansky told the executives.

That news was as welcome as a cancellation notice. Columbia, which has spent a fortune hiring writers and producers, is not accustomed to making low-budget TV shows. Now Sagansky was putting out the word that there would be less of a need for the studio’s slickly produced comedies.

Sagansky is not alone when calling for the need to “average down” the cost of programming. All three networks, squeezed by ratings erosion, sluggish advertising and spiraling program costs, are going outside the major Hollywood studios to develop new TV shows.

In fact, escalating program expenditures are the chief reason that the networks are turning to lower-cost alternatives.

“The Cosby Show” costs NBC about $50 million annually in license fees, so much that the network can barely turn a profit despite it being one of NBC’s biggest hits for seven years.

To renew “Cheers” for another season, Paramount has asked NBC for $120 million, which equals the total advertising revenue generated by the show.

“There was a truism that you could be the No. 3 network and still make money,” laments John Agoglia, senior vice president of NBC Entertainment. “Now you can be No. 1 and have a margin that is pitifully small.”

Not that any of the networks are about to go broke. ABC and NBC had combined profits of more than $500 million last year. Only CBS, saddled with costly sports contracts, lost money.

But profit margins are shrinking. Nicholas Heymann, vice president of County NatWest Securities in New York, figures that the NBC network’s profit margins have slid from 13.3% in 1989--its peak year, when it earned $375 million--to 10.2% in 1990 and a projected 7.8% in 1991.

Furthermore, those estimates do not include war-inflated news costs or the loss of advertising due to war coverage. When those factors are tallied up, already tight profit margins will be squeezed even further.

Over the past decade in particular, networks came to rely upon a handful of powerful studios to supply the majority of their prime-time programs. This led them to become almost totally dependent on one-hour dramas and half-hour comedies.

The networks stopped scheduling such low-cost prime-time staples as variety shows, game shows and documentaries. The goal became to attract the largest possible audience--at whatever the cost.

“It used to be that a big circulation guaranteed profitability,” said Steve Warner, vice president at CBS Entertainment. “That is no longer the case, so we have to figure out other ways to make money.”

Among new avenues being explored are joint ventures with overseas producers, developing programs with niche cable networks and producing more in-house shows at the network news divisions.

But the best examples of low-cost programs are the so-called reality-based or nonfiction shows that now sprinkle prime-time schedules. They include “Rescue 911” and “Top Cops” on CBS; “Unsolved Mysteries,” “Real Life With Jane Pauley” and “Expose” on NBC, and “America’s Funniest Home Videos,” “Funniest People” and the upcoming “American Detective” on ABC. Altogether, there are more than a dozen such shows on the air.

“It’s the economics that are compelling the networks to look for other types of programming concepts,” said John Cosgrove, executive producer of “Unsolved Mysteries” and “The Story Behind the Story” for NBC.

Indeed, the economics look rather bleak. ABC, CBS and NBC each spend between 75% and 85% of their budget on programming. It costs about $1.5 billion per network to buy a season’s worth of prime-time shows.

At the same time, the three networks are attracting only 63% of TV households during prime time this season, compared to 85% in 1980. Network advertising revenue has grown in the past five years at an annual rate of only 3.5%.

But the cost of programming has increased at a much faster rate.

According to Economists Inc., a Washington consulting firm, between 1979 and 1989 the average per-episode licensing cost for a new one-hour show rose 5.1% annually to $880,000 and a half-hour show increased 8.2% annually to $415,000.

By contrast, the “reality-based” shows--which encompass everything from serious programs such as “60 Minutes” to fluff like “America’s Funniest Home Videos”--cost between $400,000 and $600,000 an hour to produce, about half that of a traditional drama or action/adventure show.

“These shows are going to be around through the 1990s because they are much less expensive to make,” predicts Arnold Shapiro, executive producer of “Rescue 911” and the upcoming “True Detective,” both on CBS.

Nonfiction programs cost less because they are produced by younger people who don’t command high salaries, use actors who are willing to work for low wages, and require only three or four writers compared to twice that on traditional comedies or dramas, Shapiro said.

And in what some critics blast as the ultimate in low-cost programming, NBC recently began airing a new Sunday night program titled “Sunday Best,” which features excerpts from old NBC shows presented by Carl Reiner.

It is NBC’s latest effort in counter-programming against “60 Minutes”--which, after 23 years, is still one of the top-rated shows on television and has annual advertising revenue of $75 million.

NBC executives deny that “Sunday Best” was put on the air simply because it is cheap programming, costing about $650,000 per episode to produce.

The strategy is similar to one that ABC tried four years ago when it scheduled “Our World” opposite “Cosby” on Thursday night. “Our World,” a news magazine produced by ABC News, was designed to lose ABC as little money as possible in the time period rather than compete against “Cosby.”

The search for alternative program sources is also leading to some odd relationships.

With the continuing erosion of TV ratings, network programmers are trying to attract particular kinds of audiences, not necessarily just the largest one. Although cable has always targeted a narrow audience, the prospect that the broadcast networks may no longer seek the widest audience is a novel one.

MTV and Nickelodeon, both owned by Viacom International, are developing weekend prime-time programs for ABC--an idea that was unthinkable only a couple of years ago.

“Mass viewership is not a given anymore,” says John Reardon, president of MTV. “With 50 channels, the networks are now starting to think in terms of niches.”

ABC approached MTV and Nickelodeon because they have experience producing programs aimed at a specific audience--teen-agers in the case of MTV and young children with Nickelodeon.

“Home video and cable viewing is much higher on Saturday night, and that has created the one-network economy,” said Ted Harbart, executive vice president of ABC Entertainment. “If we want to attract an audience, it isn’t going to be with traditional action/adventure programs.”

The cable networks also are accustomed to producing shows for a fraction of what it cost the major studios.

“We can produce more efficiently because we are not out there buying the people who wrote the biggest sitcom of the 1980s,” said Herb Scannell, vice president of programming at Nickelodeon. “We don’t pile on producer credits and story consultants, which is making TV production more expensive.”

The Rising Cost of TV Average prices per episode for new prime-time shows from 1979 to 1989. The cost of a half-hour show increased at an annual rate of 8.2%, compared to 5.1% for a one-hour show. Source: Economists Inc., from network supplied data.