Honey, I Shrunk the TV Audience : Television: Disney investment in British morning programming is beset by the high entry price and some hot competition.

Walt Disney Co. is having trouble again with foreign affairs.

First came the cool reception for Euro Disney, the theme park outside Paris that has drawn more criticism than paying customers. Now it’s a TV investment that is causing problems for the Burbank-based entertainment giant.

A Disney-led investor group has agreed to pay more than $500 million over the next 10 years for the rights to broadcast early morning programming on Great Britain’s Independent Television Network.

Its new “Good Morning Television” show was seen as a sure-fire hit, since the network historically dominated the market. But after two months on the air, the group is struggling to win back deserting viewers and meet its massive outlay, which includes annual programming costs of $43.5 million.

Media analysts predict that it will be years, at best, before the venture goes into the black, even though executives at GMTV, as the program is better known, insist that they remain on target to make an “operating” profit this year.

“They have quite a serious problem,” says Roger Parry, managing director of Carat International, Europe’s largest media buyers. “It’s possible their economics will never work.”

Disney owns 25% of the company, with slightly lesser stakes held by London Weekend Television, Carlton Communications, the Guardian and Manchester Evening News and Scottish Television. Some analysts believe that the consortium overpaid for the broadcast rights. But its problems are also because of unexpected competition from a wacky new morning show on rival Channel 4.

While GMTV has remained true to the timeworn lineup of amiable hosts and celebrity guests plugging their latest projects, Channel 4 has scored a surprise hit with “The Big Breakfast,” which is produced by a TV company partly owned by knighted rock star Bob Geldof.

“The Big Breakfast” is essentially the zany “zoo” radio format translated to television. It features cluttered sets filled with bizarre objects, fast editing cuts, nonsensical segments, unusual camera angles, bad jokes and a manic host who is the antithesis of the standard talking head.

The show became an instant smash when it debuted last September against GMTV’s predecessor, TV-am. Its ratings continue to grow, both by pulling viewers from GMTV and by bringing legions of young viewers to morning TV for the first time.

While GMTV still tops the morning ratings and does not appear to lack willing advertisers, its declining viewership means reduced ad rates and, therefore, revenue.

In January, 1992, TV-am had an average daily audience of 2.4 million at peak viewing times. The British Broadcasting Corp., which offers serious news programming at breakfast time, averaged 1.3 million viewers, but was not much of a threat because it does not run advertising. During the same period, Channel 4, a commercial but out-of-the-mainstream station, was attracting a paltry 200,000 viewers with its ultra-somber morning broadcast.

During January, 1993, however, the new GMTV dropped to an average 1.8 million viewers, while the BBC held its audience of 1.3 million and Channel 4, with “The Big Breakfast,” rocketed to 1.1 million viewers. The most recently published TV ratings show that the trend is continuing.

Disney declined comment on the program, saying, “We never discuss any broadcasting relationships.” But clearly “The Big Breakfast” has been upsetting stomachs at GMTV.

So far, GMTV’s chairman and programming director have been replaced and the on-air hosts have been rearranged. More changes are expected to follow.

Taking over the chairmanship of GMTV is Greg Dyke. One of Britain’s most respected broadcasting executives, Dyke is credited with saving TV-am when it seemed destined for oblivion in its early days.

Dyke insists that there is “not a crisis” at GMTV, although he admits that ratings are down substantially from what the company expected. While declining to outline specific plans for retooling GMTV, Dyke said: “What we want is a family of people who like each other and whom the audience likes.”

GMTV could not be faulted for expecting an easier go of it. When Disney and its partners decided to bid for the 10-year license to broadcast breakfast-time programming in 1991, the impetus was clear.

TV-am was one of the world’s most profitable television operations with virtually no competition. It garnered up to 72% of the morning TV audience in its heyday and, in 1990, earned profit of $37.7 million on revenue of $130.5 million (at the current exchange rate).

So, sensing easy money, the consortium partners jumped at the chance to bid for the breakfast TV service when the British government auctioned off its ITV franchises to the highest bidders.

Outbidding both TV-am and another group that included the American network NBC, the Disney group--first called Sunrise, then GMTV--won the seemingly lucrative contract with a staggering $50-million-a-year bid. Under the auction agreement, GMTV has to pay that amount annually to the government plus 15% of all advertising income.

The head of TV-am, who lost with his bid of $20.4 million, immediately declared that the new morning franchise holders would be unable to turn a profit with that financial burden.

Media analyst Neil Blackley, of stockbrokers James Capel, projected that the new franchise holders would see a $5.8-million pretax loss the first year and would continue seeing losses until 1997.

And that was before “The Big Breakfast.”

“One possible saving grace,” says Parry of Carat International, “is that GMTV has powerful owners with deep pockets.

“But if any of the investors thought they would re-create the profitability of TV-am,” Parry added, “they must be sadly disillusioned.”

Breakfast Battle The morning television audience has shifted dramatically from the Independent Television Network’s “GMTV” to Channel 4’s “The Big Breakfast” over the last year.

Channel Jan., ’92 Jan., ’93 Independent Television Network 2.4 million 1.8 million Channel 4 200,000 1.1 million British Broadcasting Corp. 1.3 million 1.3 million