‘ER’ Rerun Price a Sign of Cable’s Strength

In a sign of the growing financial power of cable networks, Turner Broadcasting System Inc. has paid a record price for reruns of a television drama, agreeing to an estimated $1.2 million per episode for Warner Bros.’ top-rated medical show “ER.”

The previous record price for a drama rerun was set in the late 1980s for “Magnum P.I.,” which brought nearly $1 million an episode for broadcast rights.

The pricey sale of reruns of “ER,” now in its second season on NBC, is significant because dramas usually fetch little after their original network runs. Stations prefer comedies like “Seinfeld,” “Frasier” and “Home Improvement,” which are less timely than dramas.

“ER” is the latest of several television dramas to have fetched a high price over the last year from a cable programmer, in this case Turner’s TBS network.

“This is a boon to dramas that otherwise had an afterlife only in the international market,” said one television executive.

Industry sources say the price escalation stems mainly from rises in subscriber and advertising revenues for cable networks. But another factor is the emergence in the last five years of “vertically integrated” media companies that own television shows and the outlets that air them.

One might expect studio sellers to give their sister cable networks better prices, but what has happened in the case of sought-after shows is just the opposite.

Hollywood studios are required to hold auctions for rerun rights to protect against lawsuits from a show’s creative participants--like the “ER” cast and executive producers Steven Spielberg and Michael Crichton--but they still want to protect valuable franchises.

“Companies are willing to pay high prices to keep trophy assets in the family and off a competing channel,” said Bill Marchetti, an analyst at Paul Kagan Associates.

Hence, Time Warner Inc., which is waiting for regulatory clearance to buy Turner, recently sold cable rights to TBS for its top comedy “Friends,” and now has sold Turner “ER” too. Twentieth Century Television sold the highly sought-after “X-Files” cable rights to its sister cable network, fX, for an estimated $600,000, despite what some claim was a higher bid from USA Network. And USA Network won rights to “Murder, She Wrote,” sold by its part-owner MCA Inc.

In the case of “ER,” for instance, TBS squarely beat USA, Lifetime Television and fX.

“This is just part of the new business climate of the ‘90s,” said one studio executive. “The people who financed these shows should be able to use them to build other assets they own.”

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Marchetti noted that there were once only four consistent cable bidders for high-priced reruns: USA Network, Turner’s TNT and TBS networks, and Lifetime, which is owned by Capital Cities/ABC.

Now, fX and, most recently, NBC’s CNBC will increasingly be part of the mix. CNBC recently said that it would integrate more entertainment into its news-and-talk format in what industry sources say is an effort to use the cable network as a possible test bed for shows it develops for the NBC network.

Reruns of shows like “ER” would give such programming a jump start.

There are still questions about whether drama reruns can bring in the ratings needed to cover these high costs, particularly when the wait for rights is so long.

Life cycles for TV shows seem to be getting shorter, not longer. But analysts say that by the time these cable networks air this new batch of high-priced programming, they will be charging higher ad rates and taking in more money from alternative outlets for their channels on satellite systems and from phone competitors moving into video delivery.