Pay Issues Alter TV’s Profit Picture

Faced with skyrocketing talent demands on some long-running hits, television networks find themselves grappling with whether they can make money on their most successful programs or must sacrifice profits to prop up other parts of their schedules.

The latest potential showdown involves NBC’s “Seinfeld,” TV’s highest-rated program. A report in the industry trade paper the Hollywood Reporter indicates that co-stars Jason Alexander, Michael Richards and Julia Louis-Dreyfus have raised their asking price to $1 million per episode--more than $20 million each a year--to return for another season, the same figure reportedly agreed to in principle by star and co-creator Jerry Seinfeld.

No one expects the supporting players to command such a sum, and the figure is seen as posturing by agents. Still, industry sources acknowledge that stars have greater leverage in such negotiations as the search for prime-time hits becomes increasingly desperate.

Speculation is that NBC will have to pay a record amount--probably at least $5 million an episode for 24 episodes a year--to Castle Rock Entertainment to renew “Seinfeld.” The demand alone has repercussions, threatening to jack up the price on ABC’s “Home Improvement,” whose star, Tim Allen, has yet to sign for a seventh season of that series.

Several performers have recently engaged in high-profile tactics to secure raises, including the casts of “Friends” and “New York Undercover,” which each jointly sought to negotiate sweetened deals.

Yet such efforts are limited until a series reaches its option year, usually after the fifth season. At that point, stars and studios fulfill their initial contractual obligation and are free to negotiate with other parties.

With their audience shares dwindling, meanwhile, the networks feel compelled to hang on to their highest-rated shows, which, in a cyclical business, are vital in attracting the audience necessary to help launch future hits.

This reasoning has also extended to TV sports negotiations. Fox, for example, took a substantial loss on its $1.58-billion acquisition of NFL football broadcast rights, but ancillary benefits included a strengthened affiliate lineup and a regular showcase to promote its prime-time series. As a result, all four networks are expected to bid aggressively when those rights come up for renewal later this year.

A prime-time hit such as “Seinfeld” even more directly translates into big ratings for shows airing before or after it. “Friends,” “Seinfeld” and “ER” create what are known as “tent poles,” virtually ensuring an audience for programs in the time periods surrounding them. Given the encroachment of cable, such time periods give NBC a significant edge over competitors in establishing new programs.

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NBC also derives the lion’s share of its prime-time revenue from its Thursday lineup, with “Seinfeld” and “ER” each garnering at least $500,000 per 30-second commercial. The network billed a record $2 billion in prime time after announcing its lineup last spring.

In many ways, “Seinfeld” is an unusual case, with astounding leverage, because its ratings have stayed so high (more than 30 million people watch each week) in its eighth season. By contrast, programs such as “Roseanne” and “Murphy Brown,” which both premiered in 1988, have experienced substantial drops in audience share since their heydays.

“Home Improvement” has declined as well but remains ABC’s top-rated show, and its importance may have grown given the network’s diminished ratings in general. Because ABC is owned by Walt Disney Co., however, whose production arm is responsible for the show, the series’ creators are worried that they might not receive fair-market value from the network.

Both “Seinfeld” and “Home Improvement” have proved major hits in syndication, each generating more than $500 million through the sale of reruns to local TV stations.

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Those returns, in fact, have spurred the salary demands. Other cast members are said to resent the fact that Jerry Seinfeld garners a substantial piece of that syndication revenue as co-creator of the series with Larry David, who left last year.

Industry sources predict that the supporting actors, as an integral part of the show, will substantially increase their current salaries of $3 million to $3.5 million and come to a deal, but for much less than $1 million per episode.

“If you’re Michael Richards, do you turn down $8 million?” asked one TV agent, who predicted he’ll receive about $350,000 per episode, though some suggest the figure could go 50% higher.

Louis-Dreyfus’ husband, “The Single Guy” producer Brad Hall, recently signed a deal to create programs for CBS. The network is said to be hoping he’ll eventually develop a program for his wife.

Few shows, however, present the gold mine “Seinfeld” offers at this stage, and the actors’ salaries would probably plummet if they left. Estimates are that the co-stars would receive no more than $75,000 an episode to star in a new TV show.

NBC had no comment regarding the matter and executives at Castle Rock could not be reached.