With networks on both sides of the table

As television’s major players convene in New York next week for their annual star-studded presentations of fall prime-time schedules, one of the biggest dramas won’t be in the lineup -- even though it features big money, rampant distrust and more than a hint of incest.

It’s the story of the industry itself, which is going through economic convulsions as old financial models break down in what has been -- and in some ways remains -- a glamorous, free-spending business.

As a sign of how convoluted deal-making has become, when NBC agreed to pay $100 million a season to renew “Will & Grace” last year, representatives of the producers and director -- who share in the show’s profits -- felt obliged to sit in. They questioned how truly adversarial the negotiations to secure a fair price would be when the exhibitor -- NBC -- and the supplier -- NBC Studios -- were part of the same corporate family, essentially switching money from one pocket into the other.

Such incestuous discussions are increasingly common in the industry, where a handful of giant companies occupy both sides of the negotiating table, produce much of the programming on the air and increasingly play financial hardball to offset their ratings losses.

The squeeze is being felt not just by talent but also by the agents and managers who represent them. With the dominant companies seemingly destined to concentrate their power even more if media ownership rules are further relaxed next month, veteran agent Bob Broder recently evoked Mafia imagery, only half-jokingly referring to them as “the five families.”

Independent producers, meanwhile, have been pushed to near-extinction. Only 11% of last year’s new prime-time programs came from companies other than major studios -- and most of those were low-cost reality shows.

All in all, these factors have fed a pervasive sense of anxiety in the TV business. Granted, the Hollywood trades still showcase plenty of seven-figure deals, but a slogan from “The X-Files” -- the macabre drama introduced a decade ago -- provides an increasingly timely mantra: “Trust no one.”

Producers worry they’re being shortchanged by broadcasters who want to own more of their programming, effectively acting as supplier and exhibitor. Studios have largely eliminated so-called “development deals” that they gave writers millions to dream up new series, saying they can no longer afford to pay someone to “sit around and read the trades.” Less money is coming from selling programs abroad or peddling reruns to TV stations.

For those outside the business, the turmoil might seem just another case of Hollywood’s haves griping about its have-mores -- or, as a pundit once described it, the rich versus the extremely wealthy. But some see far broader social implications because the same forces rattling the industry dictate who gains access to the airwaves and what kinds of shows get into America’s living rooms.

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Long-term implications

“If they don’t do something about it now to give independents access to the four major networks, it’s going to cause serious problems,” said Ken Ziffren, an entertainment attorney representing the Coalition for Program Diversity, an alliance of producers (including Sony Pictures and Carsey-Werner-Mandabach), media buyers and Hollywood guilds asking the FCC to mandate setting aside 25% of prime time for independent producers.

Ziffren maintains that industry consolidation has hurt the public by leading to “derivativeness and blandness,” with a handful of companies driven by short-term profit considerations controlling all facets of production.

Networks argue that they must hold down spending as their audience share diminishes, with the average viewer now receiving roughly 90 cable and broadcast channels as well as other forms of home entertainment. “The cost of generating a ratings point has gone through the roof,” Mark Pedowitz, executive vice president of ABC Entertainment Television Group, said at a recent forum on media ownership, noting that production costs can’t keep rising while ratings fall. The new deals, he added, “reflect those underlying economics.” Pedowitz also accused creative people lamenting the shift of engaging in “a lazy and forgetful nostalgia for the golden age of television.”

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Protections unlikely

With the commission headed by Republican-appointed FCC Chairman Michael Powell, few expect it to introduce more regulatory safeguards; still, the push highlights growing fear among the dwindling ranks of program suppliers who lack a network affiliation -- even Sony, which is barred from owning a broadcast network because of its foreign ownership.

The roots of this dispute date to the elimination of the “financial interest and syndication” rules, federal guidelines that severely limited the ownership stake networks could have in programs they air. Removal of the rules cleared the way for a series of studio-network mergers in the mid-1990s.

By the time the dust settled, there were five networks -- CBS, ABC, Fox, WB and UPN -- aligned with studios, and NBC, which has vast resources as part of General Electric.

By last fall, more than three-quarters of new prime-time programs were produced by a company affiliated with the network broadcasting them. A decade ago, that number stood at just 18%. Yet while networks are interested in taking a share of revenue from hits such as CBS’ “Everybody Loves Raymond,” an equally pressing issue is controlling the price of success.

Increasingly, networks are wielding a contractual weapon called “perpetual license fees.” Wounded by the millions paid in the past to producers of hits such as “Roseanne” and “ER,” they are trying to build in fixed raises for the life of new series, so they won’t be held hostage trying to hang on to hit shows after four or five seasons.

“They’ve limited the upside for creative talent,” said Chris Silbermann, a partner in the literary agency Broder Webb Chervin Silbermann. “They’ve taken anything that might have been a home run and made it into a double.”

A wake-up call for the networks came in 1998, when the NBC drama “ER” came up for renewal. With the network losing “Seinfeld” and the National Football League that year, producer Warner Bros. possessed ample leverage and secured an unprecedented $850-million agreement paying $13 million per episode. At the time, then-Warner Bros. Chairman Robert Daly said he “would have moved the show in a flash” had NBC not met its asking price.

As networks own shows and occupy both sides of the bargaining table, such scenarios have become less common, absent the threat of another network bidding to take away a series at renewal time.

Network officials point out that studios aren’t as willing these days to foot the bill for programming because network license fees cover less of series budgets, making the networks’ role as financier necessary.

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Risks are greater

By backing shows, networks gamble millions in pursuit of elusive hits, at a time when the long odds make prime time no place for the fainthearted. Disney, for example lost millions last year on “Push, Nevada,” an interactive drama the studio produced for ABC, with actor Ben Affleck among its producers. It failed to attract viewers despite a $1-million prize for solving the show’s mystery.

“For everyone who wants more voices, where is that financing going to come from?” asked NBC Studios President Ted Harbert. “The price tag is extremely high.”

In addition, the so-called “back end” for shows -- what they make when the reruns are sold to TV stations or cable networks -- has withered, and producers are reaping less from the sale of U.S. programming abroad, where home-grown productions are in vogue. Studios were once assured a big payday if a series ran five years, providing at least 100 episodes to repeat in perpetuity. Today, however, even some long-running shows are enduring what one industry veteran called “the ‘Evening Shade’ nightmare,” referring to the Burt Reynolds comedy. Although the 1990-94 show performed well on CBS, no one was interested in buying the repeats, meaning each new half-hour simply added to production deficits the studios had little chance of recouping. Current shows, such as the Ted Danson comedy “Becker,” face a similar dilemma.

Industry sources say part of the problem is the market power wielded by Tribune Co. (owner of the Los Angeles Times, as well as 26 TV stations) and particularly Fox. Both own TV station groups in major cities that air programs like “Frasier” and “The Simpsons” before and after prime time. With only two major buyers, the negotiating leverage -- especially for more marginal programs -- has shifted to stations, tamping down prices.

In the past, said former NBC Chairman Grant Tinker, “you were lucky if you succeeded and your show made it to syndication. Now, even in success you may not succeed.”

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Some good news

Amid all the bleakness, some do see room for optimism. After an economic downturn and further concerns in the wake of the Sept. 11 attacks, this season’s advertising market has been surprisingly robust, and forecasters expect so-called “upfront” commitments after the sessions next week in New York to exceed $8.5 billion for next season.

The proliferation of shows like “The Bachelor,” which don’t have much shelf life, also could heighten demand for scripted series. “Reality TV is creating a problem in that there’s a lack of scripted shows in the pipeline,” said manager-producer Eric Gold, whose clients include Damon Wayans of ABC’s “My Wife and Kids.”

Networks stress that they remain open to outside suppliers, echoing former NBC West Coast President Don Ohlmeyer, who often said he would “take a hit from Attila the Hun.”

Still, Ohlmeyer -- who put on such NBC-produced hits as “Will & Grace” and “Providence” during his tenure -- said production makes sense for a network only if it is targeted, selective and the shows air in time slots where they have the best chance of succeeding. “You never wanted to own more than a third of your schedule ... because 80% to 90% of new shows fail,” he said. “It’s a double-edged sword.”

The bottom line, one broadcasting executive said on condition of anonymity, is that the television world has changed and those accustomed to its past largesse must adapt to it. “They want life to be the way it’s always been,” he said. “That life is not economically possible.”