TV's $200 Million Charlie Sheen Experiment

 Austin Hargrave

This story first appeared in the Jan. 25 issue of The Hollywood Reporter magazine.

In the fall of 2003, Mort Marcus and Ira Bernstein set out on a 60-city tour of America with a seemingly impossible goal: to persuade conservative TV station owners to take a chance on foulmouthed South Park in syndication. To most, it seemed too tall a task. Even parent company Viacom had passed on peddling the Comedy Central series, convinced that a crass cartoon had little hope of finding buyers.

When the pair arrived at WNYW, the Fox outlet in the all-important New York market, the GM refused to even hear the pitch. "He wouldn't let us put the sales tape in the machine or open our research books,'' recalls Marcus. "We had staked everything on it. If we couldn't sell New York, we were dead. Ira and I were devastated. I went up to my room [at The London Hotel] and threw up."

But the new partners pressed on. Armed with a tenacity that since has made them perhaps the most successful independent duo in the lucrative TV syndication business, and the viewer data to back them up, Marcus and Bernstein were able to sell Trey Parker and Matt Stone's edgy series in 48 of the country's 50 biggest markets, including to a Tribune station in New York. The show others were too skittish to touch likely will generate in the vicinity of $150 million during its syndication run, of which the pair's since-formed media company Debmar-Mercury retains 20 percent. "There are a lot of smart people in this business, but Mort and Ira combine being smart with being entrepreneurial," says Jon Feltheimer, CEO of Lionsgate, which acquired their company in 2006.

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Now, nearly a decade later, Marcus, 59, and Bernstein, 53, again are bucking both convention and controversy with the FX sitcom Anger Management, starring Charlie Sheen. Others were afraid to go near Sheen after his 2011 firing from Two and a Half Men amid a drug-induced meltdown, but Debmar is turning the Sheen circus into a franchise potentially worth as much as $800 million. After airing a 10-episode first season on the cable network in summer 2012, Anger returns Jan. 17, this time for a staggering 90 episodes, solidifying Marcus and Bernstein's reputation for being among the industry's shrewdest execs. In fiscal 2012  alone, their company -- which distributes shows featuring such diverse talent as Tyler Perry (House of Payne), Steve Harvey (Family Feud) and Wendy Williams (The Wendy Williams Show) -- accounted for $134 million in annual revenue, more than one-third of Lionsgate's overall television business for the year. And that's all before a penny of the Anger revenue is factored in.

With Anger, though, the Debmar co-presidents have been selling more than simply a sitcom. They are pushing a new template for series television, a medium rocked by a fractured landscape and changing viewer habits. "Financially and creatively, it will completely change how everybody does their projects," Anger showrunner Bruce Helford has said of Debmar's "10/90 formula," in which 90 additional episodes of a series are automatically ordered if the first batch of 10 hits a predetermined ratings target. The 6-year-old model, first employed on Perry's House of Payne, ensures that, in success, Debmar can quickly amass enough episodes of a show to launch in syndication, allowing many involved to cash in on the backend faster than ever.

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Take Sheen, for example. Over the course of 100 episodes, Anger is poised to generate $350 million to $500 million in revenue; if it ends up running for 150, that range could swell to as high as $800 million, say sources, once network license fees, international sales and syndication revenue are factored in. (Anger is expected to generate close to $1 million an episode overseas, in addition to the lucrative off-net syndication deal the company inked with Fox stations, where Anger will begin airing nightly double runs in 2014.) Sheen, who is earning a fraction of the per-episode money he made at Men's height, could make between $75 million and $200 million on the backend, or nearly 40 percent of the series' profits.

FX, too, has reaped the benefits. Although Anger failed to generate glowing reviews, the network paid only $600,000 an episode to license the series -- significantly less than it traditionally would shell out for originals or off-net fare -- and was able to sell it to Madison Avenue at the highest CPM rates the network has ever seen for a first-year series. What's more, FX quickly will accumulate enough episodes to start stacking them on the schedule the way it does its syndicated programs. "When you look at all of the off-net product that's gone for well over $1 million -- if not closer to $2 million [in the case of Modern Family and The Big Bang Theory repeats] -- per episode, I feel very, very good about the business proposition we made here," says FX Networks executive vp Chuck Saftler.

While it's still too early to know whether Anger will have the dramatic impact on the industry that Helford predicted, it has earned Marcus and Bernstein more opportunities -- they have projects in development with George Lopez, Martin Lawrence and Kelsey Grammer, among others -- and heightened interest from network chiefs around town. "I think it could change TV," Marcus says bullishly over a late-November dinner at his Santa Monica home, where his personal chef prepared a meal of gourmet pizza and herb-crusted chicken. He's in sales mode now, which both men slip into often as they discuss the potential for upending a decades-old system with the wide-eyed excitement of rebellious teenagers. "It won't be the only way things are done, but it could be a real option. Anger Management has gone a long way toward getting the networks to a place where they think, 'Maybe this can work.' "

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When Marcus and Bernstein joined forces nearly a decade ago, they had no intention of trying to reinvent television. Although they had been crossing paths for years as they climbed the TV ladder (Marcus at Disney then Miramax, Bernstein at Rysher then Lionsgate), it wasn't until 2003 that Marcus reeled in Bernstein to help him sell South Park. This was Marcus' second go at the franchise, which he had tried to acquire in the late-’90s when he was president of Buena Vista TV, but ABC Broadcasting's then-president, Steve Burke, wouldn't budge. "He said, 'You know, it's probably the funniest thing I've ever seen in my entire life,' " recalls Marcus, "'And you're not going to be buying it for The Walt Disney Co.' "

Marcus and Bernstein's South Park success opened the door to other opportunities, including a chance to distribute Joe Roth's Revolution Studios film library and the game show Family Feud. "Other people started coming to us to say: 'I have this. I have that. I need someone to sell it,' " says Bernstein, who like Marcus is refreshingly unguarded and lacks a certain Hollywood slickness. Then, in February 2006, they got a call from then-William Morris agent Mark Itkin. He wanted them to meet with agency client Perry, who was coming off a frustrating experience at CBS. "Tyler explained to us that he wanted to find a way to do a TV show his way. He didn't want the networks to tell him that he had to have a white person next door or a blonde," says Marcus. (With several shows targeting African-American audiences on its roster, he and Bernstein have grown particularly familiar with that underserved market.)

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While Marcus and Bernstein were no different than other network executives in terms of taste -- "We're 50-year-old white guys, too," jokes Bernstein -- they had come up with a groundbreaking experiment: If Perry would spend his own $5 million to produce 10 episodes of a sitcom (House of Payne) on his terms, Debmar would find a way to distribute it in 10 urban markets for two weeks as a test to prove its viability. Prove it they did: The series doubled or tripled the time-period ratings in all 10 markets that summer, enough to garner a 100-episode upfront commitment from TBS as well as from Fox and other broadcast stations in syndication. "They took an established model and they turned it on its ear, and we at TBS had a lot of success being part of that," says Turner Entertainment Networks president Steve Koonin, who ordered two more Perry comedies, Meet the Browns and For Better or Worse, on the Debmar model. The three shows collectively have generated about $600 million in revenue, with Payne by far the biggest earner. Sources suggest Perry has made more than $100 million from his TV fare.

Just as Debmar completed its first Payne test, Lionsgate -- along with a few other companies the partners decline to name -- came knocking. The independent studio acquired Debmar in a deal that not only saw Marcus and Bernstein pocket $28 million but also granted them autonomy. (They suggest the latter was key to getting the deal done.) "At the time, we at Lionsgate were particularly focused on our TV business and how we would grow it out, and they were these great entrepreneurs who were doing exciting things that we weren't doing," recalls Feltheimer, noting that they've maintained that outside-the-box approach. "I'll bring up an idea, and they're not afraid to alter it or flat-out reject it, and I really like that. They're not afraid of me."

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Not every foray has been a success for Debmar or its corporate parent. Among the misfires: Comedy Central half-hour Big Lake, from producers Will Ferrell and Adam McKay, which didn't move past the initial 10 episodes. "We have huge respect for those guys," notes Marcus, whose entertainment attorney wife, Deborah Klein, counts Ferrell as a client, "but I think what we learned was that whoever is going to be involved really has to be hands-on."

Marcus and Bernstein are adamant that the showrunner is the most critical piece of the formula, as he or she has the Herculean task of churning out two episodes a week. Finding writer-producers who can work at that pace is a challenge, which is why they have yet to secure a showrunner for Lopez's long-gestating comedy or the more recent odd-couple pairing of Grammer and Lawrence. That's not to say nabbing a massive star isn't key. To be sure, having someone like Sheen on Anger ensured a certain amount of tune-in, built-in marketing and international appeal (the series has already sold in more than a dozen territories).

"[The model] works well for its spontaneity. There's no time to overthink," says Sheen. The Debmar duo initially met with Sheen's camp to discuss potential 10/90 projects in spring 2010, when his final contract was being negotiated on Men, though the idea of tackling Anger didn't come until a year or so later. (It initially was being developed as a vehicle for Cedric the Entertainer.) Marcus and Bernstein don't have a clear answer when asked what they would do if something were to happen to the famously erratic actor, except to say that they don't envision a scenario in which they'd replace him. "This isn't Anger Management starring Charlie Sheen, or Emilio [Estevez], or whoever," quips Bernstein.

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Although Marcus and Bernstein crisscross the country regularly and often finish each other's sentences, the partners -- both married fathers of two -- run their company with some 3,000 miles between them. Marcus, a California native, is Santa Monica-based and is more focused on Debmar's Hollywood relationships, while Long Island-bred Bernstein works out of the firm's Manhattan office and is more invested in the sales side of the business.

"They have a fantastic working relationship as this glass-half-full and glass-half-empty pair," says Lionsgate TV group president Kevin Beggs of the duo, with Bernstein the optimist to Marcus' pessimist. Those qualities were on display during Anger's summer test, when Beggs would call both men on the Friday morning after the episode aired to discuss ratings. "I began the 10-episode process by calling Mort first, and by the time I was done with him, I'd be pulling off the freeway to turn my car around and go home because there was no reason to go to work based on his analysis," jokes Beggs. "And then I'd call Ira, and I'd feel really great. At one point, I started reversing the order of my calls because I needed to hear from Ira first so that I could be prepared for Mort."

Anger's first 10 episodes, budgeted at about $10 million total, cost significantly less than the $1.3 million to $1.6 million an episode typical for a first-year multicamera sitcom -- and bowed to record viewership of 5.5 million on FX, before falling nearly every week. Fortunately, the ratings for the last four episodes didn't drop more than 20 percent from those of the preceding four, a necessity to secure its additional 90 episodes. Over the course of its trial run, Anger managed to average 4.5 million total viewers and 2.5 million in adults 18-to-49, making it the highest-rated new cable comedy series of the year.

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The more skeptical prognosticators suggest that those ratings will continue to slide, particularly without Sheen in the news as much -- though he's managing to stay in the headlines thanks to some recent partying in Cabo San Lucas with Los Angeles Mayor Antonio Villaraigosa. But Marcus and Bernstein are quick to say that a nosedive is statistically unlikely. The concern is one they've had to address on every project they've worked on: What happens if the ratings drop off in episode 45? Or worse, 15? That's why part of their 10/90 pitch is that, with few exceptions, shows that are hits in their first season tend to remain on the air for at least four seasons, or the rough equivalent of 100 episodes. (And if Anger's ratings do plummet, there's a clause that allows FX to bury the show on its schedule.)

Although Saftler -- along with his team -- remains enthusiastic, he stopped short of declaring Debmar's model revolutionary. Saftler, like a handful of other network executives who declined to be quoted for this story, remains skeptical of the model's broader appeal given all of the elements -- from star to showrunner to station interest -- that need to go right almost immediately for such a deal to make sense, not to mention the risk that comes with ordering 90 episodes at one time. "I've heard people prophesize that this is the future of television. I don't agree with that simply because a show has to literally work for syndication, international and the front-end network player off the back of 10 episodes to make it work," he argues.

TV REVEW: Anger Management

Marcus and Bernstein, as well as Lionsgate brass, are considerably more optimistic, a mindset made possible by the quantity and caliber of talent looking to partner with them. "The inbounds are overwhelming," notes Beggs of the interest that's been fueled by the significant series commitments and the potential equity that comes with them. Looking ahead, the goal for Debmar is to sell a 10/90 project to one of the broadcast networks (both NBC and Fox heard the Anger pitch, but neither bit). "I think they're warming up to the concept," says Feltheimer. "If you're a network, and you start to see broadcast ratings and cable ratings heading toward each other, I think you have to say, 'Wait, you're able to get a first-rate star in a series for close to half the license fee, and you're able to program it in much more flexible ways?' " (One broadcast chief agreed that the networks should be exploring such possibilities at the very least.)

The Debmar partners believe that when they finally land a broadcast show -- even if they have to tweak the formula to, say, a slightly more palatable 10-10-80 deal to make it happen -- the big studios will need to pay attention. "If we sell one of these to a network, they'll be jumping out of windows," says Marcus. Bernstein completes his thought: "Because now we took one of their time periods away from them. They'd be freaking out." He pauses, the smile on his face growing wider. "Wouldn't that be fun?"

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