Loss Vegas

With ailing TV distributors and stations willing to compromise on deals, this year's NATPE could alter the syndication business

By many accounts, 2009 will be the most difficult year that TV stations have faced in recent memory.

An advertising free fall caused by the U.S. recession, coupled with possible complications due to the upcoming digital switchover, is forcing stations to downsize personnel, marketing and programming budgets. On top of that, the expected advertising boost from the Beijing Olympics and the presidential election never materialized, causing TV station revenue in 2008 to drop to $20.1 billion, the lowest total in seven years, according to a recent report from consulting firm BIA Advisory Services.

In this environment, TV syndicators are coming up with new ways of trying to get shows cleared as they head to the annual NATPE conference this week in Las Vegas. The strategies could have a significant impact on the TV business, lasting well beyond the current recession. "For a while, the industry got too comfortable with 'business as usual,' " says Hank Cohen, partner and CEO of Trifecta Entertainment & Media. "The people who survive will find creative solutions -- hopefully not gimmicks, but sound business principles that will stick around and become part of a new business model."

Even before the recession, stations were struggling to hold on to viewers, who have more options than ever. The current climate has put added pressure on syndicators to reduce the high cash license fees that often come with expensively produced shows.

A few shows have already seen their programming plans shaken up: Among them are Warner Bros.' "The Tyra Banks Show," which is moving out of syndication into the CW's afternoon block in September; Twentieth's "The Morning Show With Mike and Juliet," which isn't getting a renewal for next season; and "T.D. Jakes," which CBS Television Distribution has decided to launch in fall 2010 instead of fall 2009 as originally planned.

"As distributors, we need to find innovative ways to provide broadcast stations with programming that fits within their economic model, while continuing to deliver high-quality, engaging shows with a distinctive point of view," says Warner Bros. Domestic Television Distribution president Ken Werner. "Otherwise, viewers will continue to migrate to cable and other nonbroadcast platforms."

Some distributors -- the smart ones, many say -- are working to come up with new deal terms that financially strapped stations can work with. These include lower cash license fees; changing the barter split, giving distributors a bigger slice of ad revenue to subsidize license fees; adding product integration opportunities; looking for cable networks willing to share license fees; and adding Web content to boost online traffic and ad revenue.

And even with these concessions, successful launches and renewals of popular strips might be subject to more haggling over deal points.

"Stations are going to be particularly conservative about their cash expenditures, so renewals are going to take longer, just as launching new shows is going to take longer," says Program Partners co-founder/principal Ritch Colbert. "I think license fees overall are lower than the distributors have expected."

Bill Carroll, vp and director of programming at station rep firm Katz Television Group, predicts that many stations will be unable to renew shows at a normal 10% increase, and that the best most will probably be able to do this year is maintain the terms of their current deals.

According to Debmar-Mercury co-presidents Mort Marcus and Ira Bernstein, more syndicators would be wise to test-run shows on a select group of stations before trying to clear them nationwide. Debmar employed that strategy with the sitcom "House of Payne," now airing on TBS and in broadcast syndication, and talker "The Wendy Williams Show," launching in the summer.

Marcus also argues for shorter license terms up front, believing that stations shouldn't be asked to sign two-year deals for a show when they've seen only a four-minute presentation.

"If you're a network affiliate, and your network in primetime actually committed to two years' worth of production on a show based on a four-minute tape, you'd want to fire that person," Marcus says. "It doesn't make sense."

Litton Entertainment president/CEO Dave Morgan believes more needs fixing in the syndication business than just the deal structures.

"The format of the model was broken long before the downturn," Morgan says. "The industry has relied on one source of revenue: Madison Avenue. But it shouldn't be relying totally on reactionary revenue and should have found other sources of revenue (before now)."

Syndicators aren't the only ones calling for a shake-up.

Tribune Broadcasting senior vp programming and entertainment Sean Compton says his company is being "a lot more cautious" about signing deals this year. He believes shows can be produced more inexpensively.

"Many (successful) shows started at local TV stations -- Jerry Springer started in Cincinnati, Oprah Winfrey started in Chicago," he says. "Why now can't we convert back to a similar model where we have frugal productions produced at a local TV station on much tighter budgets? The reality is there should be shorter deals with a base price that's a lot less than what we're paying now. And if it works, there will be built-in performance enhancements, instead of coming in with high license fees and barter loads. This will benefit everyone."

Bob Cook, president and COO of Twentieth Television, says stations do seem to be more cautious, but he has not seen a slowdown in getting high-demand shows like Twentieth's upcoming "How I Met Your Mother" and "My Name Is Earl" cleared on favorable terms.

"If they want something, they put their hand up, and we negotiate," he says.

But it's still a buyer's market, and some station group execs say the effort of the distributors to be more flexible is still not enough.

"I think they think they're making big cuts," says Bill Butler, vp programming and promotion at Sinclair Broadcast Group. "From a buyer's perspective, we're seeing reductions, but not as much as we want."

In the meantime, financially strapped stations with time periods to fill will always have options. Shows like Debmar-Mercury's off-E! series "True Hollywood Story" and Trifecta's off-MTV "Laguna Beach: The Real Orange County"and "The Hills" are less of a gamble. For one thing, the episodes already have been produced and thus carry a lower price tag.

Also potentially making a comeback as strips are off-network dramas. NBC Universal is distributing "Law & Order: Criminal Intent" as a strip and is selling "Law & Order: SVU," while CBS is offering "Star Trek: The Next Generation."

The concept isn't new -- shows like "Bonanza" and "Magnum, P.I." aired as daytime strips years ago -- but it's only recently begun gaining favor again. And with the dramas fetching fewer dollars from cable -- down from the heyday of a few years ago when shows went for up to $2 million -- distributors are likely to look for other ways to make money off these shows.

"It's getting to the point where stations are going to have to look at alternatives in daytime, and a real alternative is off-network hours," says Chuck Larsen, president of October Moon Television, a TV distribution consulting company. "The successful ones are already produced and basically paid for with the exception of residual costs, the productions are of extremely high value, and the shows are branded so people know what they are and will tune in."

Also impacting the business -- though at this point the long-term effects are unclear -- is the recent bankruptcy filing by Tribune Broadcasting's parent Tribune Co. As one of the few station groups that syndicators rely on to get a show launched, Tribune's upcoming decisions on product will influence smaller station groups. As a result, many groups are taking a wait-and-see approach.

But with the digital switch just around the corner and no end to the recession in sight, stations have a tough road ahead. In the end, though, stations are always going to have time slots to fill and a need for programming, recession or no.

"The stations are telling us they still need hit TV shows; they still need ratings; they still need to stay in the business," says CBS Television Distribution president John Nogawski. "We come to work and produce the best product we can. Our motivation hasn't changed at all."