The major networks are seeing red – or rather, worrying about seeing it on their financial statements – over the license fees paid to renew long-running hit series, an issue that’s quietly become one of the most influential in terms of who paves the primetime TV landscape.
The issue flared up last week when ABC and Warner Bros. TV hit an impasse over a ninth season of the successful comedy “Full House” solely because of the license fee being asked on the show.
Sources say the “Full House” fee exceeds $1.5 million per installment, and with ABC balking, the studio has put “House” on the open market. “That’s a lot to pay,” as one network source put it, “on a 20-share show.”
Still, CBS recently agreed to pony up an estimated $2 million per hour for a 12th season of “Murder, She Wrote” – a vital component of its Sunday-night lineup – while NBC is preparing for what should be a major cash outlay to extend its run of “Seinfeld.”
In its last negotiation with the Carsey-Werner Co., ABC agreed to pay what’s estimated at more than $3 million an episode over the course of three years to renew “Roseanne” into 1997, also shelling out commitments on movies, series and specials to the show’s star. “Roseanne,” now in its seventh year, has seen its ratings drop a precipitous 20% since the season began.
The feeling that they’ve been raked over the coals by studios in past license-fee negotiations has prompted the networks, officials say, to try to protect themselves by producing more of their own shows – a development that, in turn, has spurred studios like Warner Bros, and Paramount to get into the broadcasting business.
Chicken and egg
The chicken-and-egg argument over who prompted this scenario can be debated, but the result is undeniable. According to network officials, multimillion-dollar license fees paid on long-running hits like “The Cosby Show,” “Cheers” and “Roseanne” have been a major factor behind their push to increase in-house production and make overall deals with talent, prompting studios to defensively explore other means of exhibition.
Rhetoric relating to the issue started flying from both directions in January when Warner Bros, and Paramount launched their studio-backed primetime services. The topic heated up at this year’s NATPE convention when Viacom president Frank Biondi alarmed the established networks by mentioning the possibility of moving a hit show, “Melrose Place,” from Fox Broadcasting Co. to the Viacom-backed United Paramount Network. Earlier, NBC West Coast prexy Don Ohlmeyer said he might want to buy fewer shows from “competitors” – referring to Paramount and Warner Bros. – who may eventually take them to their own services.
Ultimately, the whole license fee issue has to do with leverage, and who has it. While networks get to decide what gets on the air and where it’s scheduled, that clout shifts to studios once they’re free (usually after four seasons) to shop a hit series to other buyers.
It’s at that point that studios can extract commitments from a network, ranging from huge license fees to additional series, such as the multiple commitments extended to Roseanne on her show (which had expressions of interest from CBS, putting ABC’s collective feet to the fire) or to Ted Danson and Paramount on “Cheers.”
While studio officials note that a show like “Roseanne,” “Seinfeld” or “Home Improvement” can prop up an entire night and provide the launchpad for future hits, networks fret about the current “Roseanne” scenario – with ABC locked into a longterm deal on a veteran show whose ratings are falling. ABC has even floated the notion of moving the show to 8 p.m., where viewing levels are lower and its ratings would probably drop even further.
Top ABC officials were at an affiliates gathering and couldn’t be reached, but the network is said to be vitally concerned about avoiding such negotiations in the future.
That mandate has spurred not only an increase in in-house production but a number of novel new partnerships with entities like Wind Dancer Production Group, Brillstein-Grey Communications and most recently the Steven Spielberg-Jeffrey Katzenberg-David Geffen troika, DreamWorks SKG, where the network shares in the profits but, perhaps foremost, is spared from engaging in such brutal renewal negotiations by virtue of owning a piece of the program.
Still, observers say the pivotal moment may have come during the NBC-Paramount “Cheers” renewal discussions, with the studio asking at one point for more than $100 million – every dollar Par officials estimated that NBC made selling advertising time in the series – to renew the program for another season.
The studio argued that the show had brought NBC untold millions earlier in its run – when the license fee was far less lofty – and that such a deal was still worthwhile, since “Cheers” could serve as a “loss leader,” creating the platform needed to introduce new hits.
With NBC vulnerable at the time because of a decided lack of hits, the parties eventually settled on a reported $2.5 million deal, or about $65 million for 26 episodes a year. The hardball tactics, however, left a bitter taste at the network, which last year – suddenly no longer as beholden to the studio, since “Cheers” had ended its run – moved “Frasier” and “Wings” from protected Thursday berths to far more difficult assignments on Tuesday, outraging Paramount brass.
That move ultimately worked out well for NBC, which has since argued that there was nothing punitive about the scheduling switch and that the two shows are now actually more valuable to Paramount in syndication – having proven their mettle against competition from the likes of “Full House” and “Home Improvement.” Even so, “Frasier,” while still a hit, is down 17% from last season when it followed “Seinfeld.”
The shift underscored the tension that exists between networks and suppliers over the issue, but it also remains clear that when a hit show is involved – and there’s an advantage to be gained on both sides – the parties seldom let such acrimony linger. As proof, sources say NBC and Paramount are currently discussing a new two-year renewal deal – at what will doubtless be a hefty license fee – on “Wings.”