Biz watches cautiously as Pax TV nears start
WEST PALM BEACH, Fla. — When Bud Paxson dreamt up his family-friendly broadcaster Pax TV, he chose as its logo a dove — specifically a Biblical dove, the one that brought the olive twig back to Noah.
But to hear many of his peers tell it, the deeply religious Paxson might as well have chosen a turkey. Or at least — given the many potshots he’s taken — a sitting duck.
The it’ll-never-work mantra does not simply owe to the fact that Pax TV, which bows Aug. 31 with a 70% household reach, is a broadcaster with an entirely UHF base.
Naysayers also signal the web’s huge startup costs — a pledged $244 million for programming alone — plus its repeat-intensive, older-skewing starting slate, and its late arrival to the upfront advertising party. Worse, Standard & Poor’s downgraded its rating on Paxson Communications debt last month to an embarrassing triple-C.
The only unanimously held positives are that Paxson’s 80 stations will net him a tidy billion dollars or two when he gets around to selling them, and that he did well to snag ex-CBS entertainment prez Jeff Sagansky to run the show in the meantime.
Contrasts in story
Yet there’s a marked contrast in how observers are spinning the story. In the eyes of many in Hollywood, Paxson doesn’t have a prayer; on Wall Street, the project is an occasion for en masse fence-sitting; while on Madison Avenue, the mood is one is of cautious optimism.
Such reactions are entirely predictable to Sagansky, who said his principal worry this summer has been adjusting to the punishing South Florida humidity.
“This is rarely the kind of programming that TV critics and our confreres in Hollywood respond to,” Sagansky said. “It’s not edgy, it’s not hip, it doesn’t have attitude. But people have always watched it in great numbers, and guess what? They still do.”
Take Pax TV’s flagship “Touched by an Angel,” Sagansky said, bristling at the suggestion that one-hour shows are poor repeaters: “It’s been in the top-20 (in reruns on CBS) all summer. The same is true for ‘Diagnosis Murder.’ ”
Along with “Touched” (8 p.m.) and a double dose of “Murder” (9 p.m., 10 p.m.), Pax TV’s all-stripped primetime slate starts with “Life Goes On.” Starting Sept. 14, “Dr. Quinn, Medicine Woman” will take the 9 p.m. slot.
Sagansky’s prowess, however, is in fostering original fare. At CBS and NBC, he helped develop “Touched,” “Quinn” and Pax TV’s 6 p.m. strip “Highway to Heaven,” as well as spicier fare that won’t fit the Paxson bill, like “Miami Vice” and “The Nanny.”
But Pax TV’s original efforts, at startup, look pretty modest. There’s a film trivia gameshow, a 5 p.m. lifestyles magazine to counterprogram local news, and a Sunday reality show, “It’s a Miracle,” hosted by hot country crooner Billy Dean.
In the way of series, Sagansky is upbeat about Louisa May Alcott’s “Little Men,” which “Quinn” exec producer Carl Binder is overseeing, and “Flipper: The New Adventures,” which Pax TV is co-producing with MGM.
“Family values is an interesting idea, but in a way, UPN is already doing that with its less edgy fare. With all that off-network programming, Paxson has es-sentially put together a cable network, and not a very good one,” sniped an L.A.-based TV exec.
To be fair, Sagansky only came on board in May, when Paxson had already greenlit most shows. But the topper nonetheless finds himself defending the slate’s appeal to a wide 25-54 demo, when most observers say the skew looks older and less of a magnet for ad coin than it could be.
“The perception is 35-and-up, and that can’t be refuted until you get some ratings, so mainstream advertisers are likely to stay away till then,” said Jerry Solomon of media buyer SFM Media.
Solomon gauges a mood of “hopeful wait-and-see” among advertisers, while Bill Croasdale of Western Intl. Media calls the slate the clean programming that advertisers love: “There’s little chance of derogatory mail from viewers,” he said.
Programming prez Bill Scott said letters he has received from fans of “Touched” and “Quinn” show substantial interest among women in the 25-40 bracket. He’s confident that hosts such as Billy Dean will also pull in younger auds.
Value in stations
As for the economics, Pax TV may be on safer ground than commonly assumed. Paxson himself has admitted he made a mistake in November when he unveiled his project as a “broadcast network” — with all that term’s negative connotations of zero margins and bickering with affils.
The message was exactly what Wall Street, which had looked for Paxson to announce a product-sourcing venture with a major programmer, did not want to hear. Paxson stock tumbled nearly 50% to $7, though it has since recovered to $11 — a reflection, largely, of the stations’ asset value.
But, unlike an NBC, for instance, the Pax TV model relies significantly on local coin. Sagansky said 35% of revenue should come from local sales, another 35% from national spot. (Some 15% will derive from overnight infomercials, leaving just 15% from national upfront — which in turn makes Pax TV’s late-in-the-year start less of an issue.)
“Yes, the skew is probably older, but offsetting that, they control all of the inventory, and with local sales, they’ll probably be able to charge more on a cost-per-thousand basis,” said Paul Sweeney of Smith, Barney.
While almost all analysts are happy to maintain a “hold” on the stock, Prudential Securities initiated coverage last week with a “strong buy.”
Prudential’s James Marsh believes the Pax model can work. Low operating costs — thanks to an absence of news divisions and researchers at the local level — and the total-inventory advertising approach together mean that the net can break even with as little as a 0.7 rating, he said.
“Even ‘Ironside’ is getting a 1.0 on a UHF in Seattle. ‘Touched by an Angel’ is going to do much better than that in primetime,” Marsh opined.
Based on an average year-one rating of a 1.0, with a 1.3 in year two, the net can be generating healthy cash flow of $170 million by the year 2000, the analyst added.
‘Instincts have been good’
Maybe Bud Paxson is ahead of the game after all. Referring to his boss’s past gambles on Florida radio stations, home shopping and UHF ownership, Sagan-sky said: “He’s a big thinker, and his instincts have been good so far.”
Of course, Paxson himself may prefer to credit a higher power — and to look at the Old Testament rather than Wall Street for a projection. Noah waited a year for that flood to subside — Paxson will be praying that the red ink dries up within a similar time frame.