Economic crisis brings new business models

They’re not quite searching Craigslist or the 99 Cents Only store, but the broadcast networks are in serious bargain-hunting mode.

And they’re finding programming deals in more than just the reality-show aisle.

Network execs are sending a message to the industry: “We can’t live the way we’ve lived in the past.”

The old-style model of funding a pilot for $3 million-$10 million — when it has only a 10% chance of survival — can’t be sustained much longer, they say. Ditto the hefty license fees for shows that are only performing so-so.

The penny-pinching trend, which started with reality fare, and continued with the Leno-in-primetime plan, is gaining steam on several other fronts as well.

International co-productions, which network chiefs would have never considered purchasing a few years ago, are suddenly in vogue, thanks to their thrifty sticker prices.

The nets are also more willing to give low-rated series another shot, as long as producers are willing to stock ’em deep and sell ’em cheap.

The networks still want “tentpole” series — “ER,” “Lost,” et al. — that reap mega-bucks and forge an identity. But for the rest of the schedule, the target is moving toward tidy little profit margins.

That’s leading to a primetime chock full of series and longforms that were picked up partly because of bargain-basement license fees.

“What we pay right now for a lot of programming is ridiculous,” says one top-level network exec. “With all of these new economic conditions affecting our business, we have to respond. I don’t know if quality programming needs to be expensive.”

Parsimonious execs will be paying more attention than ever to the bottom line in the coming weeks as they set their fall 2009 schedules.

NBC Universal chief Jeff Zucker, for example, has said that his conglom is “managing for margins, not ratings” — which is why the Peacock chose to strip Jay Leno five nights a week at 10 p.m., a much cheaper option than running five scripted dramas there.

NBC has drawn plenty of fire for that philosophy: “If you’re trying to wring the most ad dollars out of every time period, it’s going to bite you in the ass,” one TV exec says.

But everyone’s doing it to some degree.

The fate of several shows on the bubble — such as CBS’ “Without a Trace” or NBC’s “My Name is Earl” — will hinge on whether studio and network can come to an agreement on a reduced license fee.

“Cost will be a big factor,” one exec says. “If a studio says you can have it for half, then for a network, it becomes more interesting. A lot of chicken is being played, no question.”

One show already received a surprise order this year: Fox picked up another full season of the critically-loathed comedy ” ‘Til Death” because Sony — looking to bank enough episodes for syndication — gave the network a price it couldn’t refuse.

At ABC, the Bob Saget comedy “Surviving Suburbia” landed a home after the CW dumped its programming deal with producer MRC. The deal was a no-brainer: For a song, ABC got a family sitcom (something it’s been looking to program more of, anyway) starring a former Alphabet net star.

Like ” ‘Til Death,” critics almost universally panned “Suburbia.” Yet even if both tank, ABC and Fox probably won’t lose money on those deals.

Not lose money? In this environment, that’s a much better alternative than throwing on another new show that as a 90% chance of failure.

Nonetheless, there’s a danger in completely ignoring the ratings game — or crowding your sked with too many shows that probably shouldn’t be there, one top-level network exec says.

“You have to balance (margins) with what it does to your overall schedule and your overall positioning,” he says. “If your overall number gets too low, no one will take you seriously. You won’t be the first choice for advertisers anymore; you’ll be another cable network without the dual revenue stream.”

The networks have been moving in this direction for years. Lower-cost reality shows, repurposed programs from cable siblings and repeat-heavy Saturday night skeds were just the beginning.

Now they’re turning their attention to projects that are funded either partly or wholly outside the U.S.

It started last year with the drama “Flashpoint,” which was developed for Canada’s CTV. When the 2007 writers strike left the networks’ primetime cupboard bare, CBS took a chance and acquired the cop procedural (becoming a co-producer as well).

The show easily fit into CBS’ procedural-heavy brand, starred thesps that U.S. auds were familiar with (Enrico Colantoni, Amy Jo Johnson) and — here’s the key — came with a license fee that was a fraction of what a normal drama would cost the net.

Nonetheless, CBS “would have never entertained it had they not been in the middle of a strike,” says Carrie Stein, whose Alchemy TV shingle handles distribution of the show. “It would have been lost on someone’s desk. The good news is, they picked a winner.”

NBC wasn’t as lucky this fall, as “Crusoe” — a co-production between Universal Media Studios and U.K.-based Power — wound up stranded at the bottom of the Nielsens.

But as the economy continues to falter, the networks are paying more attention to what’s coming in the door. Fox TV Studios topper Emiliano Calemzuk, who serendipitously shifted his shingle to focus on international deals after joining the company in 2007, said he knew the networks’ model was not sustainable — and that the strike and recession finally exposed those cracks.

“It worked out for us,” he said. “When the bad times hit, we had three productions available for the networks at a discounted rate.”

That included the medical drama “Mental,” a co-production between FTVS and Fox Intl. Channels that will air on Fox this summer.

“Clearly they’re all more open, they’d be foolish not to consider these shows, given the economic environment,” he says. “It’s exactly the same production quality as any U.S. drama. Granted, they’ll continue to develop their big tentpoles internally. But you can’t fill an entire schedule with expensive drama.

“That’s why everyone’s now looking at different ways of sprinkling some expensive content with stuff that’s as good, but not as expensive.”

Network execs still prefer developing projects in-house; Stein says the nets won’t even entertain the notion of international acquisitions or co-productions during the height of pilot season.

The programs — which generally boast license fees 50% to 60% of what a regular drama would cost (some have gone for as low as $250,000 for an hour) — are still seen mostly as back-ups, for midseason or summer.

That’s why this summer will see several more international co-prods on the network schedules.

Beyond Fox’s “Mental,” NBC is stocking the warm months with three: “The Philanthropist,” which it’s producing with newly acquired U.K. arm Carnival Films; “The Listener,” a co-production with CTV; and “Merlin,” produced for the BBC by Shine.

ABC picked up two internationally-produced and funded miniseries for summer: The Judy Davis starrer “Diamonds” and the Germany-produced disaster drama “Impact.”

More such works are on deck, including E1’s police drama “The Bridge,” which has been sold for next season to both CBS and CTV.

Noreen Halpern, E1’s U.S. TV production topper, says the deal is important, but outside producers must come up with quality content if they hope to develop for U.S. networks.

“There’s a recognition now that the two can go hand in hand,” Halpern says. “You could have a great project and if it comes with a great deal, there’s a huge benefit in that.”

Shows hoping for a home here must usually emulate a U.S.-produced show, and frequently includes utilizing thesps and producers who are either from the U.S. or have credits there.

For producers dabbling in the international biz, there are different levels of U.S. involvement. Some projects are straight acquisitions, like “Mental” at Fox or “Diamonds” at ABC.

Distribbed by Alchemy, “Diamonds” was financed outside of the U.S. and developed and produced for Canada’s CBC by Sienna Films. The mini had already been sold in several markets when ABC — likely lured by the small price tag and the casting of Davis, who won an Emmy for the Alphabet’s Judy Garland biopic — signed on.

“The quality of ‘Diamonds’ is terrific; it’s a $15 million miniseries that they’re getting at a greatly reduced price,” Stein says. Of course, the topic — the blood diamond trade in Sierra Leone — might not be a big audience grabber, and ABC likely wouldn’t have picked it up at a higher price.

On the flip side, Alchemy also sold “Ben-Hur” to the Alphabet web — but this time, given the expanse of the project and its much more saleable concept, ABC signed on before the project was shot. They’re still not paying a full license fee, but the Alphabet is now a part of the development and production process.

Ditto E1’s “The Bridge,” in which CBS is actively developing along side CTV.

“We want to have our partners as early as possible,” Halpern says. “That’s key: You don’t want people to see these shows as just acquisitions. The best thing for any show is that everyone feels like they’re invested from the get-go.”

Stein warns that even though a U.S. sale is key to give your production an air of legitimacy to buyers elsewhere around the globe, there’s a danger in undercutting your price too much.

“It’s tough for producers not to give all the value away to broadcasters,” Stein says. “If the network typically pays 10 million for a miniseries, give it to them for 5 — not for 1. This remains a challenge for us and many of our friends doing what we do.”

Adds Halpern: “This is ours to screw up. There’s an incredible opportunity here. We’ve got to be smart to make this work.”

A correction was made to this article on April 11, 2009.

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