King World Prods, can’t seem to shake its lingering characterization in some syndication and Wall Street circles as a three-show company.
While “Wheel Of Fortune,” “Jeopardy!” and “The Oprah Winfrey Show” – the three top shows in syndication – have made King World the reigning powerhouse of firstrun syndication, they also naggingly spotlight the company’s ongoing failure to come up with another runaway hit.
Analysts say that perception has had a significant impact upon the company’s stock. “They are definitely paying for the fact that they have not been able to come up with other hit shows,” maintains Jessica Reif, a longtime industry analyst who has covered the company since its initial public offering in 1984.
“In the days when they were first introducing ‘Jeopardy!’ and ‘Oprah,’ they were selling at a huge premium to the market, whereas the last few years they’ve sold at a huge discount.” Reif, who often recommended King World stock, points out that now, despite “a terrific” balance sheet, the company’s shares (which have hovered in the $23-$25 range) are currently trading at only 9.6 times this year’s earnings of $2.15 per share and 8.7 times estimated 1991 earnings per share, a 36% discount to the broader market.
In the past year, King World has weathered some major disappointments. “Monopoly,” the long-awaited gameshow, saw life only briefly as a summer primetime filler on ABC. The public financing vehicle Merlin Program Capital, by which the company had hoped to raise $36 million for program development, was scrapped. And “Instant Recall,” a newsmagazine show, has started slowly.
Despite such setbacks, the company says it is more determined than ever to move forward in the firstrun arena. At this year’s NATPE, King World is expected to pull out all the stops in promoting and shopping its latest and possibly most formidable new syndicated entry, “Candid Camera.”
The company says it will work to sustain the longevity of its top three shows and develop new programs. And plans for diversification to build a media conglomerate along the lines of a Viacom or MCA appear to have been put on the back burner for the time being.
‘Back to basics’
“We’re going back to the basics; we’re developing more shows,” says King World chairman Roger King.
KW continues to be fueled principally by the returns of its top three shows (the “franchise,” as president Michael King describes them). In 1987, they accounted for 88% of the company’s total revenues of $241 million. In 1990, they rang up 83% of the company’s revenues of $454 million.
“Wheel Of Fortune” and “Jeopardy!” are sold out in 95% of the U.S. through 1992 and in 45% of the country, including eight of the top 10 markets, through 1994. “Oprah” is sold out in 90% of the U.S. through 1993.
Despite the guaranteed revenue stream, King World has never been willing to sit back and watch the money roll in. Except for a two-year hiatus following the successful launch of “Oprah” in 1986, the company has remained active in firstrun syndication, always shopping at least one new show each year at NATPE.
Its most successful recent effort has been “Inside Edition,” its first in-house production, launched in January 1989 to ride the “tabloid tv” wave created by Fox’s “A Current Affair.” Flops include “Nightlife” with David Brenner, “Headline Chasers,” “Rock ‘N’ Roll Evening News” and “True Confessions.”
“Inside Edition” underwent a change of host, music, graphics, set and story selection in the first year, but in relatively short order it knocked off more highly touted competitors like “USA Today – The Television Show.”
“Inside Edition” is now No. 6 in syndication, although it is no longer carried in New York, the country’s largest tv market. The company says that for the first time “Edition” is posting a profit.
Last year’s NATPE offering, “Instant Recall,” is off to a slow start, and some industry watchers have pronounced the show, which premiered last fall in 81 markets, dead for next year. The company says it has renewals for the show in 20 markets. King World executives say they are determined to rework the show, but if it does not break even by fiscal 1992, it will be off the air.
Despite the gains made by “Inside Edition,” the absence of another blockbuster continues to fuel the contention that King World is only a three-trick pony unable to repeat its earlier successes.
Company executives say they’ve heard that tune before. “It’s very easy for the Wall Street community to knock things,” says Michael King. “There are plenty of companies with only one product that do very well. Perrier is a one-product company. I think we’re very lucky to have three brand names; we’ve got Coke, Pepsi and 7-Up.”
Management turnover and publicized personal problems of key executives served to undermine the company’s reputation on Wall Street in the late 1980s. According to industry sources, however, KW chief operating officer Steven Palley, who replaced Stu Hersch in 1987, and CFO Jeffrey Epstein, a former First Boston investment banker who helped take the company public, have done much to restore the financial community’s confidence in the company over the last three years.
Concerned over its limited scope, King World began to diversify in 1988. Its biggest step in this direction was its December 1988 purchase of CBS affiliate WIVB-TV Buffalo for $105 million. The company now says diversification will be limited to programming.
“What I have learned over the last few years was that the reason we’re not diversified is because it comes directly from our corporate culture, which is not diversified,” says CFO Epstein. “We do a very few things, and we try do those better than anyone else.”
King World execs say the firm has not yet tapped the full potential of its three hits. “These shows can go on for 10,15, even 20 years,” says Michael King. “‘Oprah’ is still in its infancy as a talkshow.” He adds that the same is true of the gameshows. “Take a look at ‘The Price Is Right’; it’s been around for over 30 years. The longevity of these programs is second to none.”
The company says “Wheel Of Fortune” viewership in terms of both rating and share increased over the past year, the first increase in four years.
“But the focus is not just on three shows,” Palley points out. “The focus is on the syndication business, the programming business. We have been trying to expand the portfolio of programming.”
The company does not rule out acquisitions to achieve that end. “The ideal acquisition would be a program library or distribution company that we could essentially fit into our operation with minimal duplicate overhead,” says Epstein. “We’ve looked at every programming company that’s been up for sale in the last few years, and the prices have been substantially too high.”
Cable tv may also offer opportunities on the programming front. King World produces “Arts & Entertainment Review” for A& E. It also programs a local cable channel (solely with King World fare) 18 hours a day, Monday to Friday, on Cox Cable’s system in Eureka, Calif. KW has expressed interest in cable networks (it was rumored to be a suitor of the troubled Financial News Network), but is still concerned over the constraints of channel capacity.
King World is in a position to make good on any acquisition aims. The company has more than $180 million in cash on its balance sheet.
But further acquisitions like WIVB-TV appear out of the question. “When you buy a television station, you pay a high multiple and put up millions and millions of dollars,” says Roger King. “When you develop a television show and it hits, you can have 20 times more cash flow from the show than you’d ever see from the station.”
Presently, the company is concentrating on getting “Candid Camera” launched. The show, hosted by Dom DeLuise and produced by Vin DiBona (producer of “America’s Funniest Home Videos” and “America’s Funniest People”), has some of the earmarks of King World’s previous success stories.
Like “Wheel Of Fortune” and “Jeopardy!,” the show comes with a recognized brand name and a prior successful run on network tv.
“Candid Camera,” which premiered on tv in 1948, was one of the top 10 primetime programs for four years in the 1960s and No. 1 in its time period for six years. In syndication in the 1970s, the show was a top 20 program for five years.
As with “Inside Edition,” King World will be entering an already crowded field. “America’s Funniest Home Videos” on ABC and “Totally Hidden Videos” on Fox (both of which, paradoxically, play off the strengths of the original “Candid Camera”) have already substantially capitalized on the homevideo/comedy programming craze.
Thus, promotion will be a key catalyst in any success “Candid Camera” achieves. King World in October announced a $25-million promotional tie-in campaign with Pizza Hut. The campaign is similar to those which fueled “Wheel Of Fortune.”
“Candid Camera” may fulfill a portion of KW’s larger programming strategy. Having successfully developed an hour block of gameshows and still tinkering with newsmagazines, the company’s strategy for 1991 is to enter a third category, comedy, with “Candid Camera.”
Unlike other King World shows, which run almost exclusively on network affiliates, the company says “Candid Camera” will be aimed at independent stations, a new market for the company. KW execs declined to comment on the number of clearances the show has received.
King World also hopes to further bolster its program lineup, and it looks like no area of programming will be ruled out.
At presstime, sources close to the company said it is working out a deal to become an outside supplier to the networks of reality-based programming for daytime, Two shows under discussion are “Assignment A.M.” and “Women’s Diaries.” King World honchos declined to comment.