Where the real TV money is

Top unscripteds draw big ad cash, offer nifty revenue streams

Just like Kelly Clarkson before him, Ruben Studdard is ready to reap the rewards as “American Idol’s” newest star. But it’s the producers, packaging agents and network officials behind the Fox hit — and other primetime reality series — that have already gone platinum with diversified business models.

“Reality programming used to just be considered a format business for international producers, but the U.S. market has become a tremendous front-end profit center for the networks and producers here, as well,” says Creative Artists Agency’s Michael Comacho, who, along with David Tenzer, packaged “American Idol” for the U.S.

That profitability is apparent in the ratings. The tail end of the 18-week second edition of “American Idol” was key in lifting Fox’s overall primetime lineup to its first-ever May sweeps win in the essential 18- 49 demo over NBC (4.7 rating/14 share vs. 4.4/12), according to Nielsen Media Research.

Key was “Idol’s” May 21 finale, which posted its best scores in 18-49 (16.8/37), 18-34 (17.2/41) and teens (16.2/43). These ratings translated to huge ad sales.

According to ad-buying sources, “Idol’s” Wednesday night spring run topped out at a $372,000-per-spot average, up 37% from the first “Idol’s” summer run and placing it not all that far from primetime reality’s top ad earner, CBS’ “Survivor” ($425,000 per unit). Both compare favorably with NBC’s top-rated “Friends” ($450,000).

Of course, in a genre where you have people French-kissing in hot tubs and others eating bugs the size of tennis shoes, advertisers will start worrying about “environments.” However, advertiser skittishness has primarily affected the premiums some B- and C-tier shows can get, buyers say.

“A higher percentage of reality shows still make advertisers uncomfortable, but it doesn’t mean advertisers are leery of buying heavily into the A-tier shows like ‘American Idol’ and ‘Survivor,'” explains John Rash, senior veep of national broadcast buying for Minneapolis-based ad agency Campbell-Mithun.

With license fees for hour-long reality series hovering between $700,000 and $1 million per episode, “Survivor” exec producer Mark Burnett says the networks are enjoying much higher profit margins than can be derived from escalating license fees for scripted series like “Friends” ($6 million-plus per episode) and “ER” ($13 million).

Despite the unquestionable firstrun success of the reality genre in primetime, it’s been widely assumed that there isn’t much of an afterlife for these series on cable and in off-net syndication. But that isn’t entirely true. Endemol USA, for example, is talking to distributors — including NBC Enterprises — about an off-net syndie run for “Fear Factor” starting in fall 2004.

“Given the few viable sitcoms on the networks available for future syndication, ‘Fear Factor’ still delivers the same kind of strong young demographic profile that makes it ideal for syndication,” explains Mark Itkin, a leading reality packager for William Morris Agency, who reps Endemol.

Chuck Larsen, who several years ago successfully sold into syndication Bunim/Murray’s genre-pioneering “The Real World” and “Road Rules,” describes the syndie market similarly. “What’s great about both shows is they mirror the same kind of adult 18-to-49 demos of hit off-net sitcoms, and, in some cases, even higher among adults 18-34 and teens.”

Meanwhile, reality series have created a number of alternative ways to make money. Again, “American Idol” provides perhaps the best example. After creating “Pop Idol” for U.K.’s ITV network in October 2001, longtime recording industry baron Simon Fuller’s 19 Television perfected a formula for making “Idol” winners and finalists into bestselling artists for a variety of recording labels.

Through 19’s TV partnership with Fremantle, which is owned by recording giant Bertelsmann Music Group (BMG), “Idol” winner Kelly Clarkson’s debut topped the Billboard charts, selling 624,000 copies and going gold in just five weeks.

Taking it to the next level, Fremantle and 19 Television produce and license “Idol” in 19 territories internationally.

They’ve licensed a DVD version, “American Idol: Search for a Superstar,” and they have the 20th Century Fox theatrical “From Justin to Kelly” slated for June 13 release.

“Scripted shows rarely offer the kind of extensive licensing and merchandising opportunities like we’re seeing on the front end with reality series,” says CAA’s Tenzer. “The (reality) genre is still young, and we’re still very bullish on the content possibilities and the different places the genre can go.”