Why Wall Street Will Scrutinize Walden, Newman As They Take Fox Control

Analysis: Honchos under pressure to launch hits on TV network and find new opportunities for them in a digital-content landscape

Dana Walden and Gary Newman
Frederick M. Brown/Getty Images

Installing new creative oversight at a major broadcast outlet is a move that typically raises the interest of Hollywood. Now that longtime production-studio vets Dana Walden and Gary Newman have been placed over the operations of TV’s iconoclastic Fox network, however, Wall Street will also be sure to raise an eyebrow.

Fox will continue to launch program concepts that challenge industry convention – stuff like “24” and “American Idol.” What Newman and Walden will have to demonstrate is an unerring ability to find a home at Fox for concepts developed at the 20th Century Fox production studio, generate the biggest amount of publicity for them on one of the biggest media platforms in the United States and then monetize them more readily at a time when streaming-video players are crying out for content.

The Fox network has been blessed in recent years with executives like Gail Berman, Peter Liguori and Kevin Reilly – folks who were happy to launch ideas that defied boob-tube convention. But the network could likely use executives who place more emphasis on not only debuting a show and milking it for ad revenue, but also on securing aftermarket backing from a syndication market that is undergoing great change.

No longer can TV networks expect their programs to secure automatic placement on a major cable network with an outsize payment to go with it. Thanks to delayed viewing and video streaming, the first run of a TV program often spurs its own “second run.” Why should TNT pick up the newest series on ABC or CBS after viewers have been downloading it to mobile devices or binge-viewing it on VOD? ABC’s “Lost” spurred a cult following, but ended up being rerun on NBCUniversal’s “G4,” which is all but out of business. CBS’s “The Good Wife” is regularly touted as one of the paragons of quality television today, but its aftermarket opportunities are found in a combination of runs on Amazon, Hulu Plus, Hallmark Channel and local station time.

The result? More networks want to control the flow of cash a show might generate both during its initial TV run and through as many distribution deals as may be possible in a landscape in tremendous flux. Expect more deals like those CBS Corp. has secured for new series like “Under the Dome” or “Extant.” When the programs debut on the network’s air, they often do so accompanied by deals already secured for runs on Amazon, for example.

“As studios have begun to monetize shows increasingly earlier in syndication, in both traditional and digital windows, companies have become increasingly cognizant of owning the content airing on their network,” said Michael Nathanson, an industry analyst with independent firm MoffettNathanson, in a recent research note.

“I think it’s getting harder for 20th Century Fox to play the game it used to play,” he said in an interview. “A lot of the networks are picking up their own shows, because the economics are more favorable.”

Newman and Walden seem to recognize the challenge ahead of them. On a conference call with reporters, Newman said the pair would “try to make decisions that are in the interest of the greater Fox, rather than any one division,” a suggestion that a potential revenue windfall for a company-owned property might outweigh other needs.

Walden cautioned that “the best show will win,” in the effort to stock the Fox network with the best content, but acknowledged that in the case of a tough decision, “I believe the competitive edge will lie with our studio” because “there are certain financial incentives that don’t exist when you don’t have an ownership stake in a show.”

Newman and Walden will also have to use their finesse with top creators and producers to lure them to Fox broadcast at a time when great creative opportunities beckon from so many different venues. “Everyone is creating great video content for so many other places beyond the broadcast networks that is making their new job of running and programming the Fox broadcast network that much more difficult by the day,” said Richard Greenfield, an industry analyst at BTIG Research.

Combining oversight of a TV network and a production studio isn’t exactly a new idea. Disney and NBCUniversal have in recent years broken down walls between ABC, NBC and their counterparts in hopes of wringing out costs and streamlining the process of getting content on the screen. Even Fox once set Sandy Grushow over both the Fox broadcast outlet and the Fox studio.

But it may be an idea that must be put into practice without fail. If 21st Century Fox is to remain competitive, it can’t depend on outlet owned by CBS, Walt Disney, NBCUniversal, Viacom or Time Warner to pick up its products , no matter how successful Fox product like “Modern Family” and “Homeland” are on ABC and Showtime. Consider the fate of “How I Met Your Dad,” a seemingly sure-fire idea Fox was to have landed this fall on CBS that was scrapped due to creative reasons.

To please Wall Street, Walden and Newman will have to demonstrate a soup-to-nuts facility with Fox content: creating it, launching it, maintaining it and re-selling it. They will have to develop programs that are hits on Fox and hits again in overseas and digital milieu. Given that only 29% of studio-developed programs launched in the 2013-14 season made it to a sophomore run, the two executives will face a difficult path ahead.