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Inside the Oscars Deal: What it Means for ABC and the Academy

When Academy of Motion Pictures Arts and Science officials approached Walt Disney Co. CEO Bob Iger last year seeking a long-term extension of ABC’s deal to broadcast the Academy Awards, the response within Disney-ABC was enthusiastic. ABC is the lone Big-Four broadcast network without a professional football contract. It hosts no Super Bowls, no Thursday or Sunday-night NFL telecasts. It has no Olympics, no World Series, no Grammys. When it comes to marquee event programming, ABC boasts the Oscars, the NBA Finals and that’s it.

On Monday, ABC and the Academy announced that they had indeed extended their Oscars agreement through 2028. A source with knowledge of the negotiations told Variety that talks began a year ago, initiated by the Academy, despite the fact that the predecessor deal was not set to run out until 2020.

In terms of structure, the agreement is very much an extension — not a new deal. The Academy will continue to have final say on producers, hosts and other production decisions, with ABC maintaining some input but ultimately deferring to the Academy. There is no agreement in place to install the network’s late-night star Jimmy Kimmel as Oscars host, despite his longstanding desire to fill the role.

In fact, no conversations have yet been had with any potential hosts for the 2017 awards, with the focus now on lining up producers. David Hill, who produced this year with Reginald Hudlin, has expressed interest in returning. ABC is high on Don Mischer, who produced in 2011 and 2012 and is producing the Emmys this year for the Alphabet. Craig Zadan and Neil Meron, who produced the show from 2013 to 2015, are said to be unlikely to return.

Though ABC executives have long grumbled at wanting more say in how the Oscars are produced, they are not without influence. The network put its foot down two years ago when the Academy pushed to have Kimmel’s rival Jimmy Fallon of NBC’s “The Tonight Show” host. The network and the Academy were in lockstep on past attempts to get Fallon pal Justin Timberlake to host, only to be rebuffed by the singer-actor.

Beyond production questions, the agreement also forges no new ground on live streaming or social media, though it leaves open the possibility that the two parties could address those issues down the road. The lack of specifics around digital could provide flexibility to adapt in a changing television landscape. After locking up rights to the Olympics through 2032, NBCUniversal rolled out an aggressive and well-polished live-streaming component for its coverage of the 2016 Summer Games in Rio de Janeiro. The company then watched as live-streaming numbers grew beyond expectations and traditional television ratings fell short, forcing it to offer additional inventory to advertisers to make up for lost eyeballs.

Financial terms of the new Oscars deal were not disclosed, but under the predecessor agreement, Disney pays $75 million per year for broadcast rights — which it then exploits by selling advertisements as well as overseas broadcast rights. The Academy, meanwhile, won’t suffer for getting a long-term dollar commitment from its broadcast partner. It certainly can use the money.

Last year the Academy sold $341 million in bonds — $122 in floating-rate bonds and the remainder in fixed-rate bonds — with the bulk of the money earned going to the construction of the Academy Museum of Motion Pictures being built at the corner of Wilshire and Fairfax in Los Angeles. The bond sale was part of a $388 million capital program launched last year by the Academy and led by Iger and fellow co-chairs Annette Benning and Tom Hanks.

ABC, meanwhile, hopes to continue to benefit from hosting an event that remains one of TV’s biggest draws. But recent ratings for NBC’s Rio Olympics coverage, down 9% in total viewers from 2012, and the MTV Video Music Awards, down 34% on Sunday from 2015, have shown that event-programming franchises are no longer guaranteed to bring in ever-increasing audiences in an era of media fragmentation. Total viewership for the 2016 Oscars, beset by the #OscarsSoWhite controversy, were down 6% from the previous year, hitting an eight-year low.

The last time Disney-ABC and the Academy renewed their deal, they did so in 2011, three years before the then-current agreement was set to expire, adding an additional six years. Now, with an earlier commitment to a longer extension, the Academy gets a guarantee of stability — a deal it likes with a partner it knows for big money. Disney, meanwhile, is betting that a relationship that has been mutually beneficial in a traditional landscape will continue to be so in a far-flung future beyond a point where anyone can predict how television will be consumed.

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