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Unscripted Producers Feel Squeeze of Growing Expenses, Reduced Pay

Reality bites — at least for many of its producers.

It’s been more than 15 years since the heyday of unscripted TV, a frenzied era when megahits like “Survivor” launched, surprises like “Joe Millionaire” came out of nowhere, and it seemed like almost any topic could become a phenomenon.

Now, with fewer instant hits and the focus on this golden age of scripted TV, malaise and fear have swept in. Reality TV has become a mature business, which means the shows are more expensive, profit margins have been squeezed, and ratings are down — yet producers are being asked to do more.

You could forgive the average reality producer for being a bit down in the dumps. But according to a new survey of the top reality producers in the U.S., conducted by Variety and PactUS (an association of independent TV producers), that’s only half of the story.

Although producers are feeling the financial squeeze, with most contending that it’s harder to do business now, they report that 2016 was a “more successful” year than 2015 — and they’re even optimistic about the future of their business (although not necessarily the industry as a whole).

“We all need a big game-changing hit, and it’s been a long time since we had one of those. What you don’t want is a show that’s got to do a 6 rating in order to be financially solvent.”
Rob Mills

“It certainly can be frustrating when your network partners make it hard for you to do business,” says Chris Coelen, CEO at Kinetic Content (“Married at First Sight”). “But I think, in general, people are aware that the entire biz has its own challenges, no matter which side of the business you’re on. I’m more on the optimistic side. I think the business presents huge opportunity for people who are entrepreneurial.”

The room for growth is there. Streaming services are still just getting their feet wet in unscripted. The documentary field is more vibrant than ever. And some unscripted producers are finding success by transitioning to the scripted world.

“The producers are going to have to adapt,” says David Lyle, president of PactUS. “There’s no doubt a producer who says, ‘I’m just going to do what I’ve always done,’ and ‘I’m the man, and they can come to me,’ is going to have a very hard time.”

Industry groups like PactUS and the Nonfiction Producers Assn. have started keeping tabs on their membership’s concerns. Not only are they devising new ways to work with buyers like the broadcast and cable networks, but they’re on the lookout for growth opportunities in areas like virtual reality and among the ever-expanding digital/streaming services.

“There may be upsides to the downside — how certain outlets may not pay as much but might be far more relaxed with rights,” says Lyle, former CEO of National Geographic Channel and ex-president of Fox Reality Channel.

The joint Variety/PactUS poll asked dozens of reality producers, anonymously, whether deals were harder to strike in 2016 vs. the previous year. Approximately 75% answered in the affirmative.

In particular, gripes center on rigid deal points that don’t give the producers much of a stake in their shows. “Networks are always looking to squeeze more out of less — and are always looking to change deal templates, which are already bad, for the worse, no matter how long-standing or successful the relationship is,” says one respondent.

Another producer laments that networks remain aggressive about holding onto rights, and “as a distribution and production company, that makes deal-making a challenge.”

One reality producer was even blunter: “It seems as if the networks are trying to kill the possibility of any independent company having any sort of upside, annuity, or stability. From horrible lock language to unsustainable milestone schedules to removing all ownership or potential backend, it’s as difficult
a time as ever to build and sustain a production company.”

Among other complaints, producers say networks are making smaller orders, have smaller budgets, are buying less, taking longer to do deals, and demanding foreign rights.

“Right now, we’re at the crossroads of the business model breaking,” says ITV America CEO Brent Montgomery. “It’s a really difficult time to be a small company, and even though I run a big company, I’m quite interested to see what happens to these small guys, because they quite often create the next hit show that feeds the entire ecosystem.” Budgets are so tight, says Montgomery, that a producer’s fee isn’t even 10% anymore. “Often it gets down to 6% or 7%,” he says. “A company needs to be doing eight or 10 series to stay afloat now, and that’s not going to create a vibrant market.”

At the same time, the survey finds that some producers are sensitive to the state of overworked networks. “Business-affairs departments are jammed, and the number of people in those departments have been reduced, so it takes forever to get deals done,” says Lyle. “In a way, it’s showing a certain sympathy for the dilemma of the buyer.”

Rob Mills, ABC’s senior vice president of alternative series, specials, and late-night, says ratings declines have triggered different kinds of deal-making. “Certainly no one is trying to bilk the producers,” Mills says. “They work hard, and they certainly deserve to be compensated generously for hit shows. I’m all about all of us being in it together.”

Mills says he favors deals that feature ratings bonuses, so that if a project turns into a hit on the scale of “The Voice,” everyone can win. “We all need a big game-changing hit, and it’s been a long time since we had one of those,” he says. “What you don’t want is a show that’s got to do a 6 rating in order to be financially solvent.”

Spike TV original series executive vice president Sharon Levy agrees that the networks have a bad habit of “time-dripping producers to death” — taking too long to make deals, instead of trusting their gut and signing on the bottom line. “The truth is, you have to have passion for creativity,” she says. “Find something you love, and put the money and the dominoes behind it.”

Asked to describe the “biggest threat to your business in 2017,” producers have a variety of complaints, including the “collapse of cable TV,” “profit margins reducing, and operation costs rising,” “networks shrinking business,” “network studios bringing production in-house,” “mega-production-company groups that dominate the industry,” and “industry stasis.”

Producers are particularly concerned about the impact of skinny bundles and how they may trigger cable networks to fold. “There aren’t many buyers who seem to know what their future holds,” says one producer. “There’s a lot of instability in the industry right now.” Case in point: NBCUniversal’s decision last week to shut down the Esquire Network.

Henry Schleiff, group president of Investigation Discovery, American Heroes Channel, and Destination America, calls the contraction of the business a concern, but he’s optimistic about the new players joining the pipeline, including Netflix, Hulu, Amazon, and, likely, Apple. “I don’t think the concern about the marketplace diminishing is all that serious,” he says. “In this world, what you need to be most concerned about is the challenge of telling a story well. The art, the genius, the talent in telling — that’s still difficult to find.”

“Even though I run a big company, I’m quite interested to see what happens to these small guys, because they quite often create the next hit show that feeds the entire ecosystem.”
Brent Montgomery

Montgomery is similarly bullish on the digital outlets. “We get to pitch Amazon and Netflix, who are not so concerned right now with profit margins and ratings,” he says.

As far as the biggest opportunities producers expect in 2017, new digital platforms and buyers lead the list, and that could mean more “premium storytelling.” Others say the “desperation across the buying landscape” could be a good thing, as programmers “finally realize they need to take a huge swing.”

The Variety/PactUS survey found that A&E was considered the most respected buyer in the business, calling the network “creatively empowering” and “very collaborative.” The network is finding ways to get creative with business models and boasts “strong programming executives and solid leadership.” Producers gave the network high marks, even though a few admitted that A&E was “easy to deal with but hard to sell to.”

A&E executive vice president/GM Rob Sharenow gives credit to the fact that most of the network’s executives were once producers. “I think that brings with it a real understanding of the process,” he says. “There’s a sense of what real collaboration means. It’s not just dictatorial.”

Other networks scoring high marks included ABC (“passionate, fair, and respectful”), FYI (“bold”), Lifetime (“easy to produce for and get deals done quickly”), History (“honor their word and allow us to make our shows”) and TLC (“on brand”).

The rankings of networks considered most difficult were topped by Amazon (“no understanding of the business” and “unresponsive”), followed by Spike (difficult “notes process” and “know-it-all”), Discovery (“harder to make a deal with”), MTV (“frustrating and confounding from a development point of view, and challenging when it comes to production”), and We TV (“unreasonable on budgets,” “over-demanding,” and “crazy executives”).

Asked which networks they respect the most, the producers again chose A&E, lauding the network for “for taking risks and empowering producers.” HGTV was congratulated for running a “professional operation” with “solid brand definition,” and Netflix was cited for “bold and interesting programming.”

Networks that fared well in these surveys are mostly the larger ones with much bigger budgets, while smaller networks with limited resources did not do as well.

Variety and PactUS also asked the producers to grade themselves, picking which production company they most respected. Probably no surprise, “The Real World” stalwart Bunim/Murray was tops, with contemporaries lauding the firm for being “kind and talented and a legend” and a “model of sustained success.”

Mills was named one of the producers’ favorite programming executives, along with Eli Lehrer (MTV2), Gena McCarthy (FYI), and Amy Savitsky (A&E). The ABC exec thinks the business should return to the independent spirit of the early 2000s, when trend-setting producers came to reality from diverse fields.

“Mike Fleiss [creator of “The Bachelor”] was a sportswriter,” Mills recalls. “The ideas were all different. Now people have worked their way up on a long-running show, and they only know one way of doing it. When reality really works is when it’s been something completely evolutionary, different, and genre-bending.”

Levy offers a call to action and challenges producers to shake off their depression. “I think it’s really easy to place blame,” she says. “I love accountability. I hold myself accountable; I hold my staff accountable. Pull your bootstraps on and free your mind. Unscripted is important to the ecosystem of television. So forget about what failed, what worked. And strive to make something great.”

The Results Are In
Variety teamed up with PactUs to survey top reality producers on the state of the unscripted business, to get a sense of their frustrations as well as their predicitions for the future. Here’s a sampling of their answers.
Did network program budgets go up or down in 2016?
Up: 6%
Down: 57%
No change: 37%
Did producer profits/margins granted by the networks go up or down in 2016?
Up: 3%
Down: 66%
No change: 31%
Was it easier or harder to make a deal with buyers in 2016 (vs. 2015)?
Easier: 8%
Harder: 75%
No change (still hard): 17%
Did terms of trade become more or less fair and equitable in 2016 (vs. 2015)?
Less fair: 63%
More fair: 3%
No change (not fair): 26%
No change (fair): 9%
Was 2016 a more or less successful year than 2015?
More successful: 70%
Less successful: 19%
No change (successful): 11%
How important is it that a format has launched elsewhere before the U.S.?
Crucial: 14%
Very important: 37%
Helpful: 31%
Doesn’t matter: 17%
What are the five best networks/buyers to deal with?
1. A&E
2. ABC
3. FYI
3. Lifetime
5. History
5. TLC
What are the five most difficult networks/buyers to deal with?
1. Amazon
1. Spike
3. Discovery
3. MTV
3. We
6. Oxygen

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