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Cover Story: The Great Reckoning

It doesn't look good for Law & Order.

An institution on NBC that spawned two successful spinoffs, the 17-year-old crime procedural has declined in ratings and stalled in its new time slot. Industry watchers are already drafting the obituaries in anticipation that NBC will drop the series next month when the network announces its fall lineup.

Call it television's cycle of life. As hit shows grow long in the tooth, even ones as durable as Law & Order, they inevitably lose the ability to grow an audience. Meanwhile, their maintenance costs—inflated license fees, swollen salaries—begin to outweigh the ratings and revenue they may continue to deliver.

Law & Order isn't the only aging veteran facing retirement. Crossing Jordan, another NBC procedural, may not return for a seventh season; The CW's Gilmore Girls may pack it in after seven years; and six-year-old ABC sitcoms According to Jim and George Lopez are on the bubble.

And NBC is hardly the only broadcast network faced with deciding the fate of a show that has passed its prime. As network executives finalize their primetime grids in the run-up to next month's upfront presentations, they must determine whether their aging veterans have another season in them. And, given the risks of launching a show—not to mention the increased competition for viewers and ad dollars—that decision is more difficult than ever.

Although the decision to renew or retire ultimately comes down to instinct, the process involves a fairly logical examination of various factors, including the show's ratings, its economics and what's being groomed to replace it.

Striking a balance

First and foremost, however, the process begins with balance. Before deciding the fates of their aging shows, networks must first consider the mix of old and new series on their schedules.

“You want a certain number of new shows, some young ones still with potential to grow, and then some veterans that you know what you will get,” says Vince Manze, an NBC veteran who was recently named president of NBC program planning, scheduling and strategy.

Although a roster with a deep bench of proven veterans can be a sign of stability, failing to support them with younger shows and active development of new ones can be fatal.

“You have to watch whether there's a chance the rug gets pulled out from under you one day,” says ABC Entertainment Executive VP Jeff Bader, who oversees scheduling. “Could they all go at once?”

NBC knows all too well the price of relying too heavily on shows past their prime. The network struggled to develop replacements for its expensive and exhausted hits Friends, Frasier and The West Wing. When all three ended their runs in quick succession, NBC's upfront revenue plummeted, from $2.9 billion in 2004 to $1.9 billion last year—a loss from which the network is just beginning to recover.

“We left shows on too long, and I think that was a development problem,” admits Manze. “But we were making quite a bit of money [on those shows] at that time, and it's also hard for sales people to give that up.”

CBS at risk

CBS ought to take note. According to an analysis of the average ratings points in the adults 18-49 demo generated by the top 10 shows at each network, CBS is most at risk for an NBC-like reversal of fortune, thanks to its heavy quotient of programs aged four years or more. (Four years is hardly decrepit, but it is typically the point at which deals are renegotiated and shows begin to accrue the liabilities of age, including an uptick in viewer demographics as fans age with the shows.)

Although The CW relies the most on four-year-old or older programs, which account for 70% of its ratings, the new network is anomalous, having launched last fall with a schedule largely built on legacies from The WB and UPN.

CBS, meanwhile, has an undeniably stable schedule. But 64% of the ratings produced by its top 10 shows come from aging veterans like CSI (seven years old), CSI: Miami (five) and Survivor (seven). Last year, the network introduced only four shows at its upfront; executives know they need to find a hit or two this season and shift the schedule balance back toward some newer fare.

“It's the essential discussion for CBS right now,” says a former network executive, “making way for the future when they are succeeding.”

To its credit, CBS is addressing the issue with one of its most aggressive development slates in recent years. Among its new prospects are Babylon Fields, Demons and Swingtown—shows about zombies, exorcists and couple-swapping, respectively—decidedly atypical CBS fare.

And executives at rival networks admit they likely wouldn't do much differently if they were in CBS' position.

“At the end of the day, it is a business, and I think [CBS has] a really good rhythm to how they introduce shows and how little they need in the fall,” says Fox Executive VP of Scheduling Preston Beckman. “You really can't fault them.”

For its part, Fox gets 62% of its top-10–produced ratings from shows at least four years old. (Its numbers are skewed, however, by the network's disproportionate reliance on six-year-old ratings behemoth American Idol, which alone delivers 39% of that total.)

At 18 years, The Simpsons is a rare exception. But with veteran hits 24 and Family Guy now six years old, Fox will need some new blood, whether or not Idol ever slows down.

An educated gamble

ABC has the youngest lineup among networks. Its top 10 shows—led by three-year-olds Grey's Anatomy, Desperate Housewives and Lost—produce a second-place 58.5 rating points on average. Four-year-old Extreme Makeover: Home Edition is the only show in ABC's top 10 older than three years.

NBC's top 10 shows deliver a fourth-place average of 43.9 ratings points, but its ratio of veterans to younger shows is closest to the ideal that Manze envisions: Only 39% of those ratings come from shows four years or older. Hits like rookie Heroes and three-year-old The Office have significant potential to grow.

And with several holes in its schedule, NBC has ample room to plug in new fare. Whether the network decides to free up more space by retiring Law & Order—and, for that matter, struggling spinoff Criminal Intent—essentially comes down to a gamble: While renewing the series would lock in another year of ad revenue, swinging the axe might clear a spot for a potential new hit to take root.

For any network, that gamble becomes an educated guess after weighing the health of the development slate against the health of the aging show on the chopping block.

“If you don't have the development, you always find yourself reaching for a show that you thought wouldn't be back,” says Fox's Beckman. “That happens more often than people would like; you generally have fewer choices than you had hoped.”

Even with promising shows in the pipeline, launching them is tougher than ever: Of some two dozen rookies launched last fall, half have been cancelled.

And launching too many hours of programming at once can shake up the existing schedule too dramatically and spread marketing dollars too thin, adds Beckman: “Once you get beyond [three new hours], the probability is, what you keep on will be better than what you will put on new.”

Knowns vs. unknowns

Whereas shows in development are unknown quantities, networks know exactly what they're getting with a veteran in terms of ratings and demos. In the case of Law & Order, ratings have been in freefall since peaking at a 7.0 average during the 2001-02 season. The show is averaging just a 2.7 rating in the 18-49 demo this season, thanks in large part to the network's decision to move it from Wednesday to the Friday-night graveyard.

The show's audience also continues to age, never a good sign. Over the past five seasons, its median age has climbed a full three years, from 49.2 to 52.2.

Presented with such data, executives at any network might conclude that an unproven rookie couldn't possible do worse. Unfortunately, it could. In fact, it happens all the time—even when replacing a struggling rookie, as NBC itself learned this season. After pulling the slumping Studio 60 on the Sunset Strip and dropping The Black Donnellys in its slot in February, the network lost a full rating point on Mondays at 10 p.m. ET and subsequently yanked Donnellys.

Even with flagging performance, a veteran show has the virtue of providing a platform for launching a rookie. (Unless NBC moves Law & Order from its 10 p.m. slot, the show has no value as a lead-in.) A network might also pull a veteran from the schedule but hold it in reserve should a rookie show flame out.

“Shows are like atheletes”

Perhaps the largest factor under consideration, however, is the economics of a veteran show. Not only can the license fee of a hit show double virtually overnight, but ownership of the show can complicate negotiations as it ages.

That's how NBC wound up paying $13 million per episode to Warner Bros. for ER at the show's height in 1998. The network pays closer to $8 million these days in a deal that goes through next season, but it will have to evaluate that figure next year. As NBC's second-highest-rated scripted show (behind Heroes) and a frequent time-period winner on Thursdays at 10, ER could give Warner Bros. the upper hand if ratings hold up and the network's fortunes don't improve.

But paying big bucks for older shows that don't have much growth potential is sometimes a necessity.

“Shows are like athletes,” says Fox's Beckman. “Sometimes, you are paying them when their best years are behind them.”

In this regard, Law & Order has its virtues. The show is produced by NBC Universal Studios and is said to cost the network around $4 million to license. Already an economical production that emphasizes formula over high-cost talent, the producers are negotiating to lower production costs further.

In the end, though, NBC may simply decide that retiring Law & Order and allowing it to live out its days in broadcast and cable syndication is the best thing. When a show delivers ratings for as long as Law & Order has, a network is happy to pony up. But inevitably, the day of reckoning will come.

“Paying for success is not a problem,” says NBC's Manze. “It's paying for failure that is.”