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Curb Your Enthusiasm

Three months after a big announcement put bigger grins on the faces of syndication executives on the NATPE convention floor in Las Vegas, those expressions are now more like the kind you see on Jerry Springer's unpleasantly surprised guests.

The first day of the National Association of Television Program Executives convention in January came with the ground-shaking declaration that The WB and UPN would close down and re-emerge as The CW. Euphoria flew around the convention floor of the Mandalay Bay Hotel—an emotion not seen at the convention since 1988 or so. For the first time in years, new inventory—some would say the most valuable growth measure of the business—would become available.

But all that glee was somewhat short-lived, as a sobering reality took hold: Weeks after The CW move, News Corp. said it was launching a network of its own, My Network TV. The end result: Two money-losing networks replaced by two new networks. Was anything gained? Was something even lost?

“It didn't leave the gaping hole we were hoping for [to sell programming],” says John Nogawski, president of CBS Paramount Domestic Television. “Obviously, we didn't know about My Network TV. Once that came into place, we were right back to where we started. They just kind of reshuffled the deck.”

Becoming an independent and relying on syndicated programming is a crapshoot. Syndication has had a steady 2005-06 season. All regularly scheduled syndication shows witnessed a slight bump to an average Nielsen Media Research 2.7 household rating through March of this year. This was against a 2.6 the year before.

But the downside, says Lyle Schwartz, senior VP and corporate research director of Mediaedge:cia, is that some of syndication's top shows have slipped substantially. “The top 15 shows are down anywhere from 10% to 15% so far this season.”

Both new networks are hoping they won't be calculating downsides at all. The CW and My Network TV say they will be immediately profitable—which would be a tall order. That's because, combined, The WB and UPN lost at least $1.2 billion over a decade, perhaps as much as $2 billion.

Might that profit come from syndication's advertising coffers? Executives don't think so. “Syndication was healthy regardless of this,” says Nogawski.

My Network TV looks to gain. But much of that will be to the benefit of stations that will control most of the advertising. In an unusual move for any network, My Network TV will give its affiliates nine minutes of advertising time per hour; My Network TV will sell the remaining five minutes per hour to national advertisers.

“I don't think staying independent was ever an option,” says Bob Cook, president/COO of Twentieth Television, who is managing the distribution and advertising sales for My Network TV. “As soon as The CW made their consolidation move, we evaluated a number of different options. [What we came up with] is a redefined, different kind of network.”

In putting on his other hat—as head of a major studio syndication division —Cook sees more opportunity for syndicators to sell product. “You have more digital channels developing,” he says. “You have the Internet. There are these kinds of evolving platforms. [Syndication] is not going to be broadcast-centric.”

Cook even sees the day when syndicators will package advertising sales for syndication and for other media—mobile, Internet, DVR and video-on-demand.

“I certainly wouldn't rule that out,” he said. “Nobody has completely figured it out. There is certainly no reason you couldn't follow the model where cable and syndication are sold together.” Syndicators already sell to advertisers commercial packages of syndication and cable runs of off-network sitcoms, such as Seinfeld, Everybody Loves Raymond and Friends.

To many observers—especially in the advertising community—the launch of My Network TV initially seems a lot like syndication: Two one-hour shows— in this case, two English-language telenovelas—that run Monday-Friday in a strip format, just like in traditional syndication. (On the weekend, My Network TV will run recap shows.)

“Buyers may call it syndication,” says Tim Duncan, principal of Boston Media Consultants. “But if a show gets a good rating, it'll get good advertising prices. Oprah gets good ratings. All this is just negotiating posturing. They are all just jaw-boning.”

In terms of actual time slots, the day-to-day program-sales activity of syndication, the business has remained relatively unaffected with the addition of The CW and My Network TV, say industry executives.

Some syndicators such as CBS Paramount believe that some 150 stations would have had immediate programming needs if My Network TV hadn't appeared. Instead, what remains is 20-30 stations, estimates CBS Paramount's Nogawski. “You have the same handful that you got before.”

Maybe former UPN stations would do better as independents. But Wall Street analysts and institutional investors place a higher valuation for a TV station that's a network affiliate.

Stations will pay—sometimes dearly—for that association. Add some urgency to that formula, and that is why two mini-networks somewhat quickly replaced two other mini-networks. “There was lot of panic,” says one veteran syndication executive. “We witnessed it at NATPE. They were lemmings.”

If either of the networks doesn't produce high-rated programming, stations might still bolt. Nogawski says some may want to rethink decisions when analyzing ratings in October: “I'd still rather have Judge Judy and a 7.5 rating.”