Deficit Disorder

CBS liked the idea of Joan of Arcadia, an hour domestic drama about a woman who moves to the 'burbs with her family and cop husband. It had the right talent: actors Joe Mantegna and Mary Steenburgen and producer/writer Barbara Hall, whose credits include CBS's Judging Amy. So the network approached Twentieth Century Fox Television, the studio backing the show, with a pilot order earlier this year.

But Twentieth balked. It weighed CBS's proposed license fees against high production costs and the limited international market for such soft, female-skewing programs. In the end, it told CBS that, even though it had brought the series to the network, it would pass. It wasn't interested in making the pilot because it wasn't interested in making the series. CBS ultimately made a deal with Sony Pictures Television to co-produce the show with the network.

illustrates a growing trend in Hollywood: Major studios' rejecting pilot orders, even series orders from networks when push comes to shove and they conclude that the financials don't add up or there's no chance the series will later sell in syndication.

"If you have a high-cost project that lacks international appeal but doesn't have a network license fee that reflects those challenges, studios have to be willing to acknowledge that financing those projects may not be good business decisions," says one studio chief.

Support the 'Vision'?

Networks are finishing up their pilot screenings this week and putting together fall schedules to present to advertisers next week. But as they do, they may not be working with all the pilots they wanted or may be working with pilots backed by studios other than the ones that had helped develop them.

There was a time, not so long ago, when studios would produce almost anything the networks ordered, and some studio chiefs still see the business that way.

"Studios do not buy the product; the networks buy the product," says Peter Roth, president of Warner Bros. Television, which, with 33 pilots in production, is the leader of the studio pack this year. "If you produce a script that is compelling enough to the network, then an order is placed. It's our job to support the vision as long as it can be produced in an economically responsible and creatively effective way."

But many studio chiefs say sometimes that can't be done.

Four years ago, for example, Disney's Touchstone Television developed CSI: Crime Scene Investigation for CBS. But Touchstone is not CSI's producer. Alliance Atlantis and CBS Productions are. When Touchstone looked at CSI's economics, it walked away from the deal. Of course, that proved an unwise decision. The show became a hit and spawned a successful spinoff, CSI: Miami.

Sources say, when Touchstone was considering the order for CSI, the show was expected to cost $2.4 million an episode, with CBS offering just $1.1 million in license fees. Touchstone didn't think the international and domestic broadcast and cable syndication revenue would close the resulting $1.3 million-per-episode deficit.

Today, that decision looks like a huge mistake, but several studio executives say they would have done exactly the same thing. "Nobody's ever going to go out of business for not doing CSI, but you could very well go out of business for doing one of the softer, serial dramas that have no international market," explains one executive.

"Giving up these projects is really scary," Newman says. "Sometimes you have to follow your gut and passion rather than looking at the economics."

That's because studios can afford only so many hunches. If a studio has, say, eight one-hour shows in production and each operates at a deficit of $500,000 per episode over a season of 22 episodes, that would put the studio $88 million in the hole. The studio bets that one or two of those shows will become hits and go into syndication, throwing off enough profit to pay for all the losers.

Until about five years ago, studios cut a good number of "output deals" with international television distributors. Such deals required those distributors to take a certain quantity of shows from the studio, and the revenue from those deals helped close deficits and finance shows. But, with money tight everywhere, many countries producing better local programming than they did just a few years ago, and some countries limiting by law the amount of American programming that can run in prime time, studios can no longer count on the international money.

Keep deficits down

In off-net domestic syndication, broadcasters are interested only in long-running hit sitcoms; most stations don't have time slots to fit hour-long off-net dramas, so they are shopped to cable networks.

In addition, in the past two years, networks have been hit by an advertising slump, making them reluctant to increase license fees and shrink the deficits.

All this means that studios have grown more careful about taking on a project and are looking to keep their deficits under $200,000 an episode. Hour programs cost approximately $1.6 million to $2.3 million to produce, while multi-camera sitcoms, such as 8 Simple Rules
or Less Than Perfect, cost anywhere from $850,000 to $1.2 million. (Single-camera sitcoms, such as Scrubs
or Malcolm in the Middle, cost slightly more.) But network license fees average $1 million to $1.6 million for dramas, $600,000 to $900,000 for sitcoms. That means that prime time programming often runs with deficits of $500,000 or $600,000 per hour, the studios expecting to get at least $300,000 an episode back from the international market. When that math doesn't work out, the studios are beginning to walk away.

This year, it's not just Joan of Arcadia
that had to find a new studio. Twentieth also decided not to do Vegas Dicks
for UPN, so Viacom's Eye Productions is financing it. Universal left film star Danny Glover's pilot, The Good Guy, on the table, and Spelling Television picked it up. UPN's Platinum
ended up being financed by CBS Productions when Fox Television Studios decided not to back it even though the studio had already made the pilot. Warner Bros. picked up UPN's pilot with hip-hop star Eve after Paramount and Touchstone both passed on it, but Warner Bros. this year passed on other pilots for UPN and ABC.

Left on the table

Fox Television Studios has left a good number of pilots on the table, including CBS mid-season replacement Queens Supreme, which also went to Spelling Television in association with CBS Entertainment Productions. (It was canceled after three episodes.) Fox Television Studios passed on UPN's One on One, which went to Paramount Network Television and is still on the air.

Last year, Twentieth chose not to do sitcom Danny
for CBS, and Paramount's Big Ticket Television decided to try it. The show failed after two episodes.

But, as Warner Bros.' Roth points out, with a total of 113 pilots in production this year for six networks, studios still are taking on their fair share of shows. "If we all agree that none of us know where our next hit is coming from, of course you want as many chances at bat as you can have."

That illustrates another truth: One studio's pass is another's pick-up, and no one knows until the show launches whether which made the right decision.

"We have our own parameters to meet and we had to be confident that we could meet them or we couldn't proceed," says one studio chief who has picked up shows after other studios have let them go.

"Just because someone at another studio thinks a show isn't viable, that doesn't mean you think it isn't," says another. "I'm only interested in my own judgment. You can't make every call correctly, but what separates the men from the boys is making the calls and being right more times than you are wrong."

Paige Albiniak

Contributing editor Paige Albiniak has been covering the business of television for nearly 25 years. She is a longtime contributor to Next TV, Broadcasting + Cable and Multichannel News. She concurrently serves as editorial director for entertainment marketing association Promax. She has written for such publications as TVNewsCheck, The New York Post, Variety, CBS Watch and more. Albiniak was B+C’s Los Angeles bureau chief from September 2002 to 2004, and an associate editor covering Congress and lobbying for the magazine in Washington, D.C., from January 1997-September 2002.