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The Secret Success of Syndication

Viewers of syndicated television can see four of comedy’s biggest hits—The Simpsons, Seinfeld, Friends and Everybody Loves Raymond—every night of the week, at least once. It is home to TV’s biggest star, Oprah Winfrey. Episodes of Law & Order will rerun forever. And Wheel of Fortune has been around since some ad buyers were in diapers.

Still, syndication doesn’t get much buzz in the marketplace—a situation the Syndicated Network Television Association hopes to remedy when it makes its pitches to ad buyers and planners at SNTA Day in New York March 10 at the Grand Hyatt. (SNTA takes the show to Chicago on March 21 and to Los Angeles on March 24).

B&C’s Joe Mandese recently sat down with six of syndication’s top sales executives to discuss the trends shaping the biz.

Each represents a SNTA member studio or distributor: Michael Auerbach, SVP, Eastern, King World Media Sales; David Barrington, SVP/general sales manager, Twentieth Television; Marc Hirsch, president, Paramount Advertiser Services; Chris Kager, EVP, ad sales, NBC Universal Television Distribution; Clark Morehouse, SVP, advertiser sales, Tribune Entertainment Co.; and Michael Teicher, EVP, media sales, Warner Bros. Domestic Television Distribution.

The syndication advertising marketplace was up 14% in 2004, making it the
fastest-rising measured medium next to the Internet. That’s really good growth. What’s driving it?

Michael Teicher: By several measures, syndication is doing pretty well. The upfront we had for ’04-’05, I think, most of us would consider pretty solid, but the success goes beyond dollars and cents. Some of the success that we’re seeing is in terms of ratings. When you have veteran shows that have been on the air for a while or even newer shows like The Ellen DeGeneres Show and veterans like Everybody Loves Raymond and The Oprah Winfrey Show and some of the court shows, increasing their ratings in an era where that’s almost unheard of, that’s an incredible measure of success.

Michael Auerbach: Michael has taken a chapter out of our book with the tremendous success of the King World shows over the last couple of years, and the phenomenal success of our latest show, CSI, almost a 6.0 household rating. That’s tremendous for a syndicated network drama.

So it’s the product that’s driving the growth?

Chris Kager: It’s our business. It’s all about the product. It’s all about the show.

Marc Hirsch: It’s always product. What happens sometimes in the press is, cable gets a lot of play because it somehow seems to get a lot of buzz. But the things that are getting buzz are one show that does a 0.7 rating and everybody is talking about it as opposed to shows that do double-digits, five days a week on a regular basis. But they’ve been on the air for 20 years, in the case of Entertainment Tonight 24 years and, in the case of some of the King World properties approximately 20 years.

It’s as though people have stopped talking about it, and therefore the buzz is gone. If you’re an advertiser looking for a different audience to reach your prospective customers, I think you’re smart enough to continue to spend money there.

Teicher: Marc makes a really interesting point that I’d like to extend. Sure, there are at least a dozen or so cable shows that have really made a name for themselves with a lot of buzz, but what some advertisers are doing is using that as an opportunity to purchase more on a particular cable network than they necessarily would.

There are a couple of shows on general-entertainment cable networks that most advertisers won’t buy, but they have good buzz. Because of the content, advertisers won’t buy them, but because of the ripple effect, the network seems to have benefited.

But when you really look at the schedule on the network, you’ll find that you’re buying shows already in syndication and we have the brands for all these years that are delivering big ratings with extensive reach.

David Barrington: Not only that, but it’s every single day of the week, as Marc and Michael said, but it’s 52 weeks a year as well. In the pre-holiday weeks, which are very important and when network ratings tend to drop, our ratings stay consistent.

For a company like ourselves [Twentieth Television], which has young-skewing product, we look at our numbers, and [they hold] up through the second quarter, through the third quarter. It’s an incredibly viable medium, and again it’s programming. You know exactly what you’re buying. You know exactly what you’re going to get eight months out. It’s a tremendous advantage.

Hirsch: SNTA has taken a very aggressive stance. We have the right people in place, and our story is getting told. For all of us collectively who compete on a day-to-day basis but benefit from the strength of the medium, Mitch [Burg] and his people are getting to corners of the business that we routinely do not, mainly the planners and high-end clients. And so I’ve been very pleased with his efforts there. That benefits all of us.

Kager: I’d like to maybe differ a little bit with what these guys have said. Obviously, it’s programming. But it’s also distribution. Our shows are fully distributed in 99%-100% of the U.S., in consistent time periods—as Dave said—52 weeks a year. So people have come to know our shows running at 7:00 Eastern Standard Time, week after week after week. And the reason that it runs at 7:00 is not only that it is a well-produced show but it’s also a well-distributed show.

So to me, they go a little bit hand in hand. It’s a chicken and the egg. But at the end of the day, our industry brings stability to Madison Avenue.

Chris, you have a new show coming up with Martha Stewart that should get some good coverage. What is the distribution story, and how is that playing out in terms of getting product out there?

Kager: Well, we’ve taken some big heavy swings in the last couple of years, with Jane Pauley and Martha Stewart, and the reason that we can take some big heavy swings is that we have electronic distribution in place, with our NBC owned-and-operated stations. So that’s clearly an advantage. Anything we do, we take to the NBC owned-and-operated stations. And then we have a relationship with the Hearst-Argyle stations that extends pretty deep into our company.

So we’re fortunate enough that we can take product to the marketplace. We get a pretty good hearing from about 50% of the U.S. between those two station types.

Teicher: This has been the single biggest challenge probably for a company like Warner Bros. at this point. Certainly, the folks around this table have heard me say this before, but given the consolidation of media companies in our business through vertical integration, these big media companies own the television stations, and Warner Bros. does not. Therefore, we believe we have to work harder and smarter and to be more creative to find ways to get our product on the air.

Fortunately, in the past two years, the NBC station group saw the potential for a long-term franchise with Ellen. This year, the Fox station group latched onto The Tyra Banks Show, thinking they could put a real stake in the ground in their daytime.

But, for us, that’s probably been the single biggest challenge that we’ve had to confront by not owning stations.

Hirsch: Distribution is a situation that gets talked about but doesn’t really exist as a problem. I don’t think [Warner Bros.] has any more problems getting programming cleared that will ultimately succeed than the rest of us will. At the end of the day, most television programs don’t work.

There hasn’t been a successful television show yet that didn’t get enough play on the air, to be given a chance to succeed, to ultimately become a hit. Yet it might be easier, if you’re NBC Universal and you’ve got a relationship with the NBC stations or if you’re King World or Paramount and you have a relationship with the CBS stations. But Dennis Swanson [executive vice president and chief operating officer for Viacom Television Stations] at CBS isn’t going to force the station group to take a bunch of product that just doesn’t work. When we came out with The Insider, originally, it’s because he wanted the program, not because we forced it down his throat.

Over the course of time, anyone with a program that works is going to find an ability to get it cleared. Station people are not stupid. They want the good shows, and they’ll take them from anyone.

Barrington: Absolutely. Obviously, the Fox stations—our stations—felt Tyra was the product they wanted, and at the end of the day, that’s where the margins are. That’s where the revenue is. Obviously, they felt relative to what they saw in the rest of the marketplace, including some stuff from Twentieth, that Tyra had a better shot in the marketplace, and that’s what was best for the company. We had plenty of opportunity to go out and sell [Twentieth programs to Fox stations], but Tyra is the one they felt was right for them.

Hirsch: But then I think what [ABC] did for years. ... They took most of the [Disney] stuff for themselves. They didn’t have outside suppliers on the network, and they thought that, when they got the big hit, they would win twice. They’d win because, as a producer, you’d win. But what really happened is, they lost twice because the network lost big time and the people who produced all of these shows just ran tens of millions of dollars of deficit.

With some marginal shows, you could argue, the decision might be easier. But if you have a big show, the stations will take it.

Teicher: There’s probably an inclination to keep it another year to try a little bit harder.

So why does the perception exist now that it’s harder to launch new shows? That there isn’t shelf space, and you can’t get the slots. The shows that do go out get OK carriage, but it’s not enough to really goose the national rating. Is there a little bit of a clog in the pipeline, or can a good show really get the coverage it needs?

Auerbach: A good show certainly can get those time periods. But remember this is a very competitive marketplace, and you have great television stations across the country that have signed up well into the next decade for the King World properties, some Paramount shows, Warner Bros., all of us around the table. And that creates a very, very tough environment not only for the stations but also for the producers.

There’s a different economic model now. It’s really tough and expensive to produce new shows. In the old days, you used to launch a show every year. Now we’re not doing that. That’s okay. That’s okay for the business.

Teicher: But I do agree with something you said earlier: the word perception. There may be a perception that more syndicated shows potentially fail, but in reality that’s not the case. This is a very difficult business. The entire television business launching new programs is extremely difficult.

We’ve had a few successes the last couple of years. Certainly, Dr. Phil has been an enormous success, and now Ellen is really finding her stride now. But we’ve reached a point in time given the complexity and the fragmentation in the market that it almost requires the perfect storm of circumstances, terrific talent, unique ideas, flawless execution, and then, in my opinion, after that, a really smart, strategic and deep consumer-marketing investment to really make a show work.

Clark Morehouse: The financial wherewithal and guts also don’t hurt in that equation. And so that perception, which is nothing but a perception, should really go away based on what’s happening with Warner Bros. and the Fox situation, and it does create a different paradigm and business model now.

Hirsch: Why is it so hard to get a new show on the air? Because there are so many long-term, very highly rated, very successful franchises in our marketplace. The off-network sitcoms, quite frankly, will be there for another 10 years. They’re taking up time periods, not only single run but double runs.

And then some of the first-run shows, like Wheel of Fortune,Jeopardy!, Oprah, Dr. Phil, Ellen, can be there for the foreseeable future. It’s just that there aren’t the usual time periods available.

Morehouse: Plus the squeeze is accentuated by The WB continuing to take time periods from their affiliates, to repurpose them on Sunday. [It] really closed out a lot of time periods. Look at the Tribune group specifically: Their 5-7 p.m. Sunday movie moved right to Saturday, which took away a lot of the time periods where we typically were producing and clearing the action-hour genre, which is pretty much over for us at this point in time.

Those great time periods, that pure daypart of 5-8 p.m. on Saturday, which at one time was a unique daypart with unique viewership really isn’t there any more. And so, it’s a bigger squeeze.

We hear a lot about station managers who, rather than go with new programs, are double-running hit shows a lot more than they used to. Has that become a problem for syndicators? Is it harder to get a new show on because people would rather double run a Dr. Phil than try a new hour?

Hirsch: I think so to some degree, if you’re running a television station and have a show that’s successful and you look at other television stations in similar circumstances that have already done it. Let’s just say for the sake of argument you’re getting a 5.0 the first time around and you can add another 2 or 3 rating points, you have to look around and say, “Okay, how many shows out there are going to get that, are going to deliver another 2 or 3 rating points? And what am I going to have to pay for them?”

We talk about Ellen as a success. The truth of the matter, Ellen is doing a 1.9 or a 2.0. If you can add 2 or 3 points—and Ellen is arguably in daytime one of the most successful shows that have come out in recent years—I think from the station manager’s standpoint, he’d say, “This is a good business for me. I can add a second run. I can get the 2 or 3 rating points, and it’s going to cost me a lot less.” And it’s surer, because how many shows are there that are going to go out and really deliver?

Kager: The industry is just becoming less risk-averse, as we continue down the road, in my opinion, and part of that is due to the changing ownership at a lot of places. And debt service has now come into play. People have to service their debt.

Isn’t it as simple as giving people what they want—both the viewers and the advertisers? If you look at network prime time now, they’re double-running CSI and Law & Order because they’re what people want. It’s ironic that syndication’s strength is the fact that you have some programs that do so well, that it creates a bottleneck that is perceived as a weakness.

Hirsch: I’ve got to go back to the word buzz. People forget that Entertainment Tonight is on for 24 years, Wheel and Jeopardy! for 21, 22 years. If the networks had a show other than 60 Minutes that was on the air for 21 or 22 years and arguably as successful today as it was 20 years ago, people would talk about it all the time.

Teicher: To dovetail to what Mark is saying, maybe it’s not sexy to talk about a show that’s been on 10, 15, 20 years, but it’s that consistency and that reliability that is a strength of syndication. If I’m an advertiser in an environment like this, where accountability is held to higher standards than ever before, I want to know what program I’m buying.

You’re not buying hope in a time period. You’re buying a proven winner.

Auerbach: When the King World sales people make their presentation at SNTA, they’re selling shows that are cleared through the rest of the decade. No cable network, no broadcast network can make that claim for so many different television shows, in different dayparts, geared towards different targeted demographics.

Barrington: What we do for a living may not be the sexiest job in broadcasting, but we have the product people want and, at the end of the day, in this environment, that’s what media planners, that’s what clients want. We’re not trying to catch lightning in a bottle.

So you’ve got a great distribution system. What are the real challenges for you then?

Auerbach: We just have more damn competitors, 60 or 70 fragmented cable networks out there. The networks are selling hard. Our competitors for syndication are selling hard.

Morehouse: Talk about perception. Look at how cable sells itself. Going back in time, we were outsold to a certain degree at the planner level, and we all agree that that’s the case, and that’s why we pony up big time to make the SNTA a bigger, more muscular marketing organization. And frankly, we were behind the curve on that a little bit.

But the cable industry gets buzz that, on the one hand, they work hard for, but results-wise, they don’t deserve it at the level that they have.

The perception of us is somewhat staid and maybe not sexy. [The perception of cable by advertisers] is a little bit over the top, and that’s where we need to work hard to level the playing field and make sure people understand the benefits of what we do.

Kager: I’m going to be a little bit candid here, too. We need to do a better job within certain categories within our industry.

We need to do a better job with the domestic-automobile category. As an industry, we need to do a better job in the automobile category. We need to sell them on our value. That’s an area that we could improve. Another area where we could improve is with the telcos. Those are two major spending categories.

There’s a big shift going on now where the automotive is starting to move money out of television. They’re looking to reach many more discrete consumers in a wider array of media that they never looked at before. There’s a lot of change going on in other big advertising categories. How does this shape up for your 2005, 2006 plans? How do you see the market drumming up, and what are the hot categories that you think will demand syndication?

Teicher: I don’t think it’s a secret that some of these categories, like automotive, may be moving some money out of television to do some really specific targeting, most notably through the Internet. To me, that makes the ratings and reach that syndication offers, our value proposition, that much more important, frankly.

Not that anybody generally buys 55 cable networks deep, but that average prime time adult 18-49 rating is 8.2. That’s across 55 networks. If you’re launching a car or you have new information on an automotive model that you’re bringing out, you’re better off on the left side of the decimal than on the right side of the decimal.

So one of your biggest threats—fragmentation, which is driven by competition—is also one of your greatest assets, because it makes you guys look bigger as the other guys get smaller?

Teicher: It certainly can be a strength, and it’s something that we all collectively in our individual meetings talk about.

Hirsch: Fragmentation counts. I don’t want to just focus on cable because I think you have to include the networks, also. When I came into this business, the average network prime time rating was a 17.0 It’s better to say that the average prime time share doesn’t look anything like a 17 any longer.

And yet, we continue to have programs that do ratings that are comparable to or, in some cases, greater than network prime, and there is a perception advertisers have in many cases that they can’t live without network. No one is suggesting that they should live without network prime time, but to not include cable and to not include syndication, you’re making a huge mistake. It’s as simple as that.

The cable fragmentation ultimately affects everyone. It effects cable because the cable network, the cable ratings are not growing. The mass of cable ratings are growing because, every year, there are three or four new ones. But they’re cannibalizing from themselves as well, which means the average cable rating is going down, as is the average network rating.

If you look at syndication’s performance among these three, you’re going to see there’s a greater stability here than there is in network prime time.

We can’t ignore the fact that the networks have lost so much of their audience, and we are so competitive on a pure high-ratings basis with much of what they do that you just can’t buy broadcast network prime without including major syndication properties as well.

Advertisers and agencies say they are moving away from traditional media planning toward total communications planning, and they say they’re doing it to find better ways of engaging consumers. How does syndication play into that?

Teicher: The notion of communications planning really plays to the strength of syndication. Communications planning goes beyond reach and frequency to attributes syndication already has, but it also includes things like engagement. And when you consider that some of the most popular television brands of all time and six of the top 10 most popular personalities on television are in syndication today, that takes engagement to a new level.

How well does the syndication industry understand what agencies are doing now, how they’re restructuring in terms of moving from media planning to communications planning?

Teicher: We at Warner Bros. are engaging right now in the most expensive project we’ve ever done to understand a specific group of women, their mindsets, their motivations, what they care about, how they think. [We are doing] some research on usage of media but more importantly, understanding what makes them tick. And that will help drive content in some of our current shows and program development down the road.

Kager: Well, we plan on spending a lot of time with planners on entertainment opportunities at SNTA Day. We plan on taking our executive producers and our programming people into deal-specific meetings, not every meeting but real specific meetings. We’re pre-qualifying those meetings right now.

If the consumer can relate to a product and the product is looked at as a hero in this whole communication mechanism, then we’ve accomplished something that’s very unique with clients and advertisers as opposed to doing their 30-second spot.

It’s tricky, very tricky, but at the end of the day, that’s what we are striving for.