As optimism creeps back into the station business and cash slowly begins to follow, syndicators are licking their chops at the opportunity. Now the onus is on them to develop a hit worthy of a big cash grab after the first-run market has been relatively quiet in recent years.
New offerings for 2011, the year that industry giant Oprah Winfrey departs syndication, are few. The two major exceptions are Warner Bros.’ Anderson, featuring CNN’s well-known Anderson Cooper, and possibly Debmar-Mercury’s Jeremy Kyle, featuring the successful British talk-show host who is less known stateside.
But with stations looking to differentiate themselves in an increasingly fragmented marketplace as their balance sheets begin to show signs of life, many expect the first-run marketplace to see a rebirth in coming years. That is, if programming suppliers do their jobs.
“People are feeling more confidence,” says John Nogawski, president of CBS Television Distribution (CTD). “Now we just have to come up with good shows. If we have good shows, then people will pay for them.”
A Developing Situation
The relationship with stations has been a chickenand- egg setup in recent years, as a lack of cash at the stations has kept some syndicators from making big bets in development. But now all signs point to stations earning higher revenue over the next few years.
“Between the economy improving, American car companies starting to make electric cars that they are going to have to market, retransmission consent fees, the struggles of the newspaper business, and the Supreme Court ruling that corporations can finance political advertising—all of those things point to a very healthy local station market,” says Mort Marcus, copresident of Debmar-Mercury.
“With CPMs going up, sub fees going up and retrans fees kicking in, there’s plenty of money out there for the right show,” says Steve MacDonald, executive VP and general sales manager of Twentieth Television’s cable sales.
“We can’t produce big shows without cash,” says Nogawski, “and there isn’t enough money in the barter marketplace. When you increase a show’s barter advertising load to 50-50, then the CPM [cost per thousand] declines and you have to fill time with direct-response advertising.”
“We’re certainly seeing cash come back right now,” says Paul Franklin, executive VP and general sales manager of Twentieth Television’s broadcast sales. “There’s a healthy environment on the broadcast side.”
Once stations have more money, syndicators are hoping they will spend some of it to acquire fresh new programming, but they also know they have to produce something worth stations’ cash.
Beyond getting cash for their productions, syndicators also are figuring out new ways to finance their shows, particularly the singles and doubles whose budgets are more challenging. Financing those smaller shows is a little trickier, but the industry will see more creative financing strategies and multiple windows in the near future.
That’s how Twentieth has produced and sold both of its game shows—Are You Smarter Than a Fifth Grader? and Don’t Forget the Lyrics, both of which play in syndication, cable and in primetime on My Network TV. “We were able to produce these shows in a way that got them on the air, and made them look good,” says Franklin. “Every show has to be looked at on its own, though.”
That’s definitely a model which CTD is looking at closely. In early January, the syndicator hired Aaron Meyerson as its new head of programming. Meyerson comes from a cable background, and he’s used to producing shows on tight budgets and taking advantage of multiple platforms. CTD doesn’t intend to produce every show in the future for multiple platforms, but it wants to have the option.
“There’s more merging of the lines than there used to be,” says Nogawski, “and we’re starting to see more of it in syndication.”
Multiplatform producing requires some strategy. Shows that work on a TV station in daytime aren’t necessarily a good fit for a cable network, and vice versa. NBC’s once-powerful syndication arm tried the company’s popular RealHousewives franchise on TV stations— an idea many thought would work because of the show’s soap opera-like nature—but at a 0.5 live plus same day household ratings average, most agree that the show has not lived up to expectations.
“It’s easy to say we want all of our shows to play everywhere, but the reality is this: Whatever show you produce, you have to be able to look at the show and say, to what platforms does this show lend itself and to what networks does this show lend itself? Some shows, like court, just haven’t translated,” says Twentieth’s MacDonald.
Off-Net Comedies Bring Smiles
The syndication marketplace has hardly been totally quiet in recent years, as off-net sitcoms have been red hot, specifically Warner Bros.’ The Big Bang Theory, Twentieth’s Modern Family and the second-cycle of Warner Bros.’ Two and a Half Men.
Success in access time periods where sitcoms typically air can add a lot to a station’s bottom line —as the industry relearned when Tribune got a stunning performance out of Two and a Half Men—so stations are willing to ante up to program those time slots. Adding to the price is the fact that shows that perform at that level are few and far between.
“Where there is proven success, I think stations are willing to step up and pay because they know what the value of that program is going to be,” says Franklin. “We see that a lot more these days in off-net.”
But that doesn’t mean that sort of lightning couldn’t strike first-run as well. True, there has been no major daytime hit since Dr. Phil premiered in 2002, but since then Warner Bros.’ Ellen, CTD’s Rachael Ray, and Sony’s Dr. Oz all have turned into profitable franchises.
If Anderson, for example, can do a 3.0 household rating—no easy feat in today’s fractured television environment— Warner Bros. will be able to ask for serious rate hikes when it goes out to renew the show next year. Sony did exactly that when it renewed Dr. Oz for season three this year.
Integrations Still Hot
Another opportunity that syndicators are exploiting is brand integration. It’s less necessary in syndication than other dayparts because people don’t record and playback syndicated shows nearly as much as they do primetime shows. But the strategic approach is helping syndicators add some coin to their pockets. Brand integrations especially make sense for syndicated programs because first-run viewers tend to be loyal, engaged and interested in what the shows’ personalities have to say.
Many syndicated programs already incorporate creative and complex brand integrations. For example, Flip Video has handed out new Flip Mino cameras to stars appearing on Entertainment Tonight and asked them to take videos and share them with viewers. ET also airs a powerful integration with Kohl’s, in which the department store chain shows viewers how to get a star’s look for less. That sends them to the Kohl’s Website, which always sees a pop after the segment airs, says Nogawski.
Ellen has run many integrations, including partnerships with drugstore chain Walgreen’s, beauty lines L’Oreal and Nivea, Italian food retailer Bertolli and toy maker Hasbro. Likewise, Rachael Ray is also a first choice for brand integrators, with the show featuring such brands as Kenmore and Staples.
“Advertisers are going to become even more demanding in the future,” says Nogawski. “Branded content is going to have to closely complement the brand, and integrations will have to be multi-purpose, with Webrelated and social media angles to it.”
In general, though, syndication is in a good position in the overall ad market. Its reach is broad and its prices remain efficient, says Judy Kenny, executive VP of ad sales for Twentieth.
“If you look at the metrics, syndication is an even better proposition today than it was 10 years ago because broadcast remains a big reach vehicle,” says Kenny. “As ratings decrease across the board and cable remains mostly a niche advertising market, our value proposition improves.”
Don’t Count Syndication Out
While first-run has been quiet in recent years, some well-known veterans are still getting the job done.
“God knows, if we are placing bets, we should bet that in five years veteran shows like Wheel of Fortune and Jeopardy! will still be on the air,” says one syndicator. “Merv Griffin sold his company in 1981 for $300 million and people thought Columbia [now Sony] was out of its mind for paying that kind of money for these two game shows. How long could they last?”
Joke’s on them. Wheel and Jeopardy! have gone on to make several times $300 million in their long lives, and that speaks to the longevity—and incredible profitability— of top-notch syndicated programs.
“We are an inevitable part of the food chain, and that’s a good place to be,” says Nogawski.
But now, syndicators claim, stations will have to work harder to compete.
“If TV stations want to continue, they are going to have to put something on that people want to watch. For many stations, up until now that hasn’t been the case,” says one syndication executive. “And affiliated stations got fat and lazy because they didn’t have a lot of competition.”
True, the TV station business used to be easier. There were only three stations in any given market, so people watched almost anything on their air. Station managers acquired programming, produced local news, aired their network’s primetime fare, and sold ads in bulk. TV stations printed money and ran on profit margins as high as 60%, while their owners vacationed on tropical islands and played a lot of golf.
Those days are over. In today’s highly fragmented and complex media environment, TV stations have to be savvy about how to attract and maintain viewers. The smart ones will accomplish that via targeted acquisitions and focused marketing, while the less motivated and less strategic may find themselves out of business. Local stations can be an integral part of the local media landscape, or they can program themselves into irrelevance, overcome by competition from cable and Internet outlets.
“First-run has unique characteristics that set it apart in the television marketplace,” says Ken Werner, president of Warner Bros. Domestic Television Distribution. “The series air five days a week in the same periods with original episodes. No other programming type offers nearly as much original programming each and every day, giving stations a consistent lineup to attract viewers and advertising dollars. It’s affordable, differentiated, easy to market and can last forever.”
Syndicators have a part to play in this redefining of the station business, and for the most part, they are uniformly bullish about the opportunity.
“Programming is the only thing that’s really differentiating stations right now,” says one syndicator. “The business model is not broken, it’s just being modified. Oprah made billions of dollars and Phil made hundreds of millions, but making tens of millions ain’t so bad either. It’s not as if this is a marketplace where anyone is losing money. It’s just a matter of the model not being what it was.”
As 2011 gets under way, syndicators like what they see for the first time in a few years.
“We’ve made a huge comeback in the past 12 months,” says Nogawski. “In our business, everyone typically enjoys what they do, but people weren’t enjoying themselves last year. Now there are a lot more smiles on people’s faces. People aren’t as afraid of losing their job, companies are more solid on the Street, their stock is worth something again, and they are able to take care of their families. Those are all good indications that we are moving in the right direction.”
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