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Time to TalkThe Talk -- Finally

Talk shows will be all the talk this fall, with four new entries— Katie, Steve Harvey, Ricki Lake and Jeff Probst—prepping to join established shows Dr. Phil, Dr. Oz, Rachael Ray, The View and Live! With Kelly and He Who Shall Be Named, as well as talkers still struggling to secure a foothold: The Talk, The Chew, The Revolution, Anderson Cooper, Jeremy Kyle and Wendy Williams.

Daytime is deeply fragmented, which keeps driving ratings downward, and distributors universally agree that four new talk shows are at least two more than the market can bear. And yet, here they all come. Why?

Money, of course.

“As far as the long-term viability, a talk show is still one of the most pro! table areas to program,” says John Nogawski, president of CBS Television Distribution, which is bringing Jeff Probst to daytime this fall.

When Oprah Winfrey announced in November 2009 that her long-running, wildly successful talk show would come to an end in May 2011, the prevailing wisdom was that syndicators would rush to market with talk shows for September 2011 to fill the void. That didn’t happen.

At the time, TV stations were still digging out from the near-depression of 2008 and were in no place to spend money on new programs. Many stations decided to expand their local newscasts instead, a move that cost them far less than paying for Oprah, or else swap another show—Ellen, Dr. Phil, Dr. Oz— into their open Oprah slots. Instead of spending freed-up Oprah money on new programs, stations used it to shore up their balance sheets.

This year, however, “the economy is better, the stations have recovered and Oprah has actually gone away,” says Debmar-Mercury copresident Ira Bernstein. “I don’t think what we’re seeing is some new economic model. I think it’s Oprah replacement latency.”

What syndicators are seeing in the post-Oprah world is the opportunity to snag a foothold and build a long-term business, and the potential is great enough that the risk is worth it.

“It’s playing the lottery, and there are less than 15 players,” says Bill Carroll, vice president, director of programming, Katz TV Group.

The gold standard of today’s fragmented talk market—and forget about Oprah Winfrey and her billions already—is Warner Bros.’ The Ellen DeGeneres Show, agree many syndicators. The show performs modestly as far as ratings are concerned, hovering around the mid-2s in households, but Ellen is an advertiser’s dream, attracting brand integrations like top chefs to GE Monogram gas ranges.

“In success, you look like Ellen,” says one syndicator. “The reason you take a swing at talk is because you want to have that business.”

“The show is truly an organic extension of [DeGeneres]. It embodies her- essence, sensibility and authenticity,” says Hilary Estey McLoughlin, president of Telepictures, the division of Warner Bros. that produces Ellen. “It’s a very entertaining, joyful kind of experience. There are not a lot of other places in daytime where you can have that feeling.”

Syndicators estimate that Ellen brings in at least $20 million annually in profits, and that’s after paying DeGeneres a healthy salary and producing a polished—a.k.a. expensive—program. Over 10 years—and healthy talkers can run for decades— talk shows can throw off hundreds of millions for a show’s producing studio, even though the first year or two are usually break-even or money-losing.

“Once you get a successful talk show going, profits can be in the neighborhood of $20 million to $50 million a year, and that’s every year,” says Debmar-Mercury’s Bernstein. “When you are talking about that range, it is a real business.”

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A big part of that pro! tability lies in advertising, and daytime remains a great place to reach viewers. Much more so than primetime, daytime is built on viewer loyalty and connection to hosts, and that environment can be very appealing to advertisers. Television, with its big audiences, also still offers advertisers the biggest bang for their buck, even considering fragmentation.

“Advertisers need to advertise on television,” says Ken Werner, president of Warner Bros. Domestic Television Distribution. “Advertisers still feel that TV is the most compelling way to get their message out, because airing their message on television results in sales. If there was a more efficient way for them to increase their sales, they would do it.”

Syndicators also have built brand integration into a real business, amounting to as much as $10 million a year on some shows, such as Ellen. CTD’s Entertainment Tonight and Rachael Ray also rake in the brand-integration bucks. Among the talk shows coming to market, most syndicators think Disney/ABC Television’s Katie has the best shot at building an advertiser-friendly platform for brand integrations, but it’s something everyone tries to do to an extent.

One thing that advertisers— and syndicators, particularly— like right now is that almost all syndicated talk show ratings are up this year compared to last, with NBCU’s Steve Wilkos and CTD’s The Doctors the only exceptions. Among the top talkers, Live!, which saw host Regis Philbin exit last November, was up 32% in the November sweeps period compared to 2010.

And even without a big event like Philbin’s retirement from Live!, CTD’s Dr. Phil has added 7%, Sony’s Dr. Oz has improved 17%, Ellen has gained 9% and NBCU’s Maury has tacked on 20%. Much of those increases are the result of viewer migration and time-period upgrades because of the departure of Oprah and several soap operas, but it still amounts to a better overall daytime environment for advertisers.

In Search of Hits

Still, ratings are not what they used to be. When the late, great Roger King launched King World’s short-lived talker Living It Up! With Ali & Jack in fall 2003, he told B&C, “As usual, it’s a very difficult business, and it’s not easy to develop hits. Last year, everyone thought a 2 rating was a hit, but a 2 rating is not a hit. A 5 rating is a hit.”

Nine years later, the market has fragmented even further. These days, a 2.0 is a hit, or enough of one to keep a show on the air. Syndicators widely agree that at a 2.0 or greater, Katie will be a success. They also agree that it’s going to be tough for any of the rest of the entries to hit even that level, which is why it’s imperative to keep costs down.

“I can’t imagine any of these shows coming on the air and popping out of the box with a 3.0 rating,” says one top syndicator. “Everyone has to be more patient.”

Next season’s glut of talk shows also is going to make breaking through the clutter to attract and keep viewers considerably tougher than it’s ever been before.

“Launching all of these shows in the same genre in the same year is going to fragment the audience so much that very few of these shows, if any, will win,” says Byron Allen, chairman and founder of Entertainment Studios, which currently is making inroads in the court genre with two strips on the air and a third—Justice for All With Judge Cristina Perez—coming next fall. Allen produces his shows economically and gives them all second runs on cable networks that Entertainment Studios owns. “The studios are spending too much money for too small of an audience to be split four or more ways in the same year,” Allen says.

Lower ratings mean lower license fees, and syndicators still need those fees to produce a successful talk show.

“You have to have a certain amount of weekly license fees, that’s a must,” says Greg Meidel, president of Twentieth Television, which is launching Ricki Lake’s new show this fall. “You can’t enter the market with a cash-plus-barter configuration as your economic model, and then give your show away on a straight barter basis.”

“People are willing to pay a license fee now, they are just $125,000 per week less than they once were per show. That’s $6.5 million that you have to make up elsewhere,” says Nogawski.

Syndicators are trying to make up that shortfall by doing things like cutting host salaries—with the exception of Couric’s, which is widely acknowledged to be $20 million, 10 times more than what most hosts can command these days. Probst is reportedly getting paid $1.5 million for his first season, more in line with what most first-year hosts earn. In general, hosts are being asked to take the same kind of risk that syndicators are taking—put in the time and effort up front and then get paid once the show establishes itself.

“Salaries have definitely come down to earth,” says one syndicator. “Most companies are willing to give stars more of the back end and share in a show’s success,” assuming that success comes.

A Little Off the Top

Other elements are getting shaved here and there too—producers’ salaries are a little bit lower, and shows are being produced for a touch less. Solutions like NBCUniversal’s—in which the company’s studios moved all talk shows to Connecticut to take advantage of a good tax break and started shooting the shows with overlapping crews and sets—are becoming more common.

“We are getting some of that savings in facilities costs; they have to take a hit too,” says Nogawski. “People are saying, ‘We can’t afford to produce the show at what you are charging me to rent the space.’ But as we come down on the talent end, facilities have to take a bit less too so they have a job.”

To some extent, there’s an advantage in being a big shop like CTD or Warner Bros. Those studios sell plenty of product and occupy tons of time slots, and that gives them leverage in the market. And they, like Twentieth and NBCU, also have strong barter ad-sales organizations in place that can hit the ground running when their studios launch new shows.

On the flip side, smaller outfits such as Debmar-Mercury and Entertainment Studios are able to do more with less and they can be much more agile, testing shows, selling them for all-barter and keeping costs down to the bare minimum.

In the end, it all amounts to the risks syndicators are willing to take, and they all agree they need to keep stepping up in order to stay relevant. Even long-running shows like Oprah eventually go away, and replacements need to be constantly incubated.

“If you don’t step up to the plate, then you are nowhere,” says Nogawski. “Sometimes you’ll get a single, sometimes a double, but until you get a couple of guys on base, you have nothing.”

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