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Networks face high costs of popular scripted series  


By Jon Lafayette

 Using the kind of logic once employed by Groucho Marx, who claimed he'd never belong to a club that would have him as a member, one could say the quality of original programming on cable has improved by looking at the caliber of the shows that have been canceled.

In the last few weeks, several high-profile shows have been terminated by cable networks. They include Son of the Beach by FX, Farscape by Sci Fi Channel, Witchblade by TNT, Nero Wolfe by A&E, State of Grace by ABC Family and Win Ben Stein's Money by Comedy Central.

"I was really surprised because Witchblade and Farscape did reasonably OK," said Shari Anne Brill, director of communications and programming services at media buyer Carat USA.

Cable network execs say that while this generation of original shows was successful in its day, times are changing.

"The bar has been raised," said Steve Koonin, general manager of TNT, noting that while Witchblade drew an average Nielsen rating of about 2, cable shows are now premiering with much higher ratings, including The Dead Zone, which opened with a 4.76 for USA Network. "Creatively, we didn't see a reason to run it for a third season and have it fall apart, just to say we got a third season. We felt that the show served us well. It did good. It was a hit, but it was time to move on," Koonin said.

And FX appears to have outgrown the sometime juvenile Son of the Beach, despite its status as one of the few original comedies to survive on cable.

"I think that FX is looking at their image and saying we are aiming to be a basic cable HBO," said David Grant, president of Fox Television Studios, which produces Son of the Beach and hopes to keep it alive on another network or in syndication. "They think their image is different and that Son of the Beach is sort of broader comedy that doesn't hit what they're trying to sell themselves as right now."

Of course, money is an issue as well. As the broadcast networks have learned, success can be expensive, as studios and talent demand more money each season a show survives.

Grant said the cost of producing Son of the Beach had risen to between $600,000 and $650,000 an episode.

Farscape was always an expensive production, reportedly costing $1.5 million per episode. Sci Fi executives declined to discuss the show's cancellation but in a statement cited the show's "extreme and growing cost of production."

Cable networks pay a bigger chunk of the cost of producing a series than broadcast networks do because cable networks order fewer episodes of each show, making it unlikely the studio will be able to make money in syndication.

"If they want to get the best creative material, they have to approach us in a way that doesn't make it insane for us to make it," said Grant of Fox Television Studios.

"There's no need for them to order 22 or 24 episodes in their mind because in their minds they're bringing people something special and of value and it's not just ratings driven" because, in addition to ad revenue, cable networks get subscriber fees from cable operators, Grant said.

Still, cable networks cancel shows like Son of the Beach because "it's very hard for them to focus on too many things. They're trying to do a few select things really well and stand out," Grant said. "I don't agree but I understand."

Instead of investing money in continuing a current series, "everybody is chasing the next breakout hit," said Kathryn Thomas, associate director of Starcom Entertainment.

That seems to be what TNT has in mind. "I can assure you that we will be in the scripted drama business. That's a fact. We will look for a show that does what its predecessor Witchblade did for us this time, except do it better," Koonin said.

Then the question becomes, how do cable networks grow their ratings if they're canceling their most-watched shows?

Thomas said networks "need to do smarter deals in preparation for success," by finding some way to share the cost of long-lived shows, perhaps with a broadcaster, or possibly with an international channel.

The other problem with canceling popular shows is everybody complains.

The advertising community is not happy about the demise of State of Grace, a rare family-friendly program.

"That was a good-quality show, and I think that that would have been better on ABC's network than what they're putting on their own schedule," said Carat's Brill. "When you call yourself ABC Family and you cancel State of Grace and you air The Bachelor instead, I kind of wonder how you're calling yourself ABC Family."

Joel Andryce, EVP of programming and development at ABC Family, said the network gave the critically acclaimed show two years to find its stride, but it didn't attract enough adult viewers to make business sense. He's hoping My Life Is a Sitcom, a program the channel plans to launch in January, will become a signature show. Meanwhile viewers upset about the cancellation of Farscape have launched websites such as savefarscape.com that urge fans to call other networks to get them to pick up the show. "Sci Fi doesn't want Farscape? Fine. It's our show now. It's time for us to take our show and go out and sell it to those curious network-running people," the site says.

Cable shows viewers care about: That can't be a bad thing, can it?

Click HERE to go to the NY Times online article. 

Vivendi Chief to Discuss Options for U.S. Divisions

September 10, 2002:

Under pressure to raise cash, Jean-René Fourtou, the chief executive of Vivendi Universal, plans to discuss a range of options for the American entertainment divisions when he meets with executives in New York and Los Angeles this week, including a possible stock offering, people close to the company said today.

Mr. Fourtou, who is making his first trip to the United States since taking charge of Vivendi on July 3, is weighing whether to sell the American entertainment divisions amid a broad review of Vivendi's overall business. People close to Vivendi said the meetings, especially with Barry Diller, the head of Vivendi Universal Entertainment, were expected to go a long way in helping Mr. Fourtou formulate his strategy.

Mr. Diller, on behalf of Mr. Fourtou, has explored selling Universal's theme park business to a consortium of private investors, including the New York-based Blackstone Group, which owns a small stake in Universal's theme park business, said two people close to the discussions.

Mr. Diller was scheduled to meet with representatives from Blackstone in recent weeks, but, one person said, he was told by Mr. Fourtou to wait until after his visit to the United States.

Vivendi has held a preliminary face-to-face discussion with at least one potential buyer for its entertainment assets. A senior NBC executive was in Paris recently and spoke with Mr. Fourtou.

On Thursday, Mr. Fourtou is scheduled to have lunch in New York with the top brass of Universal Music, including Doug Morris, the chief executive, and Zach Horowitz, the chief operating officer, followed by presentations and a tour of the Island Def Jam studio, a person who has been briefed on the itinerary said. On Friday, Mr. Fourtou will fly to Los Angeles, where he will meet with Mr. Diller; Ron Meyer, president of Universal Studios; and Stacey Snider, chairman of Universal Pictures.

The meetings follow talks held earlier this summer, when many of these same executives were invited to Paris to meet Vivendi's new management, after Jean-Marie Messier, the former chief executive, was ousted in a boardroom coup.

Mr. Fourtou's pledge to reduce debt and refocus the company on a group of core businesses has raised questions about the future of the American entertainment companies, which include the Universal Music, movies and theme park divisions inherited through the 2000 purchase of the Seagram Company from the Bronfman family and the USA Network and Sci-Fi Channel purchased from Mr. Diller last year.

Options under consideration include selling shares to the public, shedding some of these businesses piecemeal, or retaining them, people close to Vivendi said. One of the more plausible courses of events might go like this: Vivendi would sell a minority stake in Vivendi Universal Entertainment to the public and at the same time sell another minority stake to a strategic partner, perhaps someone like John C. Malone of Liberty Media, leaving Vivendi with a 51 percent stake in the business. It is unclear if Universal Music, which is not part of Vivendi Universal Entertainment, would be grouped with these businesses, or kept separate.

Then, at a later date, Vivendi could further reduce its stake by selling out to rivals. Analysts and investment bankers said NBC, owned by General Electric, could be a possible suitor, because it is the only broadcast network not affiliated with a major studio.

An executive with knowledge of Mr. Fourtou's meeting with the NBC executive described the session as nothing more than an exploratory discussion, saying that it came at Vivendi's invitation.

NBC's chief interest in any discussion with Vivendi is likely to be the Vivendi cable assets, an executive with knowledge of NBC's position said, adding that NBC would not rule out other options "if they are in everyone's mutual interest."

NBC is always mentioned in speculation about the sale of any production studio because it is the only American network not aligned with one. But Bob Wright, the president of NBC, has previously said that NBC does not need to own a Hollywood studio. Nor is NBC a logical fit to seek to purchase Vivendi's music division.

Viacom and News Corporation executives said their companies would surely be interested enough to explore a purchase of the cable channels.

In an initial public offering, Vivendi Universal Entertainment might be worth $9 billion to $10 billion, while an outright sale to a rival could include a premium that might lift the value as high as $15 billion, investment bankers said.

Beyond pointing out that Mr. Fourtou is expected to outline his plans at a board meeting scheduled for Sept. 25, a Vivendi spokeswoman declined to comment on the company's plans.

Among the considerations will be how these American media companies will fit within Vivendi as it reorganizes around its French roots; whether it is worth hanging onto the American entertainment assets, given that they generate much less cash than do Vivendi's other businesses; and whether Vivendi Universal Entertainment has the power to compete with rivals as a stand-alone company, analysts said.

One big decision facing Vivendi is whether to keep these assets or to sell them, Nick Bell, an analyst with Bear, Sterns, said. "My guess is they will be sold," he said.

Mr. Bell said he saw no place for an American media company within what he considers an increasingly French organization. He noted that Cegetel, a French phone company in which Vivendi has a 44 percent stake, generated three times the cash that the American entertainment assets did, making it difficult to justify keeping them.

Mr. Bell said Vivendi would create more value for shareholders if it sold its American entertainment assets and used the proceeds to take control of Cegetel, allowing it to consolidate that company's cash. As a minority investor it cannot do this.

Vivendi was nearly bankrupt when Mr. Fourtou took charge and is in the process of negotiating a 2 billion euro ($1.96 billion) rescue package with its banks. Mr. Fourtou has no choice but to consider all options, including selling the Cegetel stake to Vodafone, which already owns a minority share and has made no secret of its desire to take control of SFR, the mobile phone subsidiary. Sir Christopher Gent, the chief executive of Vodafone, met with Mr. Fourtou earlier this week in Paris to press his case for a friendly deal.

Any discussion of the entertainment assets would entail finding a solution for Universal Music. One option would be to lump it with the other entertainment assets and sell the whole package to a large media company that did not have a presence in the music business, analysts said.

No matter what Mr. Fourtou learns on his trip to the United States, a more pressing concern when he returns to Paris on Saturday will be the sale of Vivendi Universal Publishing, analysts said. Vivendi initially put Houghton Mifflin, the American publisher, up for sale. But when it received offers from several private equity groups for all of its publishing assets, including businesses in France and Spain, it decided to put the entire business on the block for about $5 billion. Offers are due in the next two weeks, people involved in the discussions said.

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