Originally created 01/19/98

Big money deals dramatically change landscape of television

PASADENA, Calif. -- Television executives joke about selling their souls for a hit. They'd better hope their immortal values are keeping pace with inflation.

Unprecedented deals last week awarding the rights to broadcast pro football to four networks and keeping the medical drama "ER" on NBC have shaken the industry's financial structure and undoubtedly brought smiles of anticipation to the faces of anyone already involved in a hit show.

"The price of poker has gone up," said Dennis Holt, chairman of Western International Media, a company that buys television time for advertisers. "Programming costs are going to go up like basketball players' salaries."

The nearly $18 billion contract to let ABC, CBS, Fox and ESPN broadcast football over the next eight years doubles what networks had been paying the National Football League. NBC's agreement to pay $13 million per episode of "ER" is more than double what any network has ever paid for the rights to a hit show.

If that inflation rate sounds absurd, you can only imagine how the people writing the checks feel.

NBC Chairman Robert Wright compared his network's failed attempt to negotiate part of the football contract to a party where everyone looked better than they really were as the night wore on. The price kept going up and up, beyond what Wright considered any sense of reality.

"You got that feeling you were in kind of a surreal situation," the executive said.

The networks' skittishness about losing viewers over the past few years helped send the prices for football and "ER" skyrocketing. With so many channels to choose from, there are fewer and fewer shows that can draw big chunks of America at any one time -- and these are prized more than ever.

Football offers advertisers a dependable way to reach the coveted demographic of young men. When CBS lost its football contract to Fox four years ago, it not only lost millions in advertising revenue, it lost the chance to promote its prime-time programming to young men. CBS's audience got older, and even less desirable to advertisers.

The fear of repeating CBS's experience of four years ago, exploited masterfully by NFL negotiators, helped drive prices through the roof, experts say.

"ER" producers at Warner Bros. Television also benefited from some fortuitous timing. The show was soon to be a free agent, able to jump to another network, and the negotiations caught NBC at a vulnerable time after it learned it was losing millions in revenue from the retirement of "Seinfeld."

The reported $13 million per episode is more than six times what Warner Brothers had been receiving for the show.

"If they got that kind of money for `ER,' it's going to get any kind of program that is successful to try for the same thing," Holt said.

Go ahead and try, NBC says.

"I think you can't go to the next conclusion that, therefore, every other show is going to be like that," Wright said. "Because people like ourselves will run out of money very quickly."

Networks pay millions each year to develop and introduce new shows, and the batting average of hits keeps going down. Any show that has drawn an audience is that much more valuable. ABC's recent agreement to pay Tim Allen a record $1.25 million per episode to continue "Home Improvement" is another example; the network can't afford to lose its most successful comedy.

Networks are likely to respond to the new economic realities by trying to develop more of their own shows instead of paying outside studios, ABC Entertainment President Jamie Tarses said. They will also move quickly to lock into a long-term contract anyone involved in a show at the first inkling of success.

All networks will undoubtedly raise the prices advertisers pay to run commercials, and probably run more of them.

To that end, NBC Entertainment President Warren Littlefield joked that he has a new plan for "ER" next year.

"There won't be any show," he said. "It will actually be all commercials all the time. That's how we're going to make money."


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