Studio Report Card: Warner Bros.
Warner TV gets dose of good medicine
Warner Bros. Television made history in 1998 with an unprecedented $13 million per-seg haul from its "ER" renewal deal with NBC. At the same time, Time Warner reinforced its commitment to the WB Network by launching the WeB cable channel to boost the distribution of the WB in smaller TV markets. And increasing the level of collaboration between WB Network programmers and Warner Bros. TV producers is a mandate for this year.
HIGH POINTS: Warner Bros. TV is basking in the rewards from the record-shattering, $13 million-per-episode renewal of "ER" last January, which will bring in more than $850 million in license fees alone over the course of the three-year deal, let alone the more than $100 million in off-net sales.
The "ER" deal has reverberated through the TV industry and indirectly caused the studio boycott against NBC last fall. The Peacock, in its attempt to avoid another "ER"-type renewal, demanded (but has since backed off) co-ownership in all of its new series or prenegotiated license fees that extend for the life of a show.
"That ("ER" renewal) was a milestone in TV history," said Warner Bros. TV prexy Tony Jonas.
"ER" alone -- TV's top-rated series in its fifth season -- is enough to keep the studio afloat for a while. But on top of that, Warner Bros. has TV's highest-rated comedy, "Friends," which has seen a resurgence this season.
The studio also has ABC's top-rated comedy, "The Drew Carey Show," and last fall it held (tied with 20th Century Fox TV) the distinction of getting the most shows on the air; it was its 12th straight year at the top. It also has four of the five shows on TV's top-rated night, NBC's Thursday.
MIDDLING POINTS: On the down side, the studio hasn't produced an unqualified hit the past two seasons.
Its newest ratings successes, NBC Thursday's "Veronica's Closet" and "Jesse," have yet to prove themselves in unprotected timeslots. The inexpensive "Whose Line Is it Anyway?" is showing promise as a utility player for ABC, but a backend sale seems questionable. "Two of a Kind" looks like a bread-and-butter TGIF success, but it won't be a giant corporate moneymaker.
LOW POINTS: Disappointments include the short-lived "The Brian Benben Show" and last season's rancorous midseason Tom Selleck flop, "The Closer," both on CBS. "Trinity," John Wells' first try for NBC since "ER," was pulled after the first few episodes.
LOOKING AHEAD: The biggest challenge for this year will be to work more closely with the emerging WB network, which gets its biggest hits from Sony ("Dawson's Creek"), News Corp. ("Buffy the Vampire Slayer"), Disney ("Felicity") and Spelling ("7th Heaven," "Charmed").
Not only are Warner Bros. TV's top writers producing for other networks, including Bruce Helford's ("Drew Carey") upcoming Norm Macdonald comedy for ABC, but the sensibilities of the two sides are very different. The TV studio leans toward mainstream comedies, while the WB netlet seeks hot, indie feature writers who do teen-focused dramas.
RACE OF THE NETLETS: While Warner Bros. TV is flush with profits at the moment, the WB netlet still hasn't turned a profit. And yet, in many ways, 1998 was as much or even more of a breakthrough year for the emerging network.
Starting with the prominent Sinclair station group's switch from UPN to the WB, the WB began to take the lead in the netlet race. And after the sexy "Dawson's Creek" launched in January, the WB quickly established itself as the network for teens, especially teen girls -- one of the hottest demos in Hollywood.
Movie studio money quickly followed, and this season the WB is the only network showing growth. The WB is quickly adding nights and new teen dramas, including this season's "Charmed," and much-hyped "Felicity," which earned the WB its first two Golden Globe nominations.
But perception leads to reality in Hollywood, and when it comes to image, the WB is hot. So hot that its entertainment prexy Garth Ancier resigned and is expected to take over the same post at NBC when his contract expires in May. In a rather seamless transition, Ancier's No. 2, Susanne Daniels, has taken over as entertainment prexy, making her the third woman to hold the post out of six networks.
Low points at the WB appear to be the inability to launch a hit comedy, which the netlet hopes to change with the midseason sitcom "Zoe, Duncan, Jack & Jane." Also still a trouble spot is the WB's distribution outside the top markets, which remains spotty in smaller markets even after the launch of the new localized cable distribution plan called the WeB.
Even though WB owns no stations, company execs say they are on target to turn a profit sometime around the end of the year.
-- Jenny Hontz
SYNDICATION
For Warner Bros.' syndie arm, the WB Network will begin to pay dividends this year as the first Warner Bros.-produced sitcoms from the weblet -- "The Parenthood" and "The Wayans Brothers" -- shift into profitability mode by bowing in Monday-Friday syndication this fall.
The two urban-oriented sitcoms are unlikely to big moneymakers in syndication, as Warner Bros.' NBC hits "Friends" and "ER" proved to be last year. "The Drew Carey Show," the WB-produced ABC sitcom also set for its off-net bow this year, will generate far more coin for the studio.
But the completion of the primetime-to-daytime loop with "Parenthood" and "Wayans" probably is more significant for Warner Bros. and Time Warner in the long-term because it represents a synergy milestone for the WB Network and the Warner Bros. Domestic TV Distribution (WBDTD) syndie arm, headed by prexy Dick Robertson.
The advent of the WeB has limited the amount of business WBDTD does in those smaller markets (below the top 100 ) because most of Warner Bros.' syndie programming is now earmarked exclusively for the WeB to fill out the channel's 24-hour sked. Predictions of protests from small-town broadcasters have so far proved premature.
Indeed, last year WBDTD and its Telepictures Distribution imprint wrapped up successful syndie sales efforts for the NBC sitcom "Suddenly Susan" and the WB's "The Jamie Foxx Show," both set to debut in 2000.
And on the firstrun side, WBDTD remains the syndie biz's 800-pound gorilla with a roster that includes "Rosie O'Donnell," "Jenny Jones," "The People's Court," "Extra" and 1998's well-received "Change of Heart." WBDTD is poised to launch two daytime strips this fall: a talkshow fronted by rapper/actress Queen Latifah and a courtshow, "Judge Mathis."
-- Cynthia Littleton
CABLE HIGH POINTS: With arguably the strongest lineup of basic and pay cable networks in the business, Time Warner's cable assets continued to grow at a robust pace in 1998.
The company's HBO pay TV division grew its operating cash flow 16.2% in 1998, according to a recent ING Baring Furman Selz analysis.
HBO, which garnered more than $2 billion in revenues in 1998, has benefited greatly from dramatic growth among direct satellite distributors such as USSB and PrimeStar, which have the channel capacity to carry dozens of pay-TV networks.
However, as DBS growth slows down, HBO will be hard-pressed to maintain yearly growth rates of 15%.
On the plus side, HBO's 50% ownership stake in Comedy Central has begun to contribute noticeably to HBO's growth. And while some HBO critics believe that the cabler's lineup of big budget, high-profile original movies was uneven this past year, the network still garnered gobs of critical acclaim for projects such as miniseries "From the Earth to the Moon."
In basic cable, TNT, CNN and TBS Superstation remained three of the most entrenched and highest-rated cable webs.
CNN distinguished itself by premiering its 24-hour documentary "The Cold War." The brainchild of Time Warner vice chairman Ted Turner, the critically acclaimed series added prestige to a tarnished CNN -- which was forced to apologize and retract a high-profile piece about the U.S. military using nerve gas on its own troops in Laos during the Vietnam War -- and demonstrated how the Turner news web can differentiate itself from competing news webs gunning for CNN.
In 1998, Turner's Cartoon Network continued to be a major success story. The all-animated channel was tied for third place among all cable networks for total day ratings (1.0) and increased its primetime household average a whopping 30% to 742,000.
Cartoon's prospects for continued growth appear bright. Launched as a vehicle to display Turner's massive animated library -- which includes the Warner Bros., MGM and Hanna-Barbera cartoon collections -- the web has added a significant amount of originally produced cartoons, such as highly rated "Cow and Chicken," "Dexter's Laboratory" and "Johnny Bravo."
LOW POINTS: Although CNN -- no doubt aided by a newsy year in the nation's capital -- actually grew despite the pressure from such new 24-hours news channels as MSNBC and Fox News Channel, the upstarts did take a bite out of CNN's little sister, Headline News. In total day average households, Headline News declined 10% to 154,000 in 1998.
And though CNN has so far fended off MSNBC and FNC, there's no guarantee it will continue to do so. Any damage done to CNN would be a blow to Turner and parent Time Warner. The oldest cable news channel is the fifth-highest-grossing basic cable web. Paul Kagan Associates estimated that CNN's 1998 revenue was $676.5 million and that was expected to increase to $713.4 million in 1999.
WARNING SIGNS: As competition for viewers and programming costs increase over the next few years, Time Warner's Turner Broadcasting System and HBO divisions may have a tough time maintaining their current growth rates. However, Time Warner's cable networks are as well poised to compete in the near future as any domestic programming group.
As a network group, Turner became much more aggressive on the affiliate sales front in 1998. On the whole, this assertive strategy improved Turner's bottom line but also created some negative repercussions.
For example, Turner converted TBS from a superstation that collected no affiliate revenue to a basic cable web that charged 25¢ per subscriber per month. The move increased TBS' affiliate revenue from nil in 1997 to $165 million in 1998, according to Paul Kagan Associates, but several of Turner's largest cable affiliates -- including Cablevision Systems, MediaOne and Comcast -- perceived it as unnecessarily heavy-handed and have not yet agreed to pay the 25¢ for TBS.
Already they have been taking revenge on Turner by not launching Turner's smaller nets -- such as Cartoon Network and CNN/fn -- on systems that had originally planned to add the webs.
Turner also drew the ire of many of its affiliates when TNT did not rescind the 20¢ per month NFL surcharge it collects from cable ops despite having lost its NFL package to ESPN. So even though losing the NFL meant losing its highest-rated programming, TNT still adds the 20¢ per month per subscriber to its bottom line.
Without pro football -- and also without pro basketball games due to the NBA lockout -- TNT seemed doomed to a lousy year. But the surprisingly resilient cablenet barely took a hit. It lost only 5% in primetime ratings (a 2.2 down to a 2.1, using cable universe ratings) and equaled its 1997 total day rating of a 1.0.
-- Richard Katz
