Pax uses Peacock ties to max
Partnership with NBC helps net reach profitability on pablum fare
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Fox Family Channel, which Disney acquired last week, has gone through more makeovers than Tammy Faye Bakker. Odyssey recently resurrected itself as the Hallmark Channel.
Pax, on the other hand, seems to be in a perpetual holding pattern.
A year and a half after NBC took a 32% stake in Pax worth $415 million, the two unlikely cousins are still feeling out their relationship.
While NBC mulls its eventual plans for the channel, Pax continues to go through the motions of a TV net: creating series, announcing fall skeds and selling ad time.
But the mini-net hasn't yet made waves in Hollywood.
That's partly because Pax has so far steered clear of taking any risky gambits, such as pouring money into lavish, expensive productions. And in this age of three-set households and 500-channel universes, the jury's still out on whether there's an audience for Pax's family-friendly and sex- and violence-free, fare.
Pax execs continue to program the channel with older-skewing off-net dramas such as "Diagnosis Murder" and "Bonanza," along with milquetoast original series like "Doc" and "It's a Miracle."
Add in a heavy daytime diet of infomercials, and viewers are still arriving in drips at Pax. The mini-web averaged a 0.9 Nielsen household rating in primetime last season (nonetheless up from a 0.8 the previous year).
But while Pax remains the butt of many a joke in TV land, the Peacock partnership has helped keep the Wonder Bread web on the air and even flirting with profitability just three years after launch.
"We benefit strategically by trying to improve the value of Paxson, which improves our stake," says NBC West Coast prexy Scott Sassa.
Pax ended the first quarter of 2001 with a positive cash flow and slightly smaller losses vs. the previous year -- a strong accomplishment for a network still in its infancy.
"We're just where we wanted to be," says Pax CEO Jeff Sagansky. "I don't think any network has turned the corner as fast as we have."
NBC can exercise its option to absorb Pax starting next February, but only if the FCC has struck the 35% station ownership cap by then.
Pax would give NBC, which doesn't yet possess a general entertainment cable outlet, a broadcast/cable hybrid channel with instant access to 83% of the country. Given today's limited channel capacity, the Peacock would otherwise have to pay steep fees to multiple cable operators to get that kind of distribution.
"We like the investment we made, we like what's happening now and we think Pax has a pretty solid future based on its track record," says John Eck, who oversees the Peacock's Pax investment as president of broadcast and network operations at NBC.
If Pax's goal is to make itself attractive enough before an eventual NBC takeover, Merrill Lynch Global Securities analyst Oren Cohen says Sagansky and his crew have done a good job.
"They've managed to grow revenue without exploding their expenses," Cohen says. "For a relatively new network, they've exercised some very good financial discipline."
Pax's secret? Eliminate overhead -- just about all of it.
The network first outsourced most of its sales and marketing oversight to the more experienced team at NBC.
The Peacock's sales force, which just wrapped up NBC's fall 2001 upfront billing, is out selling Pax in both the network and cable marketplace.
Pax also owns virtually all of its stations. That means most local dollars, which make up a large chunk of Pax's revenue, head straight to the net's West Palm Beach, Fla., headquarters.
It also means the web has been able to pact with a roster of NBC-owned stations, NBC affiliates and a handful of other network affils to operate the Pax station in their town.
Once these joint sales agreements are implemented, the Pax outlet is run by just three employees -- compared to between 75 and 100 at most stations. Pax has signed up JSA partners for 50 stations, with 11 to go.
The JSA deals mean many of NBC's affiliates now have an active interest in watching Pax succeed. That allows NBC to double-run Peacock programming on Pax with its affils' blessing.
It's a long way from last year, when NBC had to scratch plans to repeat "NBC Nightly News" on Pax after affiliates howled in protest. Pax is now testing a double run of "Nightly News" in Tampa, Fla.
Carving out a dual window for scripted NBC Studios series on Pax has been harder than it looks, however. That's because Pax must pay broadcast net residuals and NBC must be mindful of its profit participants.
"There are a lot of problems associated with Pax," says NBC topper Andrew Lack. "We'll work through those problems."
Given Pax's paltry acquisitions budget (the net has kept its total programming expenditures at $100 million), NBC shows that should have logically made the jump, such as "Providence," didn't.
That's also why Pax may have jumped the gun too soon on "Crossing Jordan." The mini-web announced at its upfront presentation that the new drama, starring Jill Hennessey, would join Pax's lineup in January. But a deal hasn't been struck yet.
"The programming relationship between us and NBC is very fluid," Sagansky says. "We're talking to them all the time. We don't have anything in writing. We make it up as we go along."
Pax has had more luck saving money by creating (and owning) its own low-budget series.
Pax's original dramas cost approximately $350,000 an episode to produce, compared with about $1.8 million for the big guys. Overseas production, fewer stars and smaller studio partners help defray costs.
The network has also stayed away from any more off-net programming deals. Pax launched in 1998 with an all-syndie schedule, including repeats of "Touched by an Angel." As those deals expire, Pax isn't leasing any new programming but is sticking with original fare it owns.
Of course, the jury's still out on whether Pax's risk-free strategy, while much more economically sound, brings in viewers. Pax's ratings are indeed growing and its median age is indeed dropping, but ever so slightly.
And even if NBC does take full control of Pax, Sagansky believes there is an audience hungry for family fare.
"The edgier (the nets) go, the more we'll grow our audience," Sagansky says. "We're not trying to be cool or hip. There are people who just want to feel good when they watch TV."
