Cable Networks Lose “Experimental Edge”
The cable networks are right now in an experimental phase — they’re feeling around to determine how far they should go” in ponying up for the broadcast-network windows of theatricals, says Hal Vogel, a showbiz analyst for Cowen & Co.
Vogel says the acid test for Turner could come when Warner Bros.’ expected summer blockbuster “Batman and Robin” becomes available to presale to networks. The price will depend on how well the movie does at the box office — Turner will almost certainly have to make the commitment to buy it before final returns are in. As “Batman & Robin” revenues from theaters start sailing well north of $100 million, the price to a cable network could shoot up into the $20 million stratosphere.
Various sources say the average theatrical fetches between $4 million and $6 million in its first network window, whether broadcast or cable. And even at that price, the movies are loss leaders for a cable network, Turner says.
Other sources say TNT and TBS will be lucky to gross half the average cost of an exclusive theatrical from advertising revenues, even with 12 runs of each title over the three- or four-year life of a contract, instead of the two runs to which a broadcast network usually agrees.
But Turner says that because these movies will be showing up on TNT and TBS only three years after their theatrical run instead of the usual six-to-eight years, they’ll get better ratings, and thus allow the channels to jack up their advertising rates.
“Turner is looking at the big picture,” says Tom Wolzien, a media analyst for Bernstein Research. “He wants to build the asset value of TBS and TNT” even if it means losing money in the short run by paying swollen prices to wrest movies away from the broadcasters.
Pay TV networks are feeling the ripple effect of the Tamer movie grab. For example, HBO, according to sources, has always tried to prevent the major studios with which it has output deals — Warner Bros., 20th Fox, Columbia and Paramount — from selling their pictures to a basic cable network between the first and second pay windows.
The first pay window kicks in about a year after a movie hits multiplexes, and typically extends to about 18 months. Then there’s a long period when a producer usually sells the picture to a broadcast network — not a cable channel — for two runs during a license term that stretches between three and four years, on average. The second pay window doesn’t open up until after the end of that broadcast window.
HBO didn’t want a basic cable network horning in during the time span between the two pay windows because, sources say, HBO regarded basic cable as a more direct competitor to a pay web than a broadcast network; more than 30% of the broadcast nets’ viewers are not even hooked up to cable.
But now that Turner has shoehorned TBS and TNT into the gap between the pay windows, all bets are off, says Steve Bell, president of the Encore Entertainment Group, which includes Starz, a network that owns the first pay window of the movies produced by Touchstone, Universal, Hollywood Pictures, New Line and Miramax.
“With that one stroke, Ted Turner has singlehandedly changed the architecture of the business,” Bell says. The pay networks will no longer be able to enforce a provision that stops a studio from selling its movies to basic cable during the four years between the two pay windows.
Starz is stocking up on Prozac, Bell says, because it has the pay rights to “Michael” based on an earlier deal with Turner Pictures.
Now that Turner has told the world “Michael” is headed for TBS and TNT, Bell is afraid that John Travolta fans will figure they can wait until the movie shows up on a network that doesn’t charge a monthly fee rather than signing up for Starz.
And the Hollywood production community is uneasy about TNT getting theatrical movies instead of, say, CBS, because “cable runs the sprockets out of a picture instead of scheduling it for a clean two runs over four years, the way a broadcast network would,” says one producer, who requested anonymity.
But Ed Bleier, president of Warner Bros. pay TV, cable and network features, says that’s unfair. “TNT and TBS are basically movie networks,” slotting more movies in one day than a broadcast network will ran in a week,” Bleier says.
“And Turner allocates a lot more promotional resources to a movie” than a broadcast network, which has to steer its marketing budget to madefors that don’t have the presold name recognition of a theatrical.
With Turner and Koplovitz bringing open checkbooks to the table for early window movies, producers may have to start getting used to the phenomenon of cable networks acing out their broadcast brethren. Still, Bell doesn’t see an Armageddon of synergy between producers and cable nets on the horizon.
“There are so many movies out there, that I don’t think anybody should be unduly worried about these changes in the landscape,” Bell says. “Let’s face it — no one outlet, whether it’s a broadcast network or a cable network, can buy everything.”