TV Networks Fueled by Netflix Effect Introduce Most New Shows Since 2004

The four biggest U.S. television networks are introducing the most shows in seven years as subscription services like Netflix Inc. (NFLX) make spending on new programs less risky.

This week, CBS, Fox, ABC and NBC presented advertisers with 39 new programs for the TV season that starts in September, the most since 2004-05, according to data compiled by Bloomberg.

Web-based services are providing a new market for older shows, vying with local stations and cable outlets, Jack Myers, chairman of Media Advisory Group in New York, said in an interview. Foreign demand for U.S. programs is rising and networks are now collecting fees from pay-TV systems, he said. With new revenue sources, shows such as CBS Corp. (CBS)’s “Hawaii Five-O” can break even or make money in their first season.

“Ratings are less and less of an important barometer for whether a show will stay on the air,” Myers said.

CBS, the most-watched U.S. network, expects to reach $3 billion in annual revenue from those sources in a few years, Chief Financial Officer Joseph Ianniello said in February. Services such as Netflix will pay $1 billion for program rights, he told analysts.

For the 2011-12 season, New York-based CBS announced six new shows and plans additional pickups in the next several weeks, according to Nina Tassler, president of entertainment.

The Netflix Factor

Walt Disney Co. (DIS)’s ABC, Comcast Corp. (CMCSA)’s NBC and News Corp.’s Fox also sell canceled shows and past seasons of current fare to Netflix, the Los Gatos, California-based mail-order and online service. In addition, the three are co-owners of Hulu.com, which offers current, ad-supported episodes online.

ABC, CBS and Fox now receive more money from Netflix for old shows than when the programs were originally sold for rerun on cable and local TV, said three network executives, who requested anonymity because they weren’t authorized to publicly discuss financial terms.

“We’re a new buyer in the ecosystem and that’s good for content providers,” said Steve Swasey, a Netflix spokesman. He declined to discuss the terms of deals with the networks.

“Hawaii Five-O” generates $5 million an episode, including international revenue and rerun rights sold to Time Warner Inc. (TWX)’s TNT cable channel, according to Leslie Moonves, CBS’s chief executive officer. The show, wrapping up its first year, is “extremely profitable,” he said on May 3.

Those changing economics give networks leeway to experiment. CBS is moving “Rules of Engagement” to Saturdays at 8 p.m., the first time in six years that one of the networks has put a scripted show on that night, said Kelly Kahl, who oversees scheduling. CBS is owner of the show, which makes money “across the value chain,” he said.

ABC Slate

ABC, third in Nielsen Co.’s prime-time audience ratings, plans 13 new programs, the most for the network since the 2006- 2007 season. Paul Lee, who developed hits at Disney’s ABC Family cable channel, was tapped last year to run the network’s Los Angeles-based entertainment unit.

Fox, with eight new shows on the schedule, may be making the biggest bet of all with “Terra Nova,” a science-fiction series from executive producers Steven Spielberg and Peter Chernin, former president of News Corp. (NWSA)

The show may be the most expensive pilot in TV history, according to Myers. Fox has already ordered a full season.

About a family that travels back in time to prehistoric Earth to save humanity, “Terra Nova” was filmed in Australia and has 250 special effects in the two-hour debut, according to Fox Broadcasting Chairman Peter Rice, who wouldn’t provide the cost. Los Angeles-based Fox is finishing this season first in the 18-to-49-year-old audience demographic that advertisers seek and is second overall behind CBS.

“If you’re Fox, you don’t take that kind of risk unless you have the business model solid,” Myers said.

NBC’s Strategy

NBC, last in prime-time viewers, plans 12 shows, the second year of increased spending after years of scrimping and a failed 10 p.m. talk show with Jay Leno.

Bob Greenblatt was hired to run New York-based NBC’s entertainment division after Comcast acquired control from General Electric Co. (GE) in January.

“We’ve got a couple of new network presidents and they’re starting to put their stamp on the schedule,” said Shari Ann Brill, a media consultant. “Greenblatt probably should have taken an eraser and wiped the entire slate clean, but these are built-in franchises and they keep the lights on for years.”

NBC is introducing half of its new shows in September and half next year, when the network’s sole 2011 hit “The Voice” returns. The talent show, averaging 7.3 million viewers a night in the 18-to-49-year-old age group, gives the network a platform to promote and introduce new fare.

Back to Respectability

“‘The Voice’ could be the show that brings NBC back into respectability,” said Don Seaman, head of TV research at the advertising company MPG North America. “It really doesn’t take much to turn things around quickly.”

NBC’s programming slate, following 12 new shows last year as well, probably marks a long-term commitment by Philadelphia- based Comcast to improving the prime-time schedule, Seaman said. NBC reduced spending from 2007 to 2009 under then-Chief Executive Officer Jeff Zucker.

NBC will focus “ a little less on reinvention of the wheel and a lot more broadcasting 101,” Ted Harbert, the network’s chairman of broadcasting, said during this week’s presentation to advertisers and affiliates.

Nielsen Ratings

In the season ending this month, the four networks collectively have lost about 9 percent of their audience in the 18-to-49-year-old demographic, punctuated by a 14 percent slide at NBC, according to Nielsen data. Even with so many new shows, the networks may struggle to win younger viewers against cable shows like MTV’s “Jersey Shore” and new online options.

In the aggregate, the four networks are seeking advertising rate increases of 9 percent or more, said Porter Bibb, managing director at Mediatech Capital Partners LLC, a New York-based investment bank. They will end with commitments that are in total unchanged or down slightly from a year ago, he predicted.

For those reasons, broadcast networks are adding new outlets for TV shows and relying less on 30-second commercials to make programs profitable, Myers said.

“The landscape has changed,” Myers said. “Networks are looking for a financial hit, not just a hit in the ratings.”

To contact the reporters on this story: Andy Fixmer in New York at afixmer@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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