And Now, A Show From Your SponsorZachary Schiller
Procter & Gamble Co. once turned out more TV qhows than any Hollywood studio. Its production arm made or bought everything from westerns to game shows, and its dominance in daytime dramas christened the genre "soap operas." Although P&G Productions still cranks out 765 hours of The Guiding Light, Another World, and As the World Turns each year, it long ago ceased to be a factor in prime time. As production and ad costs rose, P&G found it cheaper to leave show biz to Hollywood and just sign on for commercials.
Now, though, Procter is plunging back into programming in a big way. In March, Chairman Edwin L. Artzt announced a three-year alliance with Paramount Television Group, maker of Frasier and Wings, to develop shows for network TV and first-run syndication. Outsiders figure the deal will cost Procter $120 million or more. That's not huge compared with the packaged-goods giant's $3 billion yearly ad budget, but Procter promises more deals to come.
P&G isn't the only advertiser tuning into the TV business. Television Production Partners, a consortium of nine brand-name marketers formed early last year, aired its fourth show in April and expects to spend $30 million over the next year and a half. Hallmark Cards Inc. paid $365 million last year to acquire RHI Entertainment Inc., a leading independent producer of TV miniseries and movies, including Hallmark's wholesome Hall of Fame productions. Wendy's International Inc. is aggressively seeking family-oriented projects the fast-food chain can help bring to the airwaves.
PC PLAGUE. Why are so many of the nation's biggest marketers suddenly starstruck? Procter says it worries that the flood of new media may wash traditional ad-sponsored programming away, leaving it no place to run its commercials unless it owns some of the shows. Procter fears a world in which CD-ROMs, the Internet, pay-per-view, interactive-game channels, and other ad-free media further atomize the mass audience that was once divided neatly among the three networks. Others worry about the dearth of family-oriented shows. But there's another, less complicated reason: cold hard cash. Like everyone from Sony Corp. to Seagram Co., soap-sellers and greeting-card merchants see the booming entertainment industry as a gold rush they'd better get in on.
Indeed, if there's one thing everybody agrees on when it comes to the new media, it's that all of the different platforms under construction are going to require a heck of a lot of new content. Already, demand--and potential profits--are growing. The back-end revenues alone from a hit show can be stunning: Paramount's Cheers, for instance, fetched more than $400 million in syndication for its first three years. Its various Star Trek shows bring in more than $1 million an episode overseas. And on the cost side, an advertiser lucky enough to produce the next ER may have more clout at the bargaining table when it comes to buying airtime, especially in foreign markets.
P&G's Artzt has emphasized broader goals to explain his company's renewed interest in Hollywood. He warned in a highly publicized speech to ad agencies last May that new media threaten mass advertising--and with it, P&G's ability to sell its 50 million tubes of Crest each year. As he told another trade group on Mar. 10, just days after announcing the Paramount deal: "I firmly believe that unless advertisers participate in the development of new programming, we're not going to have much to say about how new programs get paid for." Procter's agreement with Paramount guarantees access to advertising time wherever the programs are shown.
GOLD RUSH. But while the networks have already seen their share of the audience erode, a commercial-free future is still a long way off. And even some of those fashioning the new media systems point out that they'll need advertising, too, to be economically viable. Even within P&G, not everyone believes a threat to access was the primary force driving the Paramount deal. "The party line is, they're doing this for access, but it's not a bad business proposition," notes one source close to Procter.
Procter knows that already. In 1990, it helped put Northern Exposure on the air and won cheap airtime on a hit show in the bargain. Procter agreed to pay part of CBS Inc.'s license fee to Universal Pictures for the eight initial episodes and to advertise on them without a guarantee of audience size. In return, it got a 10% discount on three 30-second ads every week for four years. It also has undisclosed rights for syndication and other revenue-generating deals. P&G's role as a fixer in Northern Exposure was a lucky, one-shot deal far smaller than its Paramount venture. But it's an indication of the possibilities.
First, though, Procter and Paramount have to get their shows on the air. In their initial collaboration, P&G is putting up some of the cash to produce a version of the studio's Entertainment Tonight in Germany. In return, it will get a share of the license fee, along with some advertising time. Meanwhile, in the U.S., P&G and Paramount hope to strike a deal with one of the networks. The network would get a break on the license fees of shows the partners hope to produce, while Procter would get reduced rates on its ad spots. Procter doesn't envision taking most of the ad time on any single show since that would take up too much of its budget.
Such a deal is far from a sure thing, however. Broadcasters may well balk at the idea of an entrenched ad-rate discount. "No network is going to want to institutionalize a benefit for an advertiser," says one industry veteran. And producers might shy away from doing business with a giant advertiser that could attempt to dictate the content or tone of a show. P&G ad chief Robert L. Wehling contends that Paramount "can make whatever they want" and that P&G will simply opt out if a particular program is inappropriate. According to Wehling, P&G isn't even telling Paramount to aim its shows at men or women or younger or older audiences.
BIG GUNS. For other marketers, however, gaining more control over the shows that carry their commercials is an important reason for their involvement in programming. On June 17, Capital Cities/ABC will show Derby, a two-hour movie about an adopted girl who races in the Kentucky Derby. The show was developed with an up-front sponsorship commitment from hamburger chain Wendy's. "We believe there's a market for and a need for family-oriented programming," says Charles W. Rath, Wendy's marketing chief. Derby is based on a script Rath wrote 15 years ago, but he doesn't foresee more screenwriting credits in his future.
Advertiser involvement in programming seems certain to grow. Nine giant marketers--AT&T, Campbell Soup, Coca-Cola, Clorox, Coors, General Motors, McDonald's, Reebok International, and Sears Roebuck--have joined Television Production Partners, a new venture to develop movies, specials, and limited-run series. Each advertiser chooses which programs it wants to be involved in and takes a portion of the commercial spots. One recent project, Hank Aaron: Chasing the Dream, aired in April and garnered a respectable 4.6 rating.
Some marketers remain leery of plunging too deeply into programming. After all, making a hit show is far different from making soap flakes: Only one in five shows makes it to the second year. Michael Neavill, media director at AT&T, sees Television Production Partners as one more way to get good ad spots at good rates, but he's not ready to join the entertainment industry. "The networks spend $400 million to $500 million a year in developing pilots for new series, and their success rate is 15%," he notes. "I look at that and say, `Wait a minute, we're in the telecommunications business. Why do I want to get into the programming business when the people who have the experience are only right 15% of the time?"' Sure, trying to come up with a hit show is risky. But some big advertisers figure not trying could be even worse.
READY FOR PRIME TIME
Advertisers are plunging into programming
TELEVISION PRODUCTION PARTNERS A consortium of nine major advertisers, including AT&T, Coca-Cola, and GM, will spend $30 million over 18 months making movies, specials, and limited-run series.
PROCTER & GAMBLE The original "soap opera" sponsor has a three-year deal with Paramount to develop network and first-run-syndication programming.
WENDY'S The fast-food chain is backing production of Derby, a two-hour ABC movie to be aired in June.
HALLMARK It bought RHI Entertainment, a miniseries and movie producer, for $365 million last year.