A Ballpark Figure on What Frasier Means to NBC

How does $378 million sound for three more years? It's a staggering sum, but not if you happen to be an anxious network exec

By Ronald Grover

Don't you just hate it sometimes that you didn't grow up to be a superstar? Los Angeles Dodgers third baseman Gary Sheffield is carping right now about "only" getting $9.5 million this year to hit a baseball. Imagine that.

And Chicago White Sox first baseman Frank Thomas laments that he's taking home only half of the GNP-size salary that new Texas Ranger shortstop Alex Rodriguez will be making this year. Then there's the story of Frasier Crane, the fictional talk-radio shrink on the hit NBC sitcom Frasier. Can that wisecracking fop really be worth $126 million a year?

We're about to find out. That's the price tag Paramount has put on the show. In negotiations with NBC that have been going on since December, the studio is holding fast for at least $5.5 million an episode before it will allow the network to bring Frasier, his brother, their dad, and that mangy dog back to your living room every week.


  That's $5.5 million times 23 episodes, the number of shows a network typically orders for a returning series. Plus, the deal that Paramount is pushing would be for three more years, making the total package for Frasier a nifty little figure like $378 million. Even A-Rod could appreciate that kind of number. He got only a 10-year, $252 million contact.

Great talent and a crazy team owner may make a ballplayer worth hundreds of millions of dollars. But what makes Frasier worth even more? That's a little harder to fathom. Right now, in the weird economics of Hollywood, returning shows are hot, hot, hot. This week Everybody Loves Raymond nabbed a two-year, $140 million deal that will see CBS pay just under $3 million an episode.

A few weeks back, The Practice got the big retainer -- between $5 million and $7 million an episode. And while Frasier is out there negotiating, so, too, are the studios behind WB's Buffy The Vampire Slayer and ABC's Dharma and Greg. Everyone wants a major-league payday.


  Actually, come to think of it, the economics aren't that much different from Major League Baseball. All you need is talent and a few crazy owners. I just don't see how NBC figures it can make any money on Frasier at $5.5 million, or maybe not even at $4 million, or $3 million an episode. Let's take a moment to work through the math.

This season, Frasier is commanding $300,000 for each 30-second commercial it airs. According to the American Association of Advertising Agencies, TV networks put on about 12 of those commercials each half-hour, so the most NBC is likely to be getting from Frasier is $3.6 million -- and that doesn't count the commissions it pays salespeople, or the cost of satellite uplinks, the promotional support, and whatever else goes into making the show.

NBC does get rights to a second airing of Frasier -- otherwise known as a rerun. Ad prices nosedive the second time around, but NBC still pays a little extra for the privilege. And to top it all off, the network's ad rates, which jumped 6% last year, aren't likely to do the same this coming season. So why does NBC want Frasier back? Despite the rumblings in Hollywood that Paramount would just as soon air the show on its corporate sibling, CBS, that isn't going to happen. NBC will pay to bring it back because it has this giant gaping hole on Tuesday nights, with a dying Third Rock from the Sun and a misfiring Dag ahead of Kelsey Grammer & Co. Frasier wins its time period and is a strong lead-in to NBC's newcomer Three Sisters, one of the few new shows that the network has going for it.


  I suspect you'll see the same kind of bidding going on over at the WB. It's caught in a similar vise and will likely pay the asking price -- $2.5 million or so -- that Fox Studios wants if Buffy The Vampire Slayer is to stay where it is now.

The show is doing well in the younger demographic groups that the WB offers to advertisers and is a great lead-in to the second-year show Angel, which has built a little buzz of its own. I'm not sure that the WB makes money on Buffy, but you can be sure it doesn't want it going to the Fox Network, which would likely use it to lure those same younger folks now watching the WB.

The problem for network execs is that it's just too darn hard these days finding new TV hits, and with viewers migrating to cable for shows like HBO's The Sopranos and Sex and The City, the people writing the checks tend to play defense. The suits have a pretty good idea how many folks will tune in to Frasier or Buffy or Dharma and Greg.


  But this is a dangerous game. Like last year, when NBC, which anted up some $40 million in 1999 to keep Mad About You going one more year, suddenly realized it had made a big mistake. Ratings for the show fell off a cliff in 2000, and the General Electric-owned broadcaster had to explain to GE chief Jack Welch what happened to all those Ben Franklins.

Here's what I would worry about if I were a TV executive: That Frasier could be this season's Mad About You. It's had a long run, and bouncing around the schedule makes it a prime candidate to lose audience share.

There's a dismal science here. What do you pay for a superstar show that's getting old and may be close to retirement? Simple question. Alas, answering it is about as easy as one-hopping one of those rockets that A-Rod smacks up the middle with his bat.

Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BW Online

Edited by Douglas Harbrecht

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