Millionaire: The Bill Comes Due

With ratings down, ABC is a victim of its own success

As a one-time boxing commentator, Alex Wallau likes nothing better than watching a good fight. But in his job as president of the ABC television network, Wallau now finds himself inside the ring. His network is sucking wind just a year after the record-breaking success of game show Who Wants to Be a Millionaire made ABC the big story in television. Waning ratings, cost-cutting, and morale issues have left the dethroned network reeling.

ABC's reversal of fortune became all too clear in late May as the sweeps period ended. Its share of the 18- to 49-year-old audience--the one advertisers really like--fell 30% from the year-ago sweeps (chart), the largest drop of any network. The problem? Besotted with Millionaire's success, ABC aired Regis Philbin and his quiz show as many as four times a week. The show became overexposed, and its audience, which grayed from a median age of 42 when it first aired in mid-1999 to 56, skewed the entire network's demographics. Just since January, ABC's ratings in the coveted demographic are down 25%. "ABC is a victim of its own success and luck," says media buyer Rino Scanzoni. "Millionaire was like a drug. You take it and it feels great, but you've got to know it won't last forever."

SHARE PLUNGE. Now the Walt Disney Co.-owned network (DIS ) is scrambling to revive ratings by airing its quiz hit only twice a week and filling the time slots with hipper fare. And execs are rejiggering the prime-time lineup, including stalwart 20/20, in hopes of drawing younger viewers. After critics and audiences savaged its four new offerings last fall--all were cancelled--the pressure is on ABC execs to convince advertisers that it can get young again. Then there's Disney, anxious to quickly regain No. 1 network status as its shares have sunk 22% in the past year to around $32, well below those of other media giants.

ABC's infatuation with Millionaire has a lot to do with what all networks are obsessed with: owning the shows they air. Networks increasingly favor their own programs to gain greater control and keep more revenue. Disney produces Millionaire, so it was hard not to blanket prime time with the popular show, say ABC execs. And it was cheap to produce--$500,000 or less an episode, vs. $1 million or more for a drama or comedy. "The totality of the [financial] impact was massive," says Wallau. Millionaire's take so far: an estimated $750 million in revenues for Disney for over 270 episodes.

ABC may have gone for the easy money last year, but in this year's up-front ad season, in which advertisers buy for the fall lineup, the bucks won't be flowing so freely. By this time, advertisers should be buying like crazy. But the slowdown has them refusing to ante up until they get a better price. And the networks aren't budging--yet. "It's a staring contest," says Wallau. ABC, with the biggest ratings drop, has the most to lose. Merrill Lynch & Co. estimates ABC's up-front revenues could be off by as much as 23% this year vs. last year, down to $1.7 billion.

LEFT OUT? Adding to the tumult is plummeting morale at ABC, including its news division, which is being cut back. It didn't help when ABC moved newsmagazine 20/20 from its 10 p.m. Friday stronghold to Wednesdays at 10 for two months next fall. ABC hopes to draw younger folks to the drama Once and Again, which will be in the Friday night slot. Furious, 20/20 veteran Barbara Walters signaled she would reconsider her options when her contract expires next year. Moving ABC headquarters from New York to Burbank last year to be near Disney central command only made the New York-based news unit feel more out of the mix.

Still, network brass were able to persuade Burbank to fund some new, youth-oriented shows, including Alias, a drama about a grad student who doubles as a spy. That has Wallau feeling better about the network's fall prospects. But the Millionaire hangover isn't likely to lift anytime soon.

By Tom Lowry in New York

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