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Belles of the Syndie Ball

1/16/2005 7:00 PM Eastern

Cable syndication is no longer chump change, as Home Box Office and Comedy Central can attest. They recently closed two landmark deals, valued at more than $100 million each, in this growing business segment.

HBO sold its spicy Sex and the City in syndication, while Comedy Central later did the same with its perennial ratings powerhouse South Park.

But that’s just the beginning of the mega deals. HBO is now testing the syndication waters for The Sopranos, with a reported asking price of $1.8 million per-episode.

The syndication of original cable programming in the U.S. has been a relatively small business in the past decade, with a smattering of deals. But premium and basic-cable networks are increasingly turning to the domestic-syndication business as a new source of ancillary revenue.

In good part, cable networks are looking for ways to offset their ever-increasing expenditures for original programming, by retaining backend rights to shows they produce themselves or others produce for them. At the same time, cable programming’s increased value in the syndication market is also bringing relief to some producers, who are often hard-pressed to create programs with viable business models. All of this ensures that cable programs will have more exposure during the annual National Association of Television Program Executives program market — which takes place in Las Vegas later this month — than ever before.

“It makes so much more financial sense when [producers and networks] can recoup some money in the backend,” says Bonnie Hammer, president of USA Network and Sci Fi Channel.

This year there are a number of original marquee series, in addition to The Sopranos, that cable networks and their programs’ producers will try to syndicate in the U.S. and abroad.

HBO’s premium rival, Showtime, plans to syndicate its edgy scripted drama about gay life, Queer as Folk. It would mark the first time Showtime has syndicated one of its major tent-pole series.

NBC Universal Television Distribution will soon begin hawking two original cable hits from channels owned by its parent — USA Network’s high-rated Monk, which at one point also aired on ABC, and Bravo’s Queer Eye for the Straight Guy.

“We’re in the process of planning on Monk and Queer Eye,” says Arthur Hasson, executive vice president of NBC Universal TV Distribution, cable and ancillary. “When we look at any product, be it off NBC or USA — whatever — we look at maximizing our revenues.”

He adds, “It’s kind of a new area. When you look at the history of what’s come off of cable — what’s sold like a backend or reruns or syndication of cable product — there hasn’t been a whole lot of it out there.”

There are a couple of good reasons why cable originals are turning into such a growth area for cable networks as well as the production companies that work with them.

Broadcast networks are producing less of the comedies and scripted shows that have been typical syndication fodder. What’s more, a growing number of original series have finally accumulated a critical mass of episodes to make syndication deals viable.

“For a long time, cable was not really generating long-running strippable, and therefore syndicate-able, shows,” says Tim Brooks, a TV historian and executive vice president of research for Lifetime Television. “Now that’s completely different. So first you have to produce stuff. Second, you have to produce enough episodes of it to make it worthwhile to take to market.”

One indication of the growing importance of syndication was HBO’s hiring of Scott Carlin as president of program distribution in 2002. His duties include pursuing syndication opportunities for the premium channel.

Carlin views cable’s increasing forays into syndication as “a function of time, rather than any kind of brand strategy at any of the networks.” Cable networks are now meeting the “threshold for distribution opportunities,” according to Carlin.

“It takes a fair amount of time to create a quantity of originals that ultimately would have value and repeat for somebody,” Carlin says.

“And the phenomenon of original drama, original comedy, on pay or basic cable is somewhat new, certainly in the past 10 years,” he says. “It takes a while to accumulate enough episodes so you ultimately have the right amount that would make sense for someone who wants to run the show five or six days a week — which is where the most value is extracted from these things, and their afterlife — in reruns.”

In recent years some cable networks have laid the groundwork for syndication by becoming more adamant about retaining ownership, and domestic rights, for their original series.

SHOWTIME’S NEW STRATEGY

Showtime has embarked on a very deliberate course of profiting from the so-called “backend” of its original series, according to Matthew Duda, executive vice president of acquisitions, planning and distribution.

“For the most part, we’re in the middle of kind of shifting strategy from licensing product that we just lay on our services to try to control more of it so we can derive revenue in the aftermarket after a Showtime run,” Duda says. “So many of our series in the past we haven’t had other rights than the Showtime run, like Dead Like Me, or Stargate, which were two MGM shows.”

As the premium-subscription business matures, the services need to plumb new opportunities, according to Duda.

“When you look at the pay-TV business, and make a decision about how you’re going to increase your revenue, it’s getting harder to do it on the traditional side of getting subscriptions,” he says. “We don’t have an advertising stream of revenue. So the other place to look is the exploitation of the product in both television, internationally and domestically, and in video.”

Showtime has the domestic rights to Queer as Folk, which is about to premiere its fourth season.

“So we’re looking to place the first couple of seasons and get someone to license that,” Duda says. “We’ve had a lot of conversations already. It looks like we’re very close to getting that placed.”

There are 86 Queer as Folk episodes, including the fourth and fifth season, which is currently in production.

HBO’s deal to syndicate Sex and the City — selling 94 half-hours to TBS for an exclusive run until this September, when TV stations will also start airing the series — is reportedly the biggest cable-syndication deal to date.

SHOPPING SOPRANOS

The edited Sex has performed well on TBS, and HBO is fielding interest from cable networks now on The Sopranos.

“We’ve had conversations in the past,” Carlin says. “We have conversations currently going on, and we’ll see what happens. … This is kind of a fluid process. If the right situation — the right opportunity — popped its head up, we’d look at it. In the cable world, there are a handful of [potential] buyers.”

An edited version of the violent mob drama, suitable for basic cable, is being offered. But sources say HBO officials, very protective of the Sopranos franchise, could wind up reassessing the situation and not sell the award-winning drama to another cable network.

There are 65 Sopranos episodes from the first five seasons and will be an additional 13 for the sixth season, which will premiere on HBO next year.

Comedy Central’s syndication deal for South Park, which starts airing on TV stations in September, was reportedly in the $100-million range over five years. The edited version of the show has cleared in more than 85% of the country, in 48 of the top 50 markets, with deals with all of the major broadcast groups, according to Christopher Pergola, Comedy’s executive vice president and chief operating officer.

“As the traditional syndication model goes, we don’t have any other original shows with enough episodes to go into syndication,” Pergola says. “We’ve talked about the possibility of trying to go out with Reno [911!] if we ended up with enough seasons of Reno.”

But Comedy Central won’t be making any moves until it sees the impact of South Park’s syndication.

“Once that’s out there, if there’s a lot of money to be made, and it really doesn’t have a negative impact on us, that may drive our decision-making in terms of developing new seasons of episodes,” Pergola says.

Comedy Central is banking that the new viewers South Park gains through syndication will buy the show’s DVDs and merchandise, and will tune in to new episodes of the show on cable. “It’s not just about the syndication revenue in this particular case,” Pergola says.

Sci Fi Channel over the years has been a big source for original cable programming that’s gone into syndication.

“Years ago, people would never think that a cable product would have life off of cable,” Hammer says. “It was always viewed that network or syndicated product would come to cable. But we have a couple of instances where things are working in other ways.”

Sci Fi’s late-night Crossing Over With John Edward was syndicated by Universal in 2001 after premiering on the cable network in 2000. Initially, Sci Fi produced the psychic talk show and had the first window to run it. But then sister company Universal got interested. Universal took over production of the series and syndicated it to TV stations, which wound up getting the first run for daytime, with Sci Fi getting the second play.

“We saw it on Sci Fi, and we liked the way the program looked,” Hasson says. “And we thought it would work in broadcast, and it was a very easy one to bring to broadcast, because it had daytime sensibilities. It tugged on the heartstrings, and we saw that that was something that was currently working in broadcast. So we saw it on cable and said, 'Why not put it on broadcast?’”

MGM’s SCI FI BONANZA

Other Sci Fi shows — Stargate SG-1 and The Outer Limits — were syndicated very successfully by the studio that produced them, MGM Worldwide Television Group. Stargate debuted on Showtime in July 1997, and went into syndication in September 1998, according to Jim Packer, MGM’s executive vice president of television distribution for North America. Stargate moved to Sci Fi in June 2002.

“We are active in that [cable syndication] market because of our Stargate franchise,” Packer says.

Sci Fi has just renewed another MGM series, the spinoff Stargate Atlantis. “So now we know for sure that we’re going to have enough episodes to syndicate,” Packer says. “So we’re out right now securing syndication distribution for that show and for Stargate season nine, the original franchise. And we have secured a Fox station group launch pad for both shows. … For us, it’s a tremendous launch.”

Since the 28 Fox-owned TV stations only reach about 40% of the country, and Stargate Atlantis’s syndicated run starts this fall, MGM will be busy at NATPE trying to clear the rest of the country. “It’s a great couple of projects to bring to NATPE,” Packer says.

And MGM is still syndicating The Outer Limits — which started its first run on Showtime and then moved to Sci Fi — even though the series is no longer in production.

MGM has another potential candidate for syndication: Dead Like Me, which Showtime cancelled last month. MGM has reportedly approached The WB Network and cable networks about picking up the show.

“We’re now talking to basic cable networks about moving it, and we ultimately will syndicate that,” Packer says. “It’s a model that we are very comfortable with.”

Like MGM, Universal has also benefited from originals that it produced for cable. For example, it sold Dream On — which had its first run on HBO — to Comedy Central after a stint on the Fox broadcast network.

Sony Pictures Television has also syndicated several original cable shows. It sold the HBO original The Larry Sanders Show to Bravo and broadcast. Last December, Sony sold Ripley’s Believe It or Not — which airs on TBS — to Sci Fi.

In terms of stripping a show on a daily basis, there is some debate about how many episodes must be in the can before a show can be syndicated. Carlin says 65 to strip a program. Pergola says 100. Some say 80.

“But if South Park and Sex and the City end up being successful runs, it wouldn’t surprise me if the broadcast model started to mimic a little bit more of what’s happening in cable, where they might be willing to take a show with 40 episodes,” Pergola says. “There’d be a lot more programming that’d be available for syndication. But that’s not the market right now.”

Brooks predicts cable’s inroads in the syndication business will be gradual.

“What the syndication market really wants, of course, is sitcoms, because they’ll be really easy to slip into early fringe and 11 [p.m.],” Brooks says. “And cable has never produced that many sitcoms. There is a limited market for dramas. … So cable really isn’t producing the kind of prime product that the syndication marketplace wants. But as fewer shows come off the broadcast networks, and there are more people who want to buy syndicated stuff, the demand will build. But I think it’s going to take a few years.”

September