The business behind network television... or "stacking" the deck

Once upon a time a writer would come up with an idea for a series. He would then align with a studio (major or independent), go and pitch it to the networks. In theory, the best ideas got selected for pilot scripts. The best pilot scripts got selected for pilot production. And finally, the best pilots got on the air and became series. (No, I can’t explain GILLIGAN’S ISLAND.)

Then things started getting more complicated. At one time networks could not own series. They bought them from studios, paid a license fee to cover production, got to air the show twice and kept all the money it received in advertising. The shows usually cost more to produce than the license fees the studios received so they financed any overage. If the show got cancelled after thirteen weeks the studio took it in the shorts. But if the show became a big hit (like FRIENDS), the studio sold it into syndication and made billions.

So the networks wanted in on that action. They convinced the government in the mid ‘90s that with the proliferation of cable and the new economics it was impossible to make a profit unless they could claim some ownership. The government worried that the networks would then only buy shows they owned. But the networks claimed that their business since depended on ratings so it was in their best interest to put on the best shows regardless of who owns it.

The government fell for it. The networks began putting on primarily shows they owned. And if they did buy something from an outside studio they generally wanted 50/50 partnership.

Independent companies like MTM disappeared overnight.

So things got more complicated. Programming decisions were made not just on quality and content but ownership, potential syndication, etc.

More cable networks emerged. Streaming services arrived. Networks tried to weather the storm by buying cable networks and partnering with (or starting their own) streaming services.

The model for a hit series success began to change. In the “old days” a show like MASH would air twice on CBS and then 20th (owner of the franchise) would sell it to independent local stations for whatever they could get. For the big hit shows there was a bidding war. But now Fox owned FX and needed content. So they put MASH on FX. Alan Alda, one of the profit participants of MASH, sued them, stating that the show would bring in more money in open syndication. For 20th to put it on FX meant that the partners made less but they made more since they received the advertising, along with a launching pad for their network. Mr. Alda won.

Syndication is no longer the cash cow it was. Why? Lots of reasons. Many independent stations are now hooked with networks like the CW. So less need for product. Syndication deals are no longer exclusive. Why pay huge bucks for a show when a cable network also has the reruns as does a streaming service? And you can buy the DVD’s in some cases.

So networks (now the owners) need to find other ways to make big money. This is especially true with dramas. They are very expensive to produce and if they’re serialized they often don’t have the rerun value a show like LAW & ORDER or NCIS has. Networks also face the problem that linear ratings are continuing to slowly decline. Advertisers don’t want to spend as much for dwindling audiences.

So networks have begun “stacking” series. In other words, making the entire series available on streaming services, and in some cases charging for them. But “stacking” diminishes the syndication value even more. And then there’s the pesky problem of how much should actors, writers, and directors make as a result? If actors, writers, and directors made residuals from repeat airings and now the networks don’t re-air them because they’re all available on line, then those folks get screwed. See, it’s a head scratcher.

At one time the networks were allowed to stream only five episodes of a current series at a time. But now they want to stream the whole season (referred to as “stacking”). And here’s where pilots come in, until recently these “stacking” negotiations took place when a network wanted to pick up a pilot, now they take place before a pilot is even green-lit.

If you are an outside studio, it then becomes harder to get a pilot picked up because outside studios benefit more if they control the “stacking” rights and can sell their series to say Netflix.

Oh, and then there are the global considerations – how does “stacking” affect foreign sales? Is your head spinning yet?

So that’s what’s going on behind-the-scenes as network pilots are being made this week. You could argue the pros and cons of these business models, but my point is – nowhere in the last twelve paragraphs did the creative merits of the pilots figure in the mix. It’s a new world.

But as intricate and complicated as it is, it still is easier to explain than GILLIGAN ISLAND.