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Do I hear $ 1 million?


Posted 02/11/99

Broadcasting & Cable
01/18/99
By Schlosser, Joe
Page 1; No. 3, Vol. 129

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COMMENTARY
Brief mention of XENA in article about how a group of stations might be changing how first run syndication of TV shows is done in the USA.

PRIMARY SOURCE

    Sinclair riles syndicators with planned auction of broadcast time

    Have the rules to the syndication game changed?

    That's the question many TV programmers and station executives were asking
last week after the Sinclair TV station group sent a letter to 20 Hollywood
studios inviting them to bid on packages of weekend air time on their stations.

    In the letter from Sinclair's top programmer, Bill Butler, the nation's
10thlargest station group asked for staffing bids of just less than $ 1 million
on two packages of weekend time slots on 34 stations and one package on 32
stations. The stations range from WTTA-TV Tampa, Fla., the nation's 14th-largest
market, to WMMP-TV Charleston, S.C., market number 120.

    The Sinclair offer comes at a time when weekend time periods for expensive
first-run action series like StarGate SG-1 and off-network hours like The
X-Files are in short supply. As a result, many studios have held back on planned
production of hour-long shows.  

    Typically, stations pay programmers to air their programming or the stations
and programmers agree to split advertising time But programmers paying stations
is nothing new. Stations in top markets like New York and Los Angeles often ask
for and receive cash to deliver programs to their large audiences. Still, the
Sinclair proposal did not sit well with most syndication executives.

    "It's completely arrogant and obnoxious," said one top executive, who
pointed out that Sinclair wants a minimum of six minutes in each hour for
advertising. "How are syndicators going to make any money? If this is what it's
going to take in these size markets to get cleared, it's going to inhibit any
kind of first-run development in the future."

    "This is the most disgusting letter I have ever read," said another irate
syndication executive. "It is pure pompousness on their part."

    Many of the top syndicators are divisions of major studios. Some of them
threatened to pull movie advertising from Sinclair if it sticks to its
demands.

    "Collectively we spend tens of millions of dollars on their TV stations,"
said one executive.

    "If we all got together or even individually and said, 'You know, they are
not good business partners and we can find other places to spend our money,'
that million dollars they are asking for weekend slots would go away in a hurry,
I promise you," another executive said. "We spend a fortune on advertising with
their stations. They're playing with fire because there is a lot of [expletive]
that could quickly turn against them."

    Others charged that Sinclair is sitting on a monopoly because it is running
two stations in 17 of its 36 markets through local marketing agreements (LMAs)
and trying to take advantage of that leverage through actions like last week's
letter.

    According to BROADCASTING & CABLE, Baltimore-based Sinclair's 56 stations
collectively cover 23.8% of the nation's 99.4 million TV homes. The 17 markets
in which it operates a second station include Pittsburgh (market 19); Baltimore
(24); Raleigh-Durham, N.C. (29); Nashville, Tenn. (30), and Milwaukee (31).

    FCC officials last week were telling irate syndicators to contact the
Justice Department with any monopoly claims, but they also said they are looking
into whether to prohibit local marketing agreements that allow some broadcasters
to circumvent the ban against owning two stations in a market.

    Bill Carroll, vice president and director of programming at TV rep firm
Katz, says the Sinclair move could set a precedent. "If this were to become the
norm for weekend programming, it would certainly seem that the logical next step
would be to look at Monday through Friday programming, but I don't know that
either side wants to take it in that direction," he says.

    "This certainly isn't intended to be a slap in the face; it's intended to
give their [syndicators'] shows the respect and attention they deserve,"
Sinclair's Butler says. "When you give a specific time period on a specific
station in a specific market and you pretty much promise the show isn't going to
be pre-empted and can't be messed with, that is a pretty good opportunity in
today's environment."

    Many stations in New York and Los Angeles have been getting paid for years
and Sinclair has asked for "comp" in certain situations before. Butler also says
Sinclair executives are only attempting to maximize the value of the station
group's available weekend time in a market where there are more shows than
"decent" time periods. The company is receiving calls on a daily basis for new
action hours and off-network series, he says. The letter is pure economics,
supply and demand, he says.

    "We have been wrestling with a way to add more structure to the way we
handle this," Butler says. "Every year we have a number of shows that offer
compensation for big clearances and we wanted to add more structure to that. We
wanted to treat everybody equal and not play favorites. We figured the best way
to do that was to make sure people got specific times and specific stations so
they could predict their value."

    The Sinclair letter offers three lists of markets, all containing 34 of
Sinclair's stations with weekend time periods. Packages A and B are deemed to
have better time periods and are available to stations at a minimum bid of $
993,820. Package C starts at a minimum asking price of $ 967,088. The
clearances, Butler says, collectively represent more than 21% of U.S. TV homes
and that the asking prices are based on a "valuation of the displaced barter."
All interested syndicators were instructed to contact Butler by noon last
Friday, Jan. 15. Sinclair's intentions were to conclude a deal by the end of
next week's NATPE convention in New Orleans.

    The letter also came with 10 specific guidelines, many of them irking
syndication executives. "In Sinclair's sole discretion, if the quality of the
actual production is significantly less than Sinclair's expectation of the
production, Sinclair will be entitled to adjust the time periods at the
conclusion of the May 2000 ratings period," guideline No. 9 states.

    As for the threats from the Hollywood studios, Butler said Sinclair
executives are not worried. "I am disappointed that individuals are taking this
as anything more than the straightforward facts that we have laid out," he says.
"These are specific time periods with specific stations. This is business and
it's handled with respect."

    Not all syndicators were upset. Studios USA Domestic Television President
Steve Rosenberg, whose Hercules and Xena air on a majority of the Sinclair-owned
stations, says he won't be paying for airtime anytime soon on the stations, but
understands the group's intentions.

    "I would much rather get a letter from [Sinclair] saying we demand to pay
you $ 20 million for the right to clear your action hour--that would be a great
letter," says Rosenberg. "But I'm not expecting it. In terms of this
announcement, however, I'm not outraged as it is not necessarily a surprise. And
in some strange way, I almost admire it."

    And another top syndication executive said if it were not for the sheer
"stupidity" of the letter itself, someone probably would be willing to pay the
million-dollar minimum asking price.

    "If they would have done it without the letter, I'm sure someone would have
paid for it, but with the letter we are all going to laugh about it," the
syndicator says. "Whoever makes a deal now with Sinclair, we will all laugh at
them and know they got suckered into this deal. I can promise you there is not a
1% chance that I will make this deal. I would rather not launch a show than pay
this kind of ransom."

    As for Butler, he's going to sift through any offers he receives and
hopefully conclude a deal by the end of the month. "I think it's funny that the
New York crowd [stations] has done this forever," Butler says with a laugh.
"Sinclair didn't invent this. If you put out a letter for 34 markets, it's much
more complicated than just saying one time period on one particular New York
City station."

                            SINCLAIR BROADCAST GROUP

                                    Package A

                         Suggested minimum bid:$ 993,820

    

       DMA                   STATION     TIME PERIOD

    14 Tampa                  WTTA       Sat. 5 p.m.

    15 Minneapolis            KLCT      Sat. 10 p.m.

    19 Pittsburgh             WCWB      Sat. 11 p.m.

    24 Baltimore              WNUV      Sat. 10 p.m.

    25 Indianapolis           WTTV       Sat. 5 p.m.

    29 Raleigh-Durham         WLFL       Sat. 4 p.m.

    30 Nashville              WUXP       Sat. 4 p.m.

    31 Milwaukee              WCGV       Sat. 4 p.m.

    32 Cincinnati             WSTR       Sat. 8 p.m.

    33 Kansas City            KSMO       Sat. 5 p.m.

    34 Columbus               WTTE       Sat. 4 p.m.

    35 Greenville/

       Spartanburg/Asheville  WFBC      Sun., 9 p.m.

    37 San Antonio            KABB       Sat. 4 p.m.

    39 Birmingham             WTTO       Sat. 9 p.m.

    40 Norfolk                WTVZ       Sat.11 p.m.

    42 Buffalo                WUTV       Sat. 6 p.m.

    44 Oklahoma City          KOKH       Sat. 6 p.m.

    47 Greensboro/

       Winston-Salem          WUFN       Sat. 6 p.m.

    54 Dayton                 WRGT       Sat. 6 p.m.

    56 Las Vegas              KVWB       Sun. 8 p.m.

    58 Charleston             WVAH       Sat. 5 p.m.

    61 Richmond               WRLH       Sat. 6 p.m.

    62 Mobile/Pensacola       WEAR   Sun. 11:30 p.m.

    64 Flint/Saginaw/

       Bay City               WSMH       Sat. 4 p.m.

    67 Lexington              WDXY       Sat. 7 p.m.

    70 Des Moines             KDSM      Sun. 10 p.m.

    74 Syracuse               WSYT      Sun. 11 p.m.

    76 Paducah                KBSI       Sat. 5 p.m.

    80 Portland, Me.          WGME   Sat. 11:30 p.m.

    84 Madison                WMSN       Sat. 6 p.m.

    92 Tri Cities, TN-VA      WEMT      Sat. 10 p.m.

   110 Peoria                 WYZZ      Sun. 10 p.m.

   114 Tallahassee            WTWC       Sat. 1 a.m.

   320 Charleston, S.C.       WMMP       Sun. 6 p.m.

    

    Excerpts from Sinclair letter

    * Sinclair Communications, Inc invites you to evaluate three lists of
markets and stations with specific time periods, for weekly hour programs for
the Fall 1999 season. You are also invited to submit a firm offer for the
purchase of one or more of these clearance lists.

    * Attached are three lists of markets, stations and time periods. The lists
are designated as "A" Time Period, "B" Time Period and "C" Time Period and offer
the times and stations indicated. Time Periods "A" and "B" are for thirty-four
(34) markets. Time Period "C" is for thirty-two (32) markets. These clearances
are for weekly hour programs, with a barter split of seven (7) minutes
(national)/seven (7) minutes (local), but no more than eight (8) minutes
(national )/six (6) minutes (local).

    * The invitation is being sent to other qualified parties. If your company
is interested in participating in a negotiation for any or all of these three
market lists, please contact me by Noon (ET) on Friday, January 15, 1999, to
begin negotiation. It is our intention to conclude negotiations the following
week or by the conclusion of NATPE, 1999. Your offer should conform to the
following stipulations, procedures and guidelines:

    * The minimum bid price for Time Periods "A" and "B" is $ 993,820 per list.
The minimum bid price for Time Period "C" is 967,088.

    * Only offers that are specific as to the amount of consideration will be
considered. The compensation is for the clearance, and is non-commissionable.
net dollars.

    * In markets where Sinclair owns, manages or programs two stations, a second
weekly broadcast will be scheduled Monday-Sunday, 9:00 a.m.-6:00 am. In single
Sinclair station markets, the second run shall be optional, at the station's
sole discretion.

    * Once an agreement has been executed, the agreement is non-cancelable and
the contracting party shall be fully liable to Sinclair for the full amount of
the agreed upon compensation. For example, if a planned for program is never
produced for the Fall 1999 season, or is cancelled mid-season, the contracting
party shall be fully liable for the total amount of the agreed upon
compensation.

    * At Sinclair's sole discretion and as part of the firm offer process,
Sinclair, in its sole discretion, may require payment, guarantees in the form of
escrow payments, third party guarantees acceptable to Sinclair, in its sole
discretion, or such other payment arrangements, which Sinclair deems desirable.

    * In Sinclair's sole discretion, if the quality of the actual production is
significantly less than Sinclair's expectation of the production, Sinclair will
be entitled to adjust the time periods at the conclusions of the May 2000
ratings period.

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