Continuing my presentation of the evidence for and against NBC renewing CI and the original L&O (the mothership) we come to the part NBC will be scrutinizing the most carefully: how profitable is each show relative to the other and to other shows NBC could air instead.
Let me just say right here and now that there are some things that concern the renewal of Law & Order SVU that do factor into what NBC will want done for CI and or the mothership.
First of all, an intriguing abstract of an article I found at The Hollywood Reporter under the byline of Nellie Andreeva dated of 03/13/2007 has some very intriguing information in it:
“Under the extended term deals implemented by all broadcast networks, beginning in the fifth season (sixth for midseason shows), the networks usually have to pay a license fee for their series that equals the series’ production costs. If one factors in ratings premiums in the range of $100,000-$150,000 per episode paid by the networks that kick in after the fourth season as well as retroactive payments by the networks of a portion of the deficits incurred by the studios in the early years of the shows, it is no surprise that the nets are taking a careful look at their older series.”
All three shows are now past the fifth season point. This means that:
1) NBC has to pick up *all* the production costs for every series it renews (it’s cleverly called a ‘license fee’). It currently costs $2-$3 million to produce each episode of CI, SVU and the mothership…so this season NBC is stuck for $2-$3million x 22 episodes per show x 3 series = $132-$198 million.
2) Add to that $100,000-$150,000 per episode for each show renewed (this is called a ‘ratings bonus/premium’). $100,000 – $150,000 x 22 episodes x 3 series =$6.6 – $9.9 million
3) Add 1) and 2) to get $138.6 – $207.9 million dollars
4) In the case of SVU the cost per show just went *up*…not only did SVU get renewed (Mariska Hargitay won an Emmy last year), Mariska and Chris Meloni’s salaries went up in the range of $300,000 per episode for each actor. So add $300,000 x 22 episodes x 2 actors and you add $13.2 million dollars to your costs which now range from $151.8 – $221.1 million dollars. And I don’t know if any of the other SVU actors also got raises but if they did, that only means that NBC’s costs went up that much more.
5)Now for the truly *nasty* surprise for NBC…the ‘retroactive payments by the networks of a portion of the deficits incurred by the studios in the early years of the shows’. What this means that any deficits that the mothership, SVU and CI racked up in Seasons 1-4 get charged to NBC. So we could be talking about costs to NBC that are *well above* $151.8 – $221.1 million dollars for this year.
Now I hope you’re starting to see why NBC is concerned about costs.
Now we need to look at the income side for NBC…which is dependent upon ratings. The higher a show’s ratings, the higher the rate an advertiser pays to run an ad on that show.
In an hour of television there are 15 minutes of time available for commercials. These 15 minutes are divided into 3 minutes for your local affiliate to run ads (and on which they collect the lion’s share of the money) and 12 minutes for the national network to sell. Usually the network does not sell all of its 12 minutes…if it did, you would never see any ads for other upcoming shows on the network and no public service announcements like NBC’s ‘The More You Know’ series of advertisements. For simplicity’s sake I’m going to make a faulty assumption that the network sells all 12 minutes only to demonstrate just how much revenue is available to try and help out the network.
Using the best available data I can find from a 2006 BusinessWeek article:
The average 30 second primetime TV commercial costs $20 per 1000 viewers. So if a show delivers 10 million viewers, then the ad should cost $200,000.
For the sake of keeping the calculations simple let’s say every new episode of CI is actually attracting 10 million viewers for the whole episode. There would be 24 30-second ads available for an hour episode of CI so the network could make *at most* $4.8 million per CI episode. If you subtract out the upper end of our costs from the $4.8 million possible and assume that there are no deficit costs left over for CI from Seasons 1-4 NBC gets *at most* $1.65 million dollars per episode of CI. However if there are deficit costs from CI Seasons 1-4 that means less money for NBC for airing CI. Also remember that all 12 minutes of available time for NBC may not be sold. So assuming 10 million viewers are watching CI the profit margin on CI for NBC is about 34.4% Think of that as twice as much cost as there is profit available to NBC.
There are some problems here. NBC isn’t getting ratings anywhere near 10 million viewers for its CI reruns. And sometimes CI isn’t getting 10 million viewers for never before seen episodes. Also there are times when CI viewers only watch part of the show (which means that if your ad airs during the wrong part of the show 10 million people may not be watching). So if you’re an advertiser you’re not going to be happy paying $200,000 if 10 million people don’t see your ad. In fact at the end of the season (and in time for the next season’s upfronts which is where package deals for advertising are made in advance of the start of the new season) you are going to be pushing for lower rates before you commit due to the lower than expected ratings for the previous season. This means that NBC isn’t likely to be able to charge the higher rate and thus CI’s profit percentage is going to be lower than the 34.4% I figured above.
What if CI’s average ratings for the season are only a 7? That means that on average only 7.7 million viewers are showing up (1 ratings point equals approximately 1.1 million viewers). So you should adjust the ad rate down from $200,000 per 30 second ad to only $154,000 per 30 second ad or $3.696 million. Doing the same kind of calculations I did before (subtract out $3.15 million) leaves NBC with only $546,000 profit or a 14.8% profit margin per episode. So losing only 2.3 million viewers has a huge impact on how profitable a show is.
I haven’t tracked the mothership’s ratings this season but I can tell you that it is probably in the same or worse shape as CI. In fact I suspect that the mothership may be more costly, partly because it has run for so many more seasons (and I figure it has earned many more bonus payments from NBC because it has lasted 17 seasons) and partly because it is doing the worst in the ratings compared to SVU and CI. My informal polling of my acquaintances suggests that no one including those who used to call themselves mothership fans is watching the new episodes. So here NBC Entertainment Division President Reilly may be right to pick CI over the mothership (assuming it’s ultimately his choice to make and that one show has to go). But from Reilly’s comments I strongly suspect that a lot depends on how Dick Wolf behaves. NBC has said no to Dick Wolf shows before…’Deadline’, ‘Crime & Punishment’, ‘Dragnet’, ‘Trial By Jury’, and ‘Conviction’ were all cancelled (the last two were cancelled only last season). Note that none of these five shows ran long enough to force NBC to pay their production costs or ratings bonuses which if they had had decent ratings may have ironically made them more profitable that Wolf’s ‘hits’.
For perspective last year NBC was only able to sell $9.8 billion worth of ads for all of its shows for the 2006-2007 season. This season because so many of NBC’s shows are finishing third or lower, that number may have to go down yet again to appease advertisers. So as far as NBC is concerned, shows with big costs but low ratings may have to be sacrificed to stay profitable for GE (their parent company) and its shareholders.
So expect to see a lot of new shows rather than old favorites on the peacock network. And be prepared for the possibility that Dick Wolf’s potential fervor to save the mothership for one more season (and get within 2 seasons of tying the ‘Gunsmoke’ record he covets and 3 seasons of beating that record for the longest running primetime drama) may cost us CI and possibly the mothership as well.
One more thing…from the abstract of the Hollywood Reporter I cited above, Dick Wolf has hired Rene Balcer to do script doctoring on the mothership for the rest of this season. Given how key Balcer has always been to CI (he wasn’t only the showrunner, he created a lot of what makes CI CI) and given that both shows are in ratings trouble, I find it very telling that the big push to improve a show is going towards the mothership *at the expense of* CI.