Company Town: The business behind the show

Big broadcaster Sinclair in dire straits

Another big broadcaster may be on the verge of bankruptcy.

JoblogoBaltimore-based Sinclair Broadcast Group Inc., which is controlled by David Smith and his family and operates 58 television stations, said if it can't restructure its heavy debt load it will have to file for bankruptcy. The company, which has about $1.3 billion in debt, is trying to negotiate terms on notes of $500 million that are coming due in the next 18 months.

If Sinclair files for bankruptcy it will be bad news for Hollywood, which counts on the broadcaster to spend heavily on programming for its stations. With 58 stations to program, Sinclair is one of the biggest buyers of reruns, movies, talk shows and game shows.

Sinclair is the latest broadcaster to be feeling the pinch of a poor economy and a changing media landscape. In a filing with the Securities and Exchange Commission, the company said auto advertising used to represent 25% of its ad revenue and now accounts for only about half that.

Other broadcasters who have filed for bankruptcy this year include Young Broadcasting Inc. and ION Media. Tribune Co., which owns the Los Angeles Times and a major group of TV stations, has been operating in bankruptcy since late last year.

Also darkening Sinclair's prospects is Cunningham Broadcasting Corp., a small broadcaster operated by Sinclair that is actually owned by trusts established by David Smith's mother Carolyn. Cunningham, Sinclair said, is at risk of defaulting on its loans at the end of the month. If Cunningham has to file for bankruptcy, that would mean the loss of $77 million in revenue it kicks back to Sinclair annually.

Sinclair has gained notoriety in the industry for both its hard-nosed business tactics and its political stances. Smith is a colorful and known for his sharp elbows. He, along with his brothers inherited two stations from his father and built it into one of the biggest operators in the country.

Smith made national headlines in 2004 when his stations that were affiliated with the ABC network refused to air a "Nightline" broadcast featuring then-anchor Ted Koppel reading the names of those who had died in Iraq. Later that year, Sinclair aired a controversial documentary challenging Sen. John Kerry's war record.

-- Joe Flint

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Producers line up for California film tax credits

California may be teetering on financial collapse and about to pay its bills with IOUs, but that doesn't appear to be discouraging filmmakers and producers from seeking film tax credits from the state.

The California Film Commission said it received 56 applications for the tax credits on Monday, the first day companies could apply. The tax credits were adopted earlier this year by the state Legislature in an effort to keep movie and television production from migrating to other states.

"We got a great response,'' said Amy Lemisch, director of the California Film Commission, the state agency that is administering the program. Applicants included movies of the week to low-budget features, cable series and studio films, she said. "We got a little of everything."

The commission will review the applications over the next 20 days and send out "credit allocation letters" to those who qualify. Because of the interest, the commission has devised a lottery system to determine which applications will be reviewed first. The tax credits won't take effect until 2011.

To compete with cheaper locales, the Legislature this year agreed to allocate $500 million in film tax credits over a five-year period. Producers can obtain a tax credit totaling 20% to 25% of "qualified production expenses." There are a number of restrictions: Only feature films that cost $75 million or less are eligible. The program also is limited to new basic cable TV series, movies of the week or miniseries and existing TV series that move back to California.

-- Richard Verrier

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Supreme Court hits stop button on Hollywood's challenge to cheaper DVRs

The high court likes their digital video recorders.

The Supreme Court cleared the way for Cablevision Systems Corp., a New York-based cable operator with more than 3 million subscribers, to deploy so-called remote storage DVRs. Unlike current DVRs, which record programs on a device in a customer's home, remote storage DVRs record them in a central location.

As of March, the penetration of DVRs in the United States was 30%, according to Nielsen. Because storing shows on a central server is so inexpensive compared with deploying devices, the ruling clears the way for Cablevision and other distrubutors to offer the service to consumers at very low or no cost.

The move is a blow to Hollywood, which had fought the technology all the way to the Supreme Court. Fox, NBC Universal, Paramount, CBS, Disney and other programmers argued that because Cablevision transmits recorded programs to consumers over its cable lines, the remote storage DVRs actually constitute a new on-demand service for which they should pay licensing fees.

Of course, what this is really about is advertising. Television executives are very worried about the ease with which consumers can skip advertisements while watching recorded programs via DVRs.

The justices declined to hear arguments from programmers, in effect validating a 2008 federal appeals court ruling in favor of New York-based cable operator Cablevision's plans to deploy its remote storage DVRs.

"We are of course disappointed by the Court's decision not to hear this case but understand that the Court can only hear a limited number of cases each year," Daniel Mandil, chief of legal affairs and intellectual property protection for the Motion Picture Assn. of America, said in a statement. The MPAA has led the court case on behalf of the networks and studios. "We will continue to do what is necessary to protect the legal rights of our members with regard to their content and look forward to the continued development of the law in this area in future cases," he added.

Many DVR providers, including TiVo, have started working with the networks to develop new ways to serve advertising to consumers who are watching recorded shows.

"This is a tremendous victory and it opens up the possibility of offering a DVR experience to all of our digital cable customers," Cablevision Chief Operating Officer Tom Rutledge said in a statement. "At the same time, we are mindful of the potential implications for ad-skipping and the concerns this has raised in the programming community. We believe there are ways to take this victory and work with programmers to give our consumers what they want — full DVR functionality through existing digital set-top boxes — and at the same time deliver real benefits to advertisers."

— Ben Fritz


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10 best picture nominees will mean cuts in the Oscar telecast

AnimatedShort Don't fret about getting ready for that close-up.

Ten best picture nominees will likely be bad news for sound mixers, costume designers and others in low-profile categories who were dreaming of a little TV time during next year's Oscars.

The awards show telecast will have to change dramatically, one person close to the production suggested. While no decisions have been made, there's little chance the ABC television network, which broadcasts the Oscars, would expand the ceremony's three-hour running time. If the show is going to run highlight reels from an additional five films without losing the commercials (and those aren't going away),  there's only one option: Move other awards out of the prime-time show.

Likely candidates are, of course, the categories that already appear early in the show and get the shortest acceptance speeches: sound mixing and editing, makeup, art direction and the short films -- animated, documentary and live action.

-- Meg James and Ben Fritz

In Wednesday's Times, find out more about the decision, its impact on the film business and the reaction of stars like Samuel L. Jackson and Jon Favreau; the financial reasons behind the move; the new calculus for potential best picture nominees; and read commentary from film critic Kenneth Turan and columnist Patrick Goldstein.

Photo: Kunio Kato accepting the animated short film Oscar for "La Maison en Petit Cubes" at the 2008 Academy Awards in March.

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NBC Entertainment chief Ben Silverman is still the one

A major milestone was reached this week in television.

The event passed quietly without an e-mail pronouncement from NBC Universal, which is really quite remarkable considering the company issues about 19 news releases a day. Silverman   

No, this time NBC, a.k.a. "America's News Leader," sat on the news. 

Ben Silverman marked two full years as co-chairman of NBC Entertainment and Universal Media Studios. He officially has entered the third year of his tenure with General Electric Co. 

Yet, there were no corporate PowerPoint presentations charting NBC ratings trajectories (down), studio revenue percentages (up), or even an amortization schedule for special effects in "My Own Worst Enemy" (don't ask). No parties with tigers. No new locker-room jam sessions led by Ben in a white towel singing the blues (at least no evidence has popped up on YouTube). 

And the word "awesome" didn't come up.

Remember last summer when speculation was rampant that NBC's controversial programming chief was on his way out? But Silverman figured he still had something to prove;he wants to lead an NBC prime-time turnaround. And NBC Universal Chief Executive Jeff Zucker didn't want his aggressive move two years ago to shake up NBC by hiring Silverman to be labeled a mistake.

Earlier this year, Silverman and Zucker put the finishing touches on a contract extension that is expected to keep Silverman at NBC for another year.

In a statement, NBC said ""Ben Silverman remains a valuable asset to this company and provides fresh leadership and vision that will allow NBC Universal to achieve its long-range goals.  We also feel confident that as a creative force in our business model, Ben will take NBC Universal to the next level as we embrace the new challenges and opportunities."

-- Meg James

 

Photo: Dan Steinberg/AP 

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TV Networks still angling for advertising

Network executives are searching for some sparklers in their sales divisions, and hopefully before the Fourth of July holiday.

June is usually the time of year when the broadcasters ring up billions of dollars in commercial sales for the coming television season. But that hasn't happened so far this year. Declining audiences, an extremely fragile economy and bankruptcy filings by cash-strapped U.S. automakers – traditionally among the biggest TV advertisers – have made it more difficult for network executives this spring to sell commercial time. By this time last June, the networks had already booked more than $9 billion in prime-time advertising commitments in the so-called "upfront" market.

Now a month after unveiling their new fall shows as bait, the networks still haven’t hooked any big-fish advertisers. Network executives declined to discuss the situation at length, but acknowledged that although their lines have been empty, they expect ... hope ... the upfront auction to begin with a big boom within the next few weeks. 

-- Meg James

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NBC and 'Southland' producers worried about the bleeping FCC

Can bleeps be indecent?

That's what NBC and the team behind "Southland," the network's gritty cop drama, are trying to figure out.

Worried about increased scrutiny of program content by the Federal Communications Commission, NBC executives and the show's top staffers including creator Ann Biderman and executive producer John Wells have discussed whether the show's gimmick of bleeping out swear words could put the network afoul of indecency rules. The reason for the sudden concern is because "Southland," which is made by Warner Bros., is moving from its current 10 p.m. time slot, which is safe from the FCC's indecency rules, to 9 p.m. this fall, which does fall under the commission's purview.

We've posted a clip below to give you a flavor of what "Southland" does (pay attention at 2:13). It is similar to what Fox did years ago with its short-lived Hollywood comedy "Action," which starred Jay Mohr as a studio executive with a blue streak that made Ari Gold of "Entourage" look like Mr. Rogers.

So if there is already a precedent for bleeping, what's the big deal? Well it was a different world back in 1999 when Fox premiered "Action." Bill Clinton was president and it was five years before Janet Jackson had the wardrobe malfunction that rocked the world. Since then, the broadcast networks have been pressured by the commission and advocacy groups to steer clear of anything remotely risque. At the same time, cable continues to push the envelope (yes, we just used that tired cliche) and get rewarded with Emmys and ratings. Cable content does not fall under the FCC's purview.

Although worrying about bleeped words sounds a little extreme, the fines for indecency have gone from $32,500 per incident to $325,000, and even if the networks do fight fines and win the legal costs are huge. In other words, NBC's right to be a little paranoid.

Among the ideas said to be floating around were possibly pixilating the mouths of the characters while they were being bleeped or finding other ways to obscure their faces at the crucial moment so it would be harder for all those lip readers out there to figure out just what the bleep is being said.

We suggest having the characters say something that will look like the real thing when it is bleeped, although that might lead to a lot of reshoots when cast members burst out laughing while saying, "what the fudge was that?"

-- Joe Flint


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Brian Graden leaving MTV Networks

Brian Graden, one of the most senior and influential executives at Viacom Inc.'s MTV Networks is leaving the cable programming giant at the end of the year, according to people familiar with the situation.

GRADEN The move, which was first reported by the New York Post, comes as MTV struggles with sliding ratings and a sense that it has gone too far into the reality programming genre. That said, Graden was a star at the company where he oversaw programming for several channels including MTV, VH1 and Logo.

His role is not going to be filled, people inside the company confirmed. Viacom's cable networks, particularly MTV, are the lifeblood of the company. MTV has been struggling to grow ad revenue for the last few years -- and although the economy is partly to blame, the problem has been caused by ratings declines over the last few years. According to media research firm SNL Kagan, MTV's ad revenue has fallen from $1 billion in 2005 to a projected $846 million in 2009. It's a similar story at VH1. That channel took in a record $484 million in 2007, according to SNL Kagan, but this year is expected to generate about $400 million, a 9% drop.

Graden, whose official title is president of entertainment, MTV Networks Music Channels, has been with the company for almost 12 years. Shows that were launched during his tenure include the reality hits "The Hills" and "The Osbournes." He also played a part in the creation of Comedy Central's huge hit "South Park," which was developed after Graden commissioned an animated short Christmas card from the show's Matt Stone and Trey Parker. The short was such a hit that it led to the birth of "South Park."

-- Joe Flint

Photo: Brian Graden. Credit: MTV Networks

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No surprise: Los Angeles is losing share of TV pilot production

As if L.A. needed any more reminders of just how much production is leaving town, along comes fresh data to document the grim trend.

While much attention has focused on the migration of feature film production, a new survey highlights how the exodus of production is eroding another key segment of the local economy: the filming of television pilots.

TV pilots, the pool of contenders from which the networks choose their series, on average employ 150 people per show and have budgets from $3 to $5 million.

But as any location manager will tell you, this year's pilot season was a bust, reflecting a steady erosion in the local industry.

The number of pilots produced in L.A. fell nearly 42% to 59 from 101 between 2004 and 2009, according to a report from FilmL.A. Inc, the nonprofit group that handles film permits. In large measure that's because the networks are ordering fewer pilots as they rely more on reality programming in prime time.

But the survey also provides evidence that some of the loss is due to market share going to other locales. Consider: In 2004 L.A. hosted 81% of all pilots. That dropped to 57% in 2009. Of 103 pilots produced this year, 59 were shot in L.A. and 42 were produced outside California, mostly in Canada and states such as New Mexico, Louisiana and Illinois that offer film tax credits and rebates.

"The fact that so many of this year's pilots chose to film outside the area shows that no facet of the entertainment industry can be considered captive in Los Angeles,"  said FilmL.A. President Paul Audley.

-- Richard Verrier

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The Digital Switch: Albuquerque swears it's ready

Antennas 

If you find yourself in the Albuquerque area this Friday and want to watch some television, you might be out of luck.

That's because New Mexico's Albuquerque-Santa Fe market -- the nation's 44th in size -- is apparently asleep at the switch, according to Nielsen Media research, which says 7.6% of the homes in that region are "completely unready" for Friday's conversion from analog to digital television. Nationally, only 2.5% of the nation's homes are "completely unready." Nielsen defines a completely unready home as one with no TV sets ready for the switch. "Partially ready" homes have at least one ready TV and one unready TV.

We lobbed in a call to Albuquerque Mayor Martin Chavez's office and talked with his spokeswoman Deborah James, who assured us, "Albuquerque is ready." She attributed the high percentage of "completely unready" homes to outlying rural areas. She also forwarded us an e-mail from Sean Anker, the engineer at KOB-TV, the local NBC affiliate. The e-mail says that Nielsen is off base in its estimates (Nielsen wrong? Is that possible?). In other words, when Friday rolls around, there will be very few angry calls from people wondering where "Live with Regis and Kelly" went. Nielsen stands by its numbers.

So if Albuquerque is the worst place to be come Friday to watch digital television, what's the best place? That would be the Providence, R.I.-New Bedford, Mass., market, where every single home apparently is ready. Way to go, Providence!

As for us, we're not much better than Albuquerque. Nielsen says 4.46% of Los Angeles homes are, wait for it, completely unready. Come on, Angelenos, let's pick it up!

Overall, Nielsen says, African Americans (5.1% of those surveyed) and Hispanics (4.3%) are disproportionately unprepared for the switch. People under the age of 35 (4.6%) are also more "completely unprepared" than the national average, but aren't they already watching all the TV via the Internet anyway?

-- Joe Flint

Photo: Antenna farm on Mt. Wilson. Credit: Anacleto Rapping / Los Angeles Times

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About the Bloggers
Company Town Team

Joe Flint, a veteran entertainment industry journalist, is the lead Company Town blogger.

Dawn C. Chmielewski is a Los Angeles Times staff writer covering entertainment business and technology.

Claudia Eller is a Los Angeles Times reporter who covers the movie industry.

Meg James is a Los Angeles Times reporter who covers the television industry.

Richard Verrier is a Los Angeles Times reporter who focuses on labor and production issues in Hollywood.

John Horn is a Los Angeles Times staff writer who covers the entertainment industry;

Ben Fritz is a Los Angeles Times reporter who covers the entertainment industry with a focus on box office and technology.


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