Big media's new research coalition's mixed message

It's not an academic exercise. No, it's a research foundation. It's a competitor to Nielsen. No, it's not a slap at Nielsen at all.

Confused? We are too. The conference call detailing the media industry's creation of the Coalition for Innovative Media Measurement (see our earlier post) sent out a few mixed messages. Let's hope their efforts to develop new and better ways to measure ratings are a little clearer.

NBC Universal Research President Alan Wurtzel opened the call, saying the coalition  was "neither a trade or academic organization" as all the members have "skin in the game" and it's "time to take our future into our own hands."

Pretty tough talk. Yet a few minutes later Wurtzel went out of his way to say the purpose of CIMM was not to build a better Nielsen.

"This is not about establishing a competitor to Nielsen," Wurtzel stressed. In fact, he added, this was "never really about Nielsen."

So lets get this straight. A group of media giants including News Corp., NBC Universal, Walt Disney Co., CBS, Viacom, Time Warner and Discovery are getting together with Procter & Gamble, AT&T, Unilever and several major advertising agencies to do research on how to better track media consumption -- and it's not about Nielsen?

CBS's Dave Poltrack said the purpose of this organization is to "support innovative research," but that if anything is actually developed for commercial use, that would be done independent of the coalition. 

Missing from the list of industries involved is new media (no Google, no Yahoo), which is interesting because one of the things this organization stressed is that it wants to find a better way to measure media consumption online and on mobile devices. That doesn't mean the group won't be adding new members who are able to pony up the entry fee. The companies involved would not say how much they have raised in funding but indicated it was in the seven figures. The entry fee to be part of CIMM is not seven figures, however. 

This is not the first time there have been efforts to build better systems to measure audiences, and it certainly is needed. Nielsen has had lots of issues over the past few years with its measurement systems, and if a bunch of big companies getting together can help encourage them to shake things up, that's not so bad. In fact, CIMM is not against having Nielsen join its efforts if it wants to apply for membership.

A Nielsen spokeswoman said the ratings firm "shares all of the objectives" of the coalition and "has always worked closely with clients to bring innovation to the industry." The company said it looks forward to working with CIMM and would like to hear more about its plans. 

So would we.

-- Joe Flint

Photos: Top right: NBC's Alan Wurtzel. Credit: NBC Universal. Bottom left: Dave Poltrack of CBS. Credit: CBS

Bungled U.S. Olympics Channel Collapses

The U.S. Olympic Committee is taking one for the team.

The U.S. organization this week abandoned its plans to launch a cable television channel dedicated to ambitious coverage of Olympic sports and athletes. The effort was handled clumsily from the start. The July announcement was intended to make a big splash during the Allen & Co. media investment conference in Sun Valley, Idaho.  Instead, the proposed venture immediately began taking on water.  Although the channel was billed as a collaboration with cable giant Comcast Corp., Comcast executives were conspicuously absent from the news conference to announce the channel.  Reporters were told that scheduling difficulties -- not cold feet -- were to blame for the Comcast no-shows.

Then, the International Olympics Committee stepped in, taking aim at the U.S. organization (and perhaps explaining why Comcast had dropped out of sight). The IOC frostily called the U.S. group's plans for a new channel "disappointing" and done "in haste" without considering the ramifications. The IOC threatened to block the move, saying that it did not want the U.S. committee's efforts to launch its own channel to strain the IOC's relationships with important sponsors, including NBC. The network has agreed to pay the IOC more than $2 billion for the TV rights to the Olympic Games through 2012.

NBC Universal was incensed by the U.S. Olympic Committee's plans for a new channel. NBC also owns a minority stake in Universal Sports, another channel that showcases Olympic sports, and it didn't want its investments undermined by the U.S. Olympic Committee's proposed channel. NBC's parent, General Electric Co., is also a major Olympics sponsor.

[UPDATED] Shortsighted or smart? TNT's 'Saving Grace' has plug pulled by producers

TNT issued a press release today announcing its plans for a shortened nine-episode final season of  "Saving Grace," the cable network's at-times risque drama starring Oscar winner Holly Hunter.

Alas, these are not the "plans" TNT was hoping to announce. TNT did not cancel "Saving Grace." That was done by Fox Television Studios, a production unit at News Corp.

Although "Saving Grace" was a solid if not spectacular (i.e. TNT's "The Closer") performer, Fox Television Studios saw more risk than reward in going ahead with a full third season and a fourth season, which TNT wanted. The worry was that the show would not bring in enough money in reruns or in DVD sales to justify the production costs of the program.

Furthermore, the show, with its Southern feel and religious undertones, proved to be a hard sell overseas, which is where producers try to recoup a lot of their programming costs.

Still it is very unusual for the producers to pull the plug on a show, especially in this case since TNT's contract still had a few more seasons to run.

However, such a move might become more common in today's challenging marketplace. Perhaps other cable networks such as TNT, USA, FX, and AMC, who are becoming homes for these types of big-budget serial dramas should take notice on this one. 

The long-term value of these shows is not a slam dunk. Sure, HBO's "The Sopranos" can pull in big bucks from A&E in reruns, but that is still the exception, not the rule. That said, sources tell Company Town that Fox TV Studios did not even discuss the idea of TNT agreeing to pick up the reruns for "Saving Grace," something the network did with Warner Bros. on "The Closer."

It is hard to say if Fox Television Studios is being smart or shortsighted. But this issue is not going to go away and if studios want cable networks to keep buying smart dramas, both are going to have to find a way to make the numbers work or else viewers will walk. And then everyone loses.

-- Joe Flint

Photo: Holly Hunter poses for a picture at the Turner Entertainment Network's Upfront event in New York. Credit: Seth Wenig/Associated Press

Television delivers strong quarter for Lions Gate

Lions Gate Entertainment posted better-than-expected results for the fiscal first quarter: Revenue grew 30%, thanks in large part to gains from television production and first full-quarter revenue from its recent TV Guide Network and TVGuide.com acquisition.

For the quarter ended June 30, Lions Gate reported revenue of $387.7 million and net income of $36.3 million, or 31 cents a share, up from net income of $3.5 million, or three cents, for the same quarter last year. Analysts had forecast a loss of five cents a share, according to Thompson/First Call.

Investors welcomed the news: Lions Gate shares were up as much as 11% in after-hours trading.

Overall motion picture group revenue of $272.7 million was up 6% compared to $257.4 in the prior year's quarter, mostly attributable to a strong performance by Lions Gate-owned production company Mandate Pictures, the company behind the Fox Searchlight blockbuster release "Juno" and Universal Pictures' recent release "Drag Me to Hell."

However, Lions Gate's own theatrical revenue fell by 26% as the studio released only one movie in the quarter: "Crank: High Voltage." The action thriller grossed a disappointing $13.7 million in the U.S.

Lions Gate's home entertainment revenue was $151 million in the quarter, a 6% decline from last year. Titles "Madea Goes To Jail," "My Bloody Valentine 3-D," "New in Town," "The Spirit" and "Transporter 3"  could not compete with "exceptional revenue" from the last year's "Rambo" and with the western "3:10 To Yuma" and other titles.

The quarter was far and away driven by strong results in Lions Gate's TV division. TV production revenue increased to $87.2 million, up 112% from $41.1 million in the same period last year, credited to the delivery of new episodes of the cable series "Weeds"; "Nurse Jackie"; "Tyler Perry's House of Payne" and its spinoff "Meet The Browns"; and "South Park."

Lions Gate also realized $27.8 million in new revenue from its recently acquired assets TV Guide Network and TVGuide.com.

This is Lions Gate's first upbeat quarter in the last year, during which activist shareholder Carl Icahn has been highly critical of management for overspending as the company racked up losses and its stock continued to tumble.

Icahn, who recently increased his stake in the independent studio to 17.7%, has been uncharacteristically quiet lately and has not tipped his hand about whether he plans to launch a proxy contest as he had threatened.

The clock is ticking for Icahn to put up his own slate of directors -- Lions Gate's annual shareholders meeting in mid-September is fast approaching.

Meanwhile, as a defensive measure against Icahn, last month Lions Gate nominated its largest shareholder, Mark Rachesky, to its 12-member board. Rachesky, a former associate of Icahn's who owns 19.8% of the company's common stock, has said he would support management's board nominees at the shareholders meeting.

Lions Gate's other "friendly" major shareholders include Michael Steinberg, whose Steinberg Asset Management owns 14.6%, and Gordon Crawford, whose Capital Research Global Investors holds about 9.5%.

Lions Gate has been attempting to shore up its balance sheet, promising to slash some $200 million out of its production and marketing expenses. Earlier this summer, the company sold 49% of the TV Guide cable channel for $123 million. Lions Gate recently announced that it had acquired the right to broadcast episodes of "Ugly Betty" -- the first scripted series to be aired on the TV Guide channel.

In recent weeks, the studio's popular cable shows "Mad Men" and "Weeds" earned a total of 22 Emmy nominations and TBS ordered dozens of new episodes of "Tyler Perry's House of Payne" and "Meet The Browns."

Last week, Lions Gate also announced the launch of two new branded channels in Asia, the action channel KIX and horror and suspense channel Thrill.

-- Claudia Eller

AFTRA's Roberta Reardon, unopposed, elected to second term

Call it the least anticipated union election in Hollywood. Roberta Reardon on Sunday was reelected for another two-year term as president of the American Federation of Television and Radio Artists, which represents 70,000 actors, recording artists and broadcasters. Reardon, elected to her first term in 2007, was reelected to a second two-year term by delegates attending the union's 62 national convention in Chicago. The outcome was a given. Unlike her counterparts at the Writers Guild of America and the Screen Actors Guild, Reardon did not face any challengers.

In her statement to delegates, Reardon reiterated her opposition to any merger with the larger Screen Actors Guild that did not include all of AFTRA's members. "We will continue to forge ahead with plans for our future, knowing that if and when the merger subject comes to us again, we will be strengthened from within and ready to serve our members and prepare them for whatever the future brings. But understand, should that knock come on the door, from whatever source, our response must be simple and strong and clear: All of us or none of us."

-- Richard Verrier

Want a better spot on the dial in New York City? Open up your wallet.

The price of real estate is rising in New York — at least on the TV dial.

Time Warner Cable just rejiggered its lineup of channels in the Big Apple on its cable systems, and the cost of moving to a better neighborhood is pretty steep. According to people familiar with this dance, it is not unheard of for a cable network to pay Time Warner Cable as much as $5 million annually for what it considers to be a good channel position in New York City, which is the nation's No. 1 TV market and home to all the top advertising agencies.

Although it may seem anachronistic in the age of digital video recorders and remote controls, channel position still matters. Being lower on the dial is better than being higher, and being adjacent to other similarly themed channels beats being banished to cable Siberia.

In this latest shift, News Corp.'s FX has jumped from channel 37 to 10, which had been occupied by CNN, which now moves to 78. Unfortunately for CNN, that's not a great neighborhood. Most of the channels in the 70-80 region of the dial are New York City access channels.

Also on the move is NBC Universal's Oxygen, which jumped from 61 to 12. That slot had been occupied by Lifetime, which is moving to 62. Its new neighbor will be Turner's Cartoon Network, which hardly seems like an ideal fit. Cartoon, FYI, had been on channel 22 and was bumped to make room for Discovery Kids, which is now co-owned by Hasbro and getting a makeover for a relaunch.

The move of several Time Warner-owned networks by a cable system owned by the recently spun-off Time Warner Cable has led many to joke that old family ties don't count for much anymore. However, Time Warner Cable did not move TNT or TBS, so draw your own conclusions.

The losers in all this are the viewers who every few years have to relearn the dial.

— Joe Flint

Photo: Empire State Building and Chrysler Building. Credit: Richard Drew/Associated Press

Networks hedge their bets with chump insurance

When ABC's highly anticipated new drama "FlashForward" (pictured) premieres in September, HBO probably will be scrutinizing its performance just as much as the alphabet network.

That's because the pay cable channel negotiated a nice stake in the show last spring that pays it from  $5,000 to $7,500 for each episode that airs and has roughly a 7% stake in any back-end revenues the show generates.

"FlashForward," which is executive produced by David Goyer and Brannon Braga and is based on the Robert Sawyer novel, was first pitched at HBO, and when the network decided after buying the script that it wasn't that hot on the product and the show's creators wanted to shop it elsewhere, it negotiated for a piece of the show.

The industry uses a Yiddish word that's probably not appropriate for a family website to describe this practice, so we'll just call it "chump" insurance. No network executive wants to be the one who let a hit walk out the door, so even if a show isn't a good fit with the first place it is pitched, it has become commonplace to negotiate a piece of the show just in case it turns out to be gold.

Typically, a network letting go of a product will cut a deal that could give it anywhere from 2.5% to 10% of the back end and as much as $7,500 per episode, the latter of which becomes a line item in the budget. While that may sound excessive, keep in mind that the alternative is letting a project sit on the shelf and languish. 

Other shows with similar arrangements include the CW's "Life Unexpected," which is made by CBS Productions but was originally pitched at Disney's ABC, which is now on the show's payroll.  CBS, meanwhile, has been getting a cut of the USA drama "In Plain Sight," which is produced by NBC Universal. News Corp.'s 20th Century Fox Television had a stake in "Everybody Hates Chris," which was made by Paramount (now CBS Television Studios) for UPN and later the CW.

Of course, there are limits to these pacts. HBO wanted a production credit on "FlashForward," but apparently that's not part of the deal with chump insurance.

-- Joe Flint

Photo: Joseph Fiennes in ABC's "FlashForward." Credit: Craig Sjodin / ABC

Big broadcaster Sinclair in dire straits

Another big broadcaster may be on the verge of bankruptcy.

Baltimore-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

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

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