Hit TV Shows Lose Luster as Cable Reruns
Viewers move to streaming services like Netflix and Hulu, which also
carry repeats of popular shows
Hallmark Channel last year pulled reruns of legal drama ‘The Good Wife’
after just a few weeks because of low ratings.
ByJoe Flint
Wall Street Journal
April 7, 2015 7:52 p.m. ET
http://www.wsj.com/articles/hit-tv-shows-lose-luster-as-cable-reruns-1428450774
For decades, cable channels spent heavily to fill their schedules with
reruns of hit shows, and Hollywood studios came to count on that steady
stream of cash to keep their content-machines going.
But as Viacom <http://quotes.wsj.com/VIAB> Inc.’s recent announcement of
a hefty write-down shows
<http://www.wsj.com/articles/viacom-announces-restructuring-1428352039?KEYWORDS=viacom>,
the rerun “syndication” market is no longer the sure bet it once was.
The owner of more than 20 cable channels attributed $430 million of its
$785 million in pretax charges to underperforming programming, including
the purchase of reruns—such as “CSI” and “Community”—that failed to
deliver enough viewers.
Viacom isn’t the only media company to have made bad bets on reruns
lately. Time Warner <http://quotes.wsj.com/TWX> Inc.’s TNT struck out
with “The Mentalist” and “Hawaii Five-0,” leading to a similar
write-down. Crown Media Holdings <http://quotes.wsj.com/CRWN> Inc.’s
Hallmark Channel last year pulled repeats of the critically acclaimed
legal drama “The Good Wife” after just a few weeks because of low
ratings. “NCIS LA” and “Modern Family” haven’t delivered the big numbers
that USA Network, owned by NBCUniversal, had anticipated.
Reruns of hit TV shows are having trouble scoring ratings on cable TV.
WSJ’s Keach Hagey explains why on MoneyBeat.
These recent experiences may reveal the potential cracks forming in the
lucrative syndication market that could have major implications across
the entire TV ecosystem. TV and studio executives are now left
contemplating exactly how much a rerun of “NCIS” or “Modern Family” is
really worth.
There are several reasons why many reruns no longer have the firepower
they once did. Streaming services such as Netflix, Amazon
<http://quotes.wsj.com/AMZN> and Hulu carry reruns of many popular
shows, as well as their own original content. Plus, the amount of
original programming on cable networks has increased, taking eyeballs
away from reruns.
“The more stuff that ends up on Netflix <http://quotes.wsj.com/NFLX>,
the more viewers move there and the more holes you will get in your
traditional business,” said Todd Juenger, a Bernstein Research analyst.
This can set off a vicious cycle: If viewers no longer flock to reruns,
then cable networks will likely pay less for them and focus more on
original content. Studios will then need to make up for that lost
revenue somewhere else, perhaps by striking earlier, more expensive
licensing deals with more online video providers like Netflix. That
helps beef up video alternatives like Netflix that are cannibalizing
traditional linear TV viewing in the first place.
For makers of TV shows, the challenge is that the revenue that comes
from streaming services for repeats has traditionally been seen as just
gravy on top of what traditional outlets, like cable networks, pay.
Analysts such as Mr. Juenger and even some syndication executives aren’t
sure that streaming services can make up the difference if cable
networks lose their appetite for reruns.
“The subscription video-on-demand buyers are starting to be much more
selective in what they buy,” said one sales chief at a major TV
production studio.
To be sure, many industry executives said some of Viacom’s problems were
self-inflicted. “Community” and “Entourage,” another show it wrote off,
were cult hits. Also, Viacom’s networks, which range from MTV to Spike
to Nickelodeon, typically have the heaviest load of commercials,
according to Nielsen, which could have played a part in driving viewers
away.
“The business is changing rapidly as platforms expand and consumer
behavior changes,” said a Viacom spokesman. “Like everyone in the
industry, we are looking very carefully at not only the value, but also
the shrinking shelf life, of acquired programming.”
Buying syndicated shows has always been a crapshoot and sometimes
networks have aggressively gone after shows before they exhibited real
staying power. Time Warner <http://quotes.wsj.com/TWX> Inc.’s TBS, for
example, bought repeats of the CBS <http://quotes.wsj.com/CBS> comedy
“Two Broke Girls” very early in its run on that network. Since then the
show’s ratings have fallen, which means it likely won’t deliver strong
ratings later for TBS.
Another challenge is that some of the broadcast networks are ordering
fewer shows that appeal to the masses, which means cable networks are
less willing to spend heavily for those reruns.
“Cable networks are now forced to look at programs that are more
targeted and thus tend not to pay the premium for those shows,” said
Bill Carroll, a vice president and director of content strategy for the
industry consulting firm Katz Television Group. “Just because a show is
successful on network TV doesn’t mean it is going to have the same
degree of success in reruns.”
Furthermore, most shows in syndication have a shorter lifespan. There
are exceptions such as “Seinfeld” and “Friends.”
For cable networks, the dilemma is whether to risk $100 million on
reruns or invest that money in original shows where the potential
profits are greater.
“Do we live with lower audiences or spend money on original programming
trying to attract audiences?” asked Mr. Juenger, the Bernstein Research
analyst.
USA Network said its reruns remain an “important part of the programming
mix because of the huge margins and the profits that it brings to the
network,” according to a spokeswoman. She also said that “Modern Family”
has helped bring in younger viewers.
Some industry executives expect cable networks will seek to hedge their
bets on reruns by demanding shorter and less costly deals, especially if
a show is already on a streaming service.
Still, cable networks need content not just for the evening but also
during the day, when there is hardly any original programming. As Mr.
Carroll put it, “there will always be a ‘Law & Order’ on somewhere.”
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