The Peacock blinked.
NBC, facing a production boycott from the major studios because of its hardball financial demands on the producers of new TV series, has been quietly spreading the word that it is softening its stand on co-productions and extended license-fee deals.
"They have been calling to say they have opened the door and invited everybody back in," said one studio official, who asked not to be identified.
The thaw, at least for now, appears to end a confrontation that could have revolutionized the economics of television in Hollywood had NBC prevailed.
NBC officials have declined to comment on the matter. Studio officials also have been publicly silent.
For the past several months, NBC has been presenting production companies with a host of new demands before agreeing to purchase a show: that the studios co-produce their shows with the network; that production payments, known as license fees, be frozen throughout the run of the series; and that producers renew all shows in perpetuity.
Such terms would have made it nearly impossible for production companies to negotiate the kind of lucrative renewal deal obtained by Warner Television with the hit series "ER," which now costs NBC a staggering $13 million per episode.
Such tactics underlie a longstanding desire among NBC and its competitors to participate in the success of the hit series they broadcast once the shows enter the lucrative world of syndication, where producers often make hundreds of millions of dollars in the rerun market.
Producers have balked at sharing these profits with the networks, arguing that their production costs are far higher than the price a network pays to license the series. Such deficits leave a producer swimming in red ink until the series goes into syndication.
Most series, however, don't go into syndication, and a producer never makes up the losses. As a result, producers maintain, it is only fair to keep the networks out of the syndication pie.
But stinging from the high price it was forced to pay to renew "ER," NBC didn't quite see it that way.
"Why shouldn't we own a piece of the back end (syndication profits)?" Don Ohlmeyer, president of NBC West Coast, asked in a recent interview with the Business Journal. "Doesn't a network have a part in making a show a hit? And then we have to pay an arm and a leg to keep it."
Ohlmeyer refused to comment about the current thaw between the network and production companies.
Subsequent to the surfacing of news about the boycott, Warren Littlefield, president of NBC Entertainment, resigned. He was quickly replaced by Scott Sassa, a highly skilled business executive who has been running the network's stations division, and is seen by the production community as a peacemaker.
"It is real simple why Sassa was brought in," said a former NBC official. "Ohlmeyer didn't want to make the apology and somebody had to fix the fence. Don refused to go back on his word. Somebody had to quiet this."
Bill Croasdale, a television time buyer for Los Angeles-based Western International Media, said it made good business sense for NBC to back down. The network is battling to stay ahead of its competitors as well as to stanch the flow of viewers to cable channels, and needs access to the pipeline of new shows.
"Sassa didn't want to be in the middle of a war between the network and the suppliers," Croasdale said. "(The network) started to have meetings with key studio people and it's been friendly. This goes a long way in ending the strained relationship."
Although still the No. 1 network, NBC has slipped this fall, with flops like Bo Derek's "Wind on Water" and the slow-starting "Trinity," produced by John Wells, the man behind "ER." The former series was cancelled and the latter has been dropped from the schedule, awaiting a new time slot later this year.
NBC now needs replacement shows, and it is turning to the studios TV factories like Paramount Pictures, Sony Entertainment Inc. and Warner Bros. which are among the principal suppliers of network programming.
"There was nothing in the well at NBC," Croasdale said.
NBC is not the only studio seeking fresh programming. All of the networks are gearing up to develop new shows for next year's schedule.
Croasdale, however, warned that the studios need to be realistic about the changing state of network television before making demands on producers.
"As the networks see the erosion of their audience to cable continue, it will ultimately impact on the ad dollars that go to the networks," he said. "The networks need some sort of protection from seeing the licensing fee go through the roof. Ultimately, they won't be able to pay for the cost of production."
Despite the peacemaking, one producer said he doesn't expect NBC to withdraw all its demands.
The producer, who asked not to be named, said the network might get renewals extended to six years instead of the current four-and-a-half-year window after which a producer can renegotiate a deal. He said co-ownership may no longer be as thorny an issue if NBC agrees to increase licensing fees, which would, in turn, reduce the deficit between what it costs to make a series and what a network pays for its production.
The studio executive said that if NBC made an offer similar to ABC's position five- to six-year renewals with increased licensing fees the matter would be settled quickly.
"They would get some cooperation, quickly," he said.
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