While he was still ranting on his webcam about “tiger blood,” Charlie Sheen was seen as quite a risky bet for a TV network looking to build a new long-running franchise.
Somewhat miraculously, that perception changed last summer when Sheen’s new series, “Anger Management,” scored a massive 90-episode order from the FX cable network.
Along with some sobriety on Sheen’s part, many give credit to Mort Marcus and Ira Bernstein, co-presidents of Debmar-Mercury, a television production and syndication unit of Santa Monica’s Lions Gate Entertainment Corp.
The deal made by Marcus and Bernstein guaranteed the 90-episode order after the show hit ratings thresholds during its initial 10-episode trial in 2012. Those first 10 broadcasts averaged a very high 4.5 million viewers.
By committing to purchase 100 episodes, FX eased the way for Debmar-Mercury to start marketing the series for syndication, generating as much as $500 million in long-term revenue at no added cost.
Syndication, which used to be derided as “reruns,” has become a lucrative part of the broadcast landscape. Reaching the 100-episode milestone allows networks to air second-run programming at the same time each day, Monday through Friday, for 20 weeks without repetition.
“We’re in the syndication business. That’s the Holy Grail,” Marcus said. “We’re just trying to find projects that we think are marketable and that can work in syndication and repeats.”
James Marsh, an analyst at Piper Jaffray in New York, said Debmar-Mercury has a strong pitch, since its model addresses a fundamental and pervasive problem for TV producers – how to generate returns.
“Most of these shows are being produced at a deficit during first run,” he said, “The key is to get it to syndication. Rather than waiting four years, that path to syndication is crystal clear.”
Debmar is addressing the production cost problem by giving the brand-name actors around which it builds shows an equity stake in their series. If the series goes to syndication, this allows the talent a greater payday than they might have had by taking a larger upfront salary and no equity.
The payday, however, comes in exchange for a grueling production schedule: The plan is to produce all 90 episodes of “Anger Management” by the end of next year.
Producing in volume also offers an opportunity to realize some cost savings, analysts said, meaning Debmar and Lions Gate have fewer production expenses to recoup and can license first-run shows at competitive rates to networks.
Episodes of “Anger Management,” for instance, were licensed for $600,000 each according to the Hollywood Reporter, which noted that other original series can command $1 million or more per episode.
The networks are nonetheless taking a risk in ordering the episodes. In the case of “Anger Management,” FX was able to pair the program with reruns of Sheen’s former show, “Two and a Half Men,” to create some cohesive programming.
Marcus and Bernstein are now looking to apply their 10-90 model to two new sitcoms also anchored by well-known actors, having recruited George Lopez for one forthcoming series, and Kelsey Grammer and Martin Lawrence for another.
Luring high-profile male leads for a series is a key ingredient in making the “10-90” model work, they claim, pointing to the syndication successes of sitcoms like “Seinfeld,” “The Big Bang Theory” and “Everybody Loves Raymond.”
Shortly after it was formed in 2005, Debmar tried out its 10-90 distribution model for the first time with TBS’ “Tyler Perry’s House of Payne.” The company has since used the model for a handful of series including “Are We There Yet?,” starring rapper Ice Cube, also on TBS. Not all of the deals have been successful securing the 90 episode order, however. “Big Lake,” a half-hour Comedy Central series that starred Horatio Sanz and was produced by Will Ferrell and Adam McKay, missed its prearranged ratings targets when it aired in 2010.
“Big Lake” failed to hit the ratings threshold before the 90-episode order was triggered. If it had been picked up and ratings then plunged, the network would be committed to paying for a failed show.
To mitigate that risk, FX set high ratings thresholds for “Anger Management” to trigger the order, according to a network vice president speaking at an industry panel last year. With such demonstrated ratings in hand, networks are more confident they will be able to sell ads during the program at a premium.
The strategy is part of a broader effort by Lions Gate to expand its brand beyond critical successes like “Weeds” and “Mad Men” and into more mainstream, commercially marketable material.
The emphasis comes as demand for syndicated content is growing. New digital outlets and a surging international marketplace have helped the TV syndication business double in value over the past decade to $20 billion annually, according to a Barclays analyst report from last year. Debmar expects to report revenue of $200 million for the year ending March 31.
Other large syndication businesses include News Corp.’s Twentieth Television and CBS Television Distribution. Yet Debmar is as yet the only producer to lock in 10-90 deals, which some analysts say has only been shown to work for a very specific subset of programming.
Deals for the Lopez and Grammer-Lawrence sitcoms have yet to be made, but Marcus is optimistic, saying he believes there is an opportunity at both cable and broadcast networks, which are more steeped in the traditional pilot model.
“We think it’s favorable for a broadcast network. ‘Anger Management’ was one of the first times they’ve looked at it and we think they’ll look at the others,” Bernstein said. “We think it’s a really good model.”
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