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Big Money-Makers Like NBC's 'ER' Help Production Companies Finance the Many Shows That Don't Survive


Warner Bros. will earn a huge windfall from the $850 million in licensing fees it will take in over the next three years for producing "ER" for NBC. But so will Steven Spielberg, Michael Crichton and Creative Artists Agency.

As is typical in these deals, agents, producers and writers who put the show together and keep it going year after year will get a generous cut of the new contract Warner Bros. negotiated this week with NBC, reducing Time Warner's profits from the deal to roughly $300 million or so over the next three years.

That may seem like a mountain of money, and it is impressive considering that series generally do not make money for production companies such as Warner Bros. until their repeats are sold in syndication. Dramas like "ER" generally have little life after their network runs.

But for television production studios, the reality is still that big winners simply help make up for the scores of losers. In television, the duds are the pilots that are produced--financed by the studio--and that never find a time slot and the TV shows that are pulled by the networks after only a year or two.

"To be successful in the television production business, you have to make 250 episodes [of 10 or 11 shows] a year and hope you get one hit," said one television executive. "That's what it takes to spread the indirect costs, to build a cadre of creative talent, to sign up writers and directors and to have the leverage with the networks to be taken seriously."

For instance, the Walt Disney Co. spent heavily in time and money to build a television comedy business before striking gold with "Home Improvement," the Tim Allen hit on ABC. The $8 million per episode Disney and creator Matt Williams will share from syndication sales will wipe out years of production deficits to produce the show as well as the scores of flops that preceded it.

To be sure, Warner Bros. Television has fared better of late than most in the television business, where the success rate, as in music albums and movies, is 10% at best.

Industry sources say the Time Warner unit will bring in between $3 million and $4 million an episode for "Friends" in syndication this fall, and should score with "Drew Carey," which is produced by its Castle Rock arm.

In addition to the $13 million an episode for "ER" for 22 new episodes a year on the network, Warner Bros. is making an additional $600,000 an episode on the drama overseas and $1.2 million an episode in syndication. (Time Warner bought the rights for its TNT and TBS cable networks in a deal that starts in the fall.)

"It doesn't compensate enough, considering that 'The Postman' has dropped off the charts," said Harold Vogel, an analyst at Cowen & Co., referring to Time Warner's new Kevin Costner movie, which flopped. "After paying the stars and the producers and everyone else who takes a chunk in "ER," Warner Bros. will be left with between $100 million and $120 million in profit a year--the cost of one movie. Against Time Warner's $5 billion in cash flow, it's not more than a decimal point."

Eager to keep the top-rated program in television as an anchor for its Thursday night prime-time schedule after losing the popular comedy "Seinfeld" for next year, NBC agreed to pay Warner Bros. the record amount to keep "ER" for three more years. The agreement sets a new record for the prices commanded for hit programming--far surpassing the $2 million an episode NBC has been paying for "ER" under the current four-year contract. Even "Seinfeld" only commanded $5.5 million an episode.

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