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Ad buyers hooked on 'Idol' too

Fox is charging even pricier rates for its reality show. Rivals hobbled by the writers strike can only watch.

January 13, 2008|Meg James and Maria Elena Fernandez | Times Staff Writers

Television's reigning champion, "American Idol," returns this week and the talent contest is expected to be more popular -- and profitable -- than ever.

The Fox show begins its seventh season Tuesday against the walking wounded. As the strike by the Writers Guild of America grinds into its 11th week, rival networks are scrambling to stay alive.

ABC, CBS and NBC are loath to pit their strongest contenders opposite "Idol," fearful of the juggernaut show that last year drew an average of 30 million viewers an episode.

"You have the No. 1 program in television for the last four years, and now it's going up against even weaker competition," said Ray Dundas, a senior vice president at the ad-buying firm Initiative, which represents such clients as Home Depot, Bayer, Coors and Hyundai Kia. " 'Idol' is going to do very, very well."

Indeed, Hollywood's self-immolation sparked by the writers strike is benefiting "American Idol" and Fox. The network's profit will increase because of its ability to command pricier ad rates. Higher ratings for "Idol" means more viewers will see promotions for Fox's other programs. Fox parent News Corp. acknowledges that, at least in the short term, the strike boosts its bottom line -- leading some writers to believe that the financial lift is encouraging company executives to hang tough against them in the labor dispute.

Even before the strike, "Idol" was one of the most lucrative shows on television, generating hundreds of millions of dollars in profit for the network and its co-producers, FremantleMedia and 19 Entertainment. Fox declines to disclose how much it earns from the show, but according to TNS Media Intelligence, which tracks ad spending, "Idol" last year collected $810 million in revenue, up 39% from 2006. Some analysts estimate the show's ad revenue could soar 20% this year.

Fox initially sold commercials in this year's "Idol" for as much as $750,000 per 30-second spot. As the writer's strike has dragged on, advertisers have been shelling out $1 million or more for a single commercial that would run as the show's grand finale draws closer, according to people familiar with the situation.

No other series on television commands such premiums. Commercial spots in original episodes of other highly rated shows, including CBS' "Survivor" and ABC's "Grey's Anatomy," sell for $250,000 to $450,000.

Other Fox shows that run on the same night as "Idol" enjoy a big ratings bounce. "House" faced cancellation when it debuted in 2004 before blossoming into a hit after it was scheduled to follow "Idol."

Fox now uses the singing contest as a launch pad for other shows.

Fox-owned local TV stations also benefit from the "halo effect:" "Idol" delivers viewers to the stations' 10 p.m. newscasts and gives stations fresh clips to use during their morning programs. TV stations in such markets as Houston and Honolulu, the hometowns of previous "Idol" contestants, have also seen their ratings -- and ad dollars -- soar because of intense local interest.

At a Citigroup investor conference last week in Arizona, News Corp. President Peter Chernin said that, regardless of the prolonged strike and the added threat of a recession, Fox was thriving.

"We are seeing great strength in all of our television advertising markets," Chernin said. "We've won the broadcast season for the last three years, and we expect to win it by a larger margin this year. We have a very strong ratings hand to play."

Hollywood's labor unrest came amid an already downtrodden season for the networks, with prime-time ratings slumping for all -- except Fox.

Walt Disney Co.'s ABC network, which is in first place among the 18-to-49-year-old audience prized by advertisers, has seen its lead deteriorate in recent weeks as it has had to rely heavily on reruns.

Repeats of ABC's most popular shows, including "Grey's Anatomy" and "Desperate Housewives," have languished, putting a drag on the network until its big reality show, "Dancing With the Stars," returns in March. ABC also faces uncertainty over one of its most profitable shows: the annual Academy Awards, whose telecast next month could be canceled if the strike continues.

Among the networks, CBS is the most vulnerable because as a smaller, less-diversified company it is more dependent on advertising, according to Wall Street analysts. The network's new fall shows failed to gain traction, but reruns of "CSI: Crime Scene Investigation" and "Criminal Minds" have produced respectable ratings, and the NCAA basketball tournament is expected to cause a bump in ratings.

NBC is the wild card. The General Electric Co.-owned network has had to reimburse advertisers for ratings shortfalls, and it reluctantly pulled the plug on its profitable night of Golden Globes coverage last week after actors threatened to boycott the event rather than cross picket lines. But NBC this month pulled bigger-than-expected ratings for "American Gladiators" and "The Celebrity Apprentice."

And then there's Fox.

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