by Charles W. Fries
Who Owns The Television Programs?
The real battle in the television
entertainment industry is about who will own the programs. Ownership generates a
long term asset for the "producer" and generally establishes the
controlling interest in the programs, in perpetuity. That's why everyone
including the broadcasters want to own them.
In the early 70's companies such as
Yorkin/Lear, MTM, Lorimar and Fries Entertainment were established and nurtured
by the Financial Interest and Syndication Rule and the Investment Tax Credit.
Fin-Syn represented protection against the network power to take the
distribution rights in perpetuity, and oft times the ownership of the program,
from the independent producer. The ITC helped to subsidize them to cover their
overhead and other costs not covered by the license fee paid by the network.
In the 80's, the networks began a policy
of "concern." "We are concerned about license fees, costs of
production, advertiser revenue and the future of our business," they said.
As their management and ownership changed, the "concerns" and the
pressure on the production community about costs and license fees increased.
License fees, (not including overhead),
have now been reduced to as low as 75% to 80% of production costs. These
reductions require the independent producer to provide financial resources only
obtained by the independent producer through committing the distribution, and
often ownership, to a more substantially viable financial entity; usually a
major studio or distributor or the network itself. Foreign sales do help to
offset these deficits but those sales are made and paid over a two to three year
period after completion of the program, a period normally too long for the
independent to manage.
These policies were motivated by the
reasoning that the cable industry was reducing the network's percentage of the
television audience and that networks should always be profitable. Accordingly,
the pressure on the FCC by the networks to modify Fin Syn follows in line with
these concerns. "We should own the programs and take the largest share of
the profits that result from subsequent exploitation. This should not be
reserved to the producer," they say.
The ownership of the program was easily
acquired by the non-regulated cable companies. Paramount and Universal created
subsidiaries to produce 80% of their television movies. Lifetime gave their
orders for movies to their owners: Hearst, ABC and Viacom. HBO has acquired
in-house independent producers and through their licensing process only highly
financed companies or foreign co-productions can be produced by independent
producers. The now defunct Viacom Pictures owned their movies as does TNT on all
the movies produced for their cable network. So of the 75 to 100 new movies
produced by cable, only about 15% are ever owned in whole or in part by the
independent producer.
All of the above results in a future
where independent producers will be working for the major studios, networks and
cable companies as employees for fees and a profit participation but no
ownership and/or control of the programs they produce.
Thus this represents the eventual
elimination of the entrepreneurial producer who owned and controlled all
distribution and ancillary rights in their programs. Unless something changes...
that's the future.
Charles W. Fries is Executive Producer and C.E.O. of Fries Entertainment.
