Cable operators, who have howled about soaring sportscosts, were griping about a sitcom deal last week: TBS Superstation's pact to pony upa record $1 million per episode, or $180 million, for Seinfeldreruns.
TBS now has bragging rights to negotiating what could bethe priciest off-network sitcom agreement in cable history: a four-year pact that willallow Seinfeld's 180 episodes to go on TBS' schedule starting inSeptember 2002.
TBS officials maintained that Seinfeld is aone-of-a-kind-show, a mega-hit with legs that's worth the price and that will be agold mine in local ad sales for cable systems.
But a number of MSO programming officials reacted withdispleasure to the deal's price tag, complaining that it sends out the wrong kind ofmessage just when Congress is threatening to reregulate the cable industry. Additionally,operators maintained that the Seinfeld cost will be passed on to cable subscribers,one way or the other, just like other programming costs.
Some MSO officials also argued that while cable hasdefended its rates to both Washington and consumers by touting its original programming,TBS is setting a bad example by paying so much for reruns that aren't even exclusive:Seinfeld will continue to air on TV stations in syndication.
"It's ridiculous," said Jedd Palmer, seniorvice president of programming for MediaOne. "I don't see how this adds value tocable."
Doug Montandon, vice president of marketing for GalaxyCablevision, quipped, "At least we're overpaying for something other thansports."
TBS officials insisted that they have no plans to passalong the cost of Seinfeld to cable operators, and that they won't raiselicense fees.
Nonetheless, the Seinfeld deal was especiallyirksome to some operators because they began paying monthly license fees of roughly 25cents per subscriber for TBS this year, as it made its transition to a basic-cable networkfrom its former superstation status. The license fee is about double TBS' formercopyright fees, although systems also got two minutes per hour in ad avails.
"They really socked it to us already," one MSOprogramming executive said. "And these costs [for the Seinfeld reruns] all getpassed along. We already have local independents in the market that also carry Seinfeld."
Added Linda Stuchell, vice president of programming forHarron Communications Corp., "If everyone has the same programming, and everyone ispaying through the nose for it ... I'm not sure that I understand the logic. If youcan get it anywhere, I'm missing something here."
TBS may not have had a choice: If it didn't buy theshow, someone else would have.
A bidding war -- which included USA Network and FX --jacked up the price for Seinfeld, allowing Columbia-TriStar TV Distribution tosecure a unheard-of premium for the show on cable for its second syndication cycle.Another unusual wrinkle in the deal, adding to its value to the syndicator, is that TBS isgiving Columbia-TriStar two 30-second spots during each Seinfeld episode.
While giving up one minute of ad time is not uncommon forbroadcast stations, it is unique for cable networks.
Turner Network Television paid in the neighborhood of $1million per episode for ER, with published estimates running from $800,000 to $1.2million, but that deal didn't include barter time.
Another beneficiary of the deal is producer Castle RockEntertainment, which owns Seinfeld and, like TBS, which is a unit of Time WarnerInc. In typical syndication deals, the program's owner retains about two-thirds of ashow's license fee.
TBS president Bill Burke maintained that Seinfeldwill be worth the price, adding that it's a perfect fit for theex-superstation's programming strategy.
"Our mission is to acquire the best off-networksitcoms that we could," Burke said, declining to comment on the show's price."Seinfeldcertainly fits that mold."
The purchase also set TBS up with a potential ratingsblockbuster: The network also has off-network rights to The Drew Carey Show, HomeImprovement and Friends.
Burke pointed out that Seinfeld is one of only threesitcoms to sign off the air while it was No. 1, the others being I Love Lucy and TheAndy Griffith Show. The show already has a top-notch ratings track record insyndication -- another reason why Burke said he believes that it will have legs in 2002.
"It's in a very small class of mega-shows thatwill stand up over time," Burke said. "The show has universal appeal. It'sdone terrifically well in Atlanta."
TBS also acquired local exclusive Atlanta broadcast rightsto the sitcom for WTBS, he added.
Several cable operators defended TBS' Seinfelddeal, too.
"It seems that whenever you get something as classicas Seinfeld, there is a brand recognition," said Tim Rigas, executive vicepresident and chief financial officer of Adelphia Communications Corp. "I would thinkthat we would be able to cover that [additional cost] and not put a lot of pressure on thecable subscriber."
Lynne Buening, vice president of programming for FalconCable TV Corp., said the $180 million deal isn't outrageous at all, particularlycompared with football, and when it's divided over four years. In addition, she said,TBS can't jack up its license fees to reflect Seinfeld because it just signedlong-term carriage deals with operators.
"You already know what your rate increases are,"she said. "TBS is a hell of a bargain at 25 cents per subscriber."
TBS expects to do well with national advertisers with its Seinfeldspots, and it also predicted that cable systems will be able to sell local avails on theshow for a premium.
But that doesn't help smaller operators in rural areasthat don't do local ad insertion, according to Montandon. Of Galaxy's 200,000subscribers, only one-third are on systems that insert local spots.
Another operator maintained that TBS' only concern ishow much it can garner in national ad revenue from the show.
"They bought it clearly for its ad-sales value,"the official said. "I'd rather see that $1 million per episode go for originalprogramming."
TBS wouldn't comment on how much it expects to sellits Seinfeld spots for, but it would get less than Columbia-TriStar does becausethe cable network doesn't reach all TV homes. Published reports said Columbia-TriStarbelieves that it will get $300,000 for each of its two 30-second spots, or $600,000 perepisode, bringing the value of the deal to about $1.6 million.
Several Madison Avenue executives, however, were skepticalabout that number.
"I don't believe it for a second," said JonMandel, director of national broadcast for Grey Advertising.
Ellen Oppenheim, senior vice president and media directorat Foote, Cone & Belding New York, called the $300,000-per-spot figure "veryaggressive," adding, "Let's just say, kindly, that that's making a lotof assumptions about what the market will be like."
Mike Farrell contributed to this story.