The Ad Age Annual Syndication Report

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NEW YORK (AdAge.com) -- Syndication will be the savior of television, some TV ad executives say. While prime-time network fare stumbled this season, losing audience share and some advertiser holds in the second quarter, syndication numbers


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and revenue are holding tight, with second-quarter scatter selling well.

"Business is up, our ratings have remained strong, we dominate key dayparts," says Mitch Burg, president of the Syndicated Network Television Association, a group of distributors that will preview new programs for advertisers this month in a trifecta of conferences. Syndicated programs are sold to local TV stations by distributors, and are scheduled largely outside of prime time. Most are barter syndication -- in other words, they come to TV with the bulk of their advertising presold.

Top TV personalities
"Our delivery indices on audience composition are about 50% higher on young adults than the networks," Mr. Burg says. "And if you were to take all of our sitcoms together, you would outreach any one of the individual networks. We have seven of the top 10 favorite TV personalities in the country [including] Oprah, Dr. Phil, Ray Romano, Regis, Ellen DeGeneres and Jennifer Aniston, who will only be available in syndication next year" after NBC's Friends ends its network run. That could apply to Mr. Romano if Everybody Loves Raymond doesn't return for a ninth prime-time season in the fall.

Advertising Age's annual survey of syndication ad pricing confirms the value of these performers -- the shows of all except Ms. DeGeneres appear on Ad Age's list of the 25 priciest programs in syndication.

Data released late last month from the Television Bureau of Advertising show syndication's strength. Syndication ad revenue was up 15.3% in 2003, while network rose 3.2% and local broadcast was down 5.4%.

The mood at this year's National Association of Television Programming Executives conference in Las Vegas was generally upbeat. Studios hawked first-run success stories with strong and growing audience numbers, including The Ellen DeGeneres Show, from Time Warner's Warner Bros. Domestic Television Distribution; On-Air With Ryan Seacrest, from News Corp.'s Twentieth Television; and Dr. Phil, from Viacom's King World Productions. Highly touted as successes among off-network series (reruns of network programs) were Sony Pictures Television's Seinfeld and Warner's Friends.

Network TV's long shadow
But network TV continues to cast a long shadow over syndication, from its effect on syndication's prosperity to programmers adopting network tactics such as staggering the debuts of new shows.

Syndication rode the coattails of a lucrative upfront prime-time TV ad market, industry executives say. Syndicated fare raked in price increases for the current season that mirrored the double-digit increases in prime-time sales. In overall revenue, syndication climbed 12% to $2.25 billion during the 2003 upfront period, according to Advertising Age figures. Prime-time programming, meanwhile, rose 15% to $9.3 billion.

Typical syndication advertisers include retail, package goods, pharmaceuticals and restaurants. But Mr. Burg says advertisers that don't usually invest in syndication are doing so now.

'Best value in TV'
"Our auto business is up 24%," he says. "Everyone is looking to get the most value for their dollars, and given our pricing structure and ratings strength, we are probably the best value in television today."

"Most automotive advertisers look at syndication as a back-door approach, pursuing it as a local advertising venue for its dealer groups," says an agency media buyer for a larger automaker.

However, the market giveth and the market can taketh away. Just as syndication benefited from a strong prime-time upfront in 2003, it also may suffer from an anticipated flat buying season in 2004, a result of the poor showing of most new prime-time programming that launched this past season.

At a recent media conference in New York, Irwin Gotlieb, CEO of WPP Group's media shop GroupM, predicted the prime-time upfront this year will be down to $9 billion.

"Syndication is not necessarily going to grow significantly or have significant increases in pricing in the new season," says Terri McKinzie, assistant media director at Publicis Groupe's Starcom USA, Chicago. "I don't know that it will be a negative marketplace this year, but we don't anticipate any double-digit increases, that's for sure. It's going to be a more moderate marketplace."

Sitcom reruns
There's a growing concern in the syndication business that the programming well will soon run dry. There are no breakout hits among first-run shows. The best-performing syndicated programs are sitcom reruns. Fox-owned stations recently picked up a third cycle of Seinfeld and King World's Everybody Loves Raymond for record prices, according to TV executives.

"Syndication is becoming a second-run business," says Bill McOwen, executive vice president and director of national broadcast at Havas' MPG USA. "First-run business, the dramas, sitcoms, you just don't see them anymore. It's all about low production dollars, the judge shows ... and talk shows. Off-nets are tapping into a broader clientele much more effectively."

But there are no other off-net hits on the horizon either.

Observers will be closely watching the performance of several off-net newcomers this season: King World's CSI: Crime Scene Investigation, and Twentieth Television's Malcolm in the Middle and Yes, Dear.

Fate of reality shows
Reality shows rather than sitcoms -- the bread and butter of off-network TV -- are filling net schedules, which have been hit hard by disappearing young viewers. Reality shows may not have a second life in syndication.

General Electric Co.'s NBC Enterprises, which is not currently a member of SNTA but is expected to join this year, is putting Fear Factor out into syndication despite fears that reality programming won't stand up.

"I think anything can go into syndication," says Mr. Burg, "if they can get enough stuff and the content doesn't become dated."

That, however, is the crux of the issue. Reality shows per se aren't the problem, Ms. McKinzie says. It is the episodic nature of most of them that won't play in reruns.

Episodic programs
"Episodic programs just don't translate well to syndication," she says. "That's why NYPD Blue can't make it in repeats." According to Ms. McKinzie, Fear Factor could work because each installment is self-contained, but when the show follows a story line every week, it doesn't work in repeats.

Mr. Burg doesn't agree: "Dramas are doing really well in syndication. You have The West Wing and ER, and people are watching them."

Faced with ratings and revenue challenges this season, syndication is starting to follow the lead of networks and is doing slow rollouts of new shows at different times of the season, ignoring the traditional fall premiere month.

Slow launches
These slow launches are happening within station groups -- such as in Fox affiliates -- which means in many cases the shows only appear in about 30% of the country. After they test the waters with these limited-distribution runs, the programs that survive are brought to NATPE and offered to other station groups for a full rollout in 85% of the markets. Twentieth Television's Texas Justice and Good Day Live were launched this way on local Fox stations.

"This way the shows get a track record, they've got a proven product and they avoid a lot of the start-up costs entailed in a full-scale launch," says Starcom's Ms. McKinzie, whose agency will hold its annual Syndication & Cable Summit May 2-3 in Chicago.

It also appears that there is some new blood out there. Warner's Sex & the City will make its ad-supported TV bow on TBS Superstation this year, which suggests that edgy programs on subscription-based cable such as Showtime or HBO may eventually beef up syndication.

"I think they'll have a hard time getting those shows in on a broadcast level without losing the story lines," Mr. McOwen says. "Sex & the City will work on cable, which the FCC keeps its hands off, but even that will be edited."

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