By Dom Serafini

It is hoped that the failed Media Rights Capital (MRC) experiment with the Sunday night block on New York-based The CW TV network serves as solid proof to the U.S. and the international entertainment industry that the upfronts and the pilot process are necessary evils for the U.S. television sector.

Let’s hope that both of The CW’s parent companies, CBS and Warner Bros., took notice. The CW was formed in 2006 when The WB and UPN networks merged. MRC is a film and TV production company founded in 2003 with offices in New York City and Los Angeles.

To recap the events, last spring, MRC acquired a block of Sunday primetime on The CW for an estimated $15 million a year, to showcase its content during the 2008-2009 TV season. The 6:30 p.m. to 10 p.m. block featured a drama (Easy Money), a dramedy (Valentine, Inc.), a comedy (Surviving Suburbia) and a reality show (In Harm’s Way).

By the beginning of last month, The CW re-took possession of the MRC block due to dismal rating and, reportedly, late payments. Indeed, the MRC block was averaging little more than one million viewers, down over 40 percent from the same period last year, which was already low.

Although the MRC block was born with some genetic defects, the therapy used aggravated its condition, especially considering that its launch, originally set for September 14, 2008 was pushed forward to October 5.

The first wrong therapy was that, by rushing its programming on air, MRC wasn’t able to get in on the upfronts time auctions — when marketers buy ad time in advance of the new fall season — thus losing millions of guaranteed ad dollars. This left MRC completely reliant on the scatter market, which, with the financial crisis, dried up.

Usually at the upfronts, networks sell 80 percent of their inventory, leaving the remainder for the scatter market, which, under normal circumstances, could even demand higher rates. Today, however, demand for television ad time sold closer to the actual air date — which is known in the industry as the scatter market — is plummeting. A year ago, the scatter market was so hot that prices were 30 percent more than those set during the upfronts. Today, with advertisers struggling to keep the space already committed, the scatter market has collapsed.

The second wrong therapy, possibly because of the little time, or simply because it was trying to reinvent the wheel, was for MRC to bypass the pilot process. At that time an MRC-TV representative said, “Unless you have the luxury of looking at lots of pilots, I’m not sure producing these as pilots would gain us a significant advantage. The piloting process can tell you a lot, but at the same time, I think you have to look at other ways to do things in the current environment.”

I’m sure that, if the shows were tested in their pilot forms, some of their kinks could have been hammered out.

In order to picture what kind of challenge MRC was facing, without the aforementioned two worsening factors, let’s throw a few figures around.

The block of 210 minutes per week on The CW would have provided MRC a total of 63 minutes of commercial time. At the cost-per-thousand viewers of $28.88 commanded by the 18-49 targeted group, MRC should have sold each minute at $110,000 on the average just to cover expenses (with the profits coming from the programming back-end), but that implied an audience of close to four million viewers — four times what it actually got.

Under normal conditions and proper strategy and implementation, the MRC plan would have been a success especially with its proven barter model. After all, the “real” money for content providers is with reruns and international sales. But, in this case the game had to be played in the traditional forms: either under the upfronts business model or under the syndicated approach, where avails were to be sold in advance after the clients screened the pilots. Usually this happened before NATPE, while at NATPE the producer cleared the various markets.

Actually, today, the syndicated business model is somewhat simpler than in the past, due to the reduced number of TV station groups and the possibility of buying time blocks on a TV network, as in the case of MRC with The CW. Nowadays, content providers that opt for a syndication business model to feed their distribution pipelines with cost-free programming can better concentrate on selling air time, instead of stretching their resources thin, with market-by-market clearances.

So, in conclusion, if the moral of this story has to be repeated or spelled out in plain English: Before producers and TV networks decide to do away with pilots, they better think twice.

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