May 2012
Volume 32 No. 3

May 2012
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Development: The Necessary Evil of the U.S. TV Business

By Dom Serafini

The U.S. television business model is so unique that no other country has been able to duplicate or replicate it. Basically, this is because it doesn't make any business sense. Would any other TV industry be willing or able to spend more than $500 million a year on development to come up with shows that have an 80 percent failure rate? And this is after having invested $240 million to produce pilots, and accumulating some $1.2 billion in deficit per season.

hollywood sign

However, for the U.S., this development process, which orbits around the new season's Upfronts, seems to be set in stone. A few years ago, NBC tried to do away with some pilots for the new season in order to save a reported $50 million, only to quickly return to fully developing them the following year. But they lost momentum in the meantime, and the network is still feeling the consequences.

If development is a necessary evil for American television, its process is pure insanity, and there are even books to prove it, like Tales From Development Hell (Titan Books) by David Hughes, a Hollywood screenwriter. Though it focuses on movies, Hughes' book could easily illustrate the development process for television. Indeed, there are elements that are valid for both film and television, like the fact that no legitimate production company accepts unsolicited ideas or scripts. Plus, studios rarely buy into a script unless all rights are available in all media. Finally, facts are generally considered to be in the public domain, therefore no one owns them. This means that anyone can “steal” a project if it is based, for example, on current events.

On top of all this, in Hollywood nothing moves fast and it could easily take nine months for a simple contract to be signed. This is why, according to a popular saying in Hollywood, it takes 15 years to become an overnight success.

If it is a film or TV project, it could take even longer. This is because a script can be rejected by anyone in the development process, and it is only likely to get a second look if someone involved has some pull. And even when a script is on a fast track, there is always the risk that someone on the development ladder might say,” This script is perfect. Let's see if we can improve it.”

There are also other factors to consider, like the notion that Hollywood is a business, rather than an artistic endeavor, as Hughes points out in his book. It is not surprising then that even around the early stage of production, Hollywood has developed a florid business where scripts are commissioned at fees ranging from $10,000 to $50,000. Scripts are also bought and sold, usually to cover “negative” costs (money spent over the years on re-writes, coverage — fees paid to readers for their evaluations — and other pre-production expenditures). In the film business such “negative” costs can even accrue to $5 million, especially when a project goes through several rights holders.

Scripts are even sold internationally (after some shows are aired), by specialized companies such as the Miami-based Pomodoro Stories, which offers alternatives to formats.

The U.S. studios also keep screenwriters on their lots by paying them something in the range of $500,000 a year to come up with ideas, and the so-called in-house Producer Overall Deals that can be in an exclusive partnership or generate first-look deals. This is in addition to having their own development staff that explores books, features, short stories, etc., and listens to pitches from agents and independent producers — and by acquiring production companies that have developed successful shows. Studios such as Warner Bros. and Fox even run contests to pick ideas, like the ones done in association with the New York TV Festival for non-scripted and scripted development deals, respectively.

A studio’s TV development structure comprises four executives for a medium-sized studio such as Lionsgate, and up to 15 people in a largestudio such as Warner Bros. and Fox. Yearly budgets for such structures vary from $50 million to $150 million.

Normally, the development process is a year-round operation, but because of a business model that revolves around the Upfronts, it starts to intensify in the fall, after the new season is underway. Chris Selak, EVP Television Development at Lionsgate explained the process sequence: “Broadcast networks have a very specific development cycle. [Pitches are heard] in late July until October. [If moved into scripts] first drafts are delivered in November with final drafts going in before Christmas. [Networks] pick up pilots in January to be produced in March with series pick-ups announced in May.” Last year, out of 88 pilots commissioned by the big broadcast TV networks, 43 were picked up to be turned into series.

It is not unusual that out of, say 300 pitches to just one of their development execs, a major studio like NBC Uni will have 50 turned into scripts and, out of those, 10 will go on a fast-track or to pilot status, with the networks providing up to 40 percent of the cost of making the pilots.

Explained Lionsgate's Selak: “At any given time, we have approximately 30-35 projects in development internally and/or set up at a network. This season we sold nine scripts to the big networks, two of which were made into pilots. We also have two projects with straight-to-series orders.”
Studios pitch the networks by visiting them one by one until a network finally greenlights a project. According to a former development executive, broadcast execs don't like to read scripts, so pitches are usually done orally.

It is estimated that each major TV network receives about 500 pitches for new shows. Of these, the network requests scripts for about 70 pitches and, for last season, each ordered an average of 20 pilots. Each pilot receives various degrees of feedback (including focus groups) and is gauged on its potential (for both audiences and advertisers) in order to advance to a full-fledged series. In 2011, each network chose an average of nine pilots for series status. The new series are then presented at the Upfronts, where they are added to network schedules for the new season (or slated for a “mid-season” winter debut or as “backups").

Pilots usually air as the first episode of the series. However, if the post-pilot series becomes too different, the pilot doesn't air. For this reason, at times, more than one pilot is commissioned for the same TV project to evaluate what the show would be like with modifications. There are also “put” pilots: those that the network has committed to air.

If a network isn't completely sold on a potential series’ premise but still wants to see its on-screen execution without investing in an expensive pilot, a 10-minute presentation might be ordered (often requiring a one-day shoot). Similarly, nets can request “demos,” which are more elaborate than presentations and shorter than standard episodes, but less expensive than full-fledged pilots. The idea is to showcase the cast and the writing.
Nets also consider backdoor pilots: An episode produced as a stand-alone program so it can be broadcast even if it's not picked up as a series, but they're not advertised as pilots, only as “specials” or “MOW.” Spin-offs are included in this category and focus on an existing character from the parent series.

In addition, networks also have their own development departments, which hear independent pitches and commission scripts, but in order to make pilots they usually turn to the studios. Similarly, an independent producer who successfully gets a greenlight for a pilot has to go to a studio to produce it. In effect, in addition to providing talent, the studios are for all practical purposes financial companies that bankroll new productions to the tune of $1.2 billion per full season (22 episodes).

The math is simple: A network primetime one-hour drama episode costs $3.5 million, of which $1.5 million comes from the net's license fee. Multiply this by the 25 dramas and 18 comedies from last year's season and the amount of deficit accumulated quickly rises. This deficit is then recouped on the international market if the shows don't get canceled before a full-season run. This is without considering the investments required to produce the pilots, which, last year, amounted to $240 million.