NBC, Fox Are Looking to Sell Time Slots of Kids’ Programs

Unable to compete in the crowded children’s television market, NBC and Fox are preparing to call it quits by leasing their Saturday morning TV slots to the highest bidders.

The two networks are in serious negotiations with outside programmers, including Nickelodeon, Warner Bros., Discovery Communications, DIC Entertainment, Sony, Pokemon producer 4 Kids Entertainment and Canadian children’s television producer Nelvana.

None of the parties involved would comment. But sources close to the talks said NBC and Fox may soon announce the winning bidders, who could pay $5 million to $10 million to each of the networks for their Saturday mornings beginning in the fall of 2002.

For years, the broadcast networks have been struggling to compete against entrenched children’s cable channels such as Nickelodeon and Cartoon Network, and the WB broadcast network, which strongly caters to young audiences.

NBC and Fox are following the lead of CBS, which more than a year ago leased its money-losing Saturday morning time periods to kids’ television leader Nickelodeon. Since then, CBS has seen its ratings nearly double. CBS and Nickelodeon are owned by Viacom Inc.

Fox could even end up running programs for adults Saturday mornings, becoming the first major network to fully abandon children in favor of movies or network reruns. Fox is considering programs from its own library, although studios such as Sony and MGM also have expressed interest.

“The kids market was taken over by cable three to four years ago and now there is an overabundance of advertising available,” said Jack Myers, editor of Jack Myers Reports, a media newsletter. Cable channels usually give advertisers negotiating leverage against network broadcasters and is one reason why annual advertising on children’s programming has remained flat for several years at about $700 million.

Some experts said the exit from Saturday morning programming could be an indicator of how networks cope with eroding profits and the double whammy of escalating programming costs and audiences defecting to cable.

Last month, Walt Disney Co. President Robert Iger said the company’s ABC network could hand over its Saturday night primetime slots to its affiliate stations because of the tough economics of this time period.

The other major networks privately said they will never give up primetime real estate, their biggest moneymaker.

But these networks acknowledge that daytime segments, such as soap operas, could be the next to be auctioned off, particularly by broadcasters who do not own shows.

The networks are having difficulty competing for niche audiences, such as soap opera fanatics and children, who can find the programming they want at any hour on a dedicated cable channel.

For instance, ABC has capitalized on its ownership of various soap opera shows to launch the Soap Net cable channel, which repeats its daytime programs during evening hours to a fast-growing audience.

This shifting balance of power is most evident in the children’s arena, where viewers have defected en masse from the networks.

Nickelodeon dominates Saturday morning ratings, reaching 21% of viewers ages 2 to 11, thanks to “Rugrats” and other shows. AOL Time Warner’s Cartoon Network, with the popular “Powerpuff Girls”, and Disney’s Disney Channel together draw 17% of these young viewers. By comparison the major networks--ABC, NBC, CBS and Fox--combined have only a 26% market share this season.

Fox and NBC have seen the biggest ratings drops in the children’s market. Fox’s share of the 2-to 11-year-old audience dropped to 9% this year from 21% in 1997, while NBC has plunged to 2% from 5% in 1997.

Some broadcasters, however, are better positioned to weather the Saturday morning competition. ABC can justify the expense because kids are the core focus of its parent company and because Disney’s children’s cable channels cross-promote ABC’s Saturday morning programs and repeat shows from the network, making production more economical.

Similarly, CBS sources said the network is making money after losing an estimated $5 million a year on Saturday morning shows. Nickelodeon pays CBS a flat yearly fee and uses the airtime to reach preschoolers--an audience previously underserved Saturday mornings.

Meanwhile, the WB has flourished in this market because of its singular devotion to young audiences since its 1995 launch. With the help of “Jackie Chan Adventures” and “Pokemon,” WB’s market share Saturday mornings has nearly doubled since 1996, to 13%.

And in the last year, WB has begun packaging advertising, cross-promoting and sharing programs with its sister Cartoon Network.

“As Nickelodeon and Cartoon Network became more and more entrenched, you could no longer compete with a four-hour island on Saturday morning,” said Jed Petrick, WB’s president and chief operating officer. WB airs 14 hours of after-school and Saturday morning children’s programming weekly.

By comparison, NBC has only three hours of programming--aimed at teens--on Saturday morning.

Many network executives said they would have abandoned children’s programming altogether but for federal laws requiring stations to air three hours a week of educational programming for children.

NBC would require any winning bidder to fulfill these requirements. Sources said Nickelodeon and Discovery Kids are the leading contenders, with both offering roughly $5 million for the time period. Discovery may have a leg up because of NBC’s aversion to helping build the brand of a competitor such as Viacom.

Fox, however, has cast a wider net, considering a host of alternatives other than kid’s programmers that would turn Saturday mornings over to movies, network reruns or other adult material.

Sources say Fox stands to earn as much as $10 million for its four-hour block on Saturdays, though it is looking for twice that amount.

As recently as the mid-1990s, Fox was the leader in children’s television with shows such as “Mighty Morphin Power Rangers.” Sources estimate that Fox is still earning as much as $10 million a year from its Saturday morning programming.

But that profit could decline dramatically as a result of a corporate shift in strategy.

This fall, Fox’s parent News Corp. and its partner Haim Saban sold Fox Kids Worldwide to Disney after failing to build the Family Channel into a major competitor to Nickelodeon and Cartoon Network.

The Family Channel aimed to build on the success of Fox’s weekday and Saturday morning children’s blocks. But management turmoil, a dearth of hits and WB’s blockbuster “Pokemon” threw the network, as well as the cable venture, off course.

News Corp.’s sale of Family Channel was the final blow to children’s television on Fox, reducing any economies of scale and clout with advertisers. Shortly after the sale to Disney, Fox announced plans to give the weekday afternoon time block now devoted to children’s programming over to its network affiliate stations.

Fox’s stations and affiliates, however, would prefer that the network continue to fulfill the federal obligation to children’s programming Saturday mornings because this is considered the least valuable real estate on television because of low viewership.

Some bidders said this factor could make it hard for any bidder to make the economics work for Saturday morning shows.

Television executives said the Saturday morning time period would be most valuable to an existing children’s programmer such as Nickelodeon, Nelvana or DIC.

For example, Nickelodeon, which is partnering with Nelvana in its Fox bid, is hoping to capitalize from Fox’s historical strength in action-adventure series to build a new business in that arena, according to industry sources.