Colonial Broadcasting Company

Part A

Barbara Warrington, Vice-President of Programming at Colonial Broadcasting Company (CBC), sat in her office preparing for a meeting with Bruce Gold, an independent movie producer. Warrington thought that Gold would probably try to sell to CBC a movie idea based on the true story of a young boy who overcomes a debilitating illness. In recent years, the number of TV movies based on real-life events (fact-based movies) had been steadily growing. The networks seemed to believe that these movies brought higher ratings than fictional movies. But Warrington wasn't so sure. She suspected that other factors could be responsible for the high ratings of fact-based movies. Warrington had data on TV movies that were broadcast during 1992. She decided to have one of her assistants run some regressions to find out what was really driving ratings.

Colonial Broadcasting Company

Along with American Broadcasting Network (ABN) and Bellmore Broadcasting Service (BBS), Colonial Broadcasting Company is one of three major American television networks.1 Every week, each network broadcasts hundreds of hours of national programming, including news, sports, talk shows, as well as prime-time programming (theatrical and made-for-television movies;2 action, comedy, and drama series; news specials, etc.).3

Broadcasting TV Movies

TV movies were first broadcast in the mid-1960s, and in the following decades came to play a major part in network programming. By 1992, the three major networksABN, BBS, and CBC were underwriting the production costs for more than two hundred hours of TV movies annually, approximately 10% of network prime time programming.

The typical TV movie is made by an independent producer, with the cost underwritten by one of the networks. It is approximately 92 minutes long, but with commercials, it runs for two hours. TV movies are broadcast during prime time, usually beginning at 9 p.m. on the East and West Coasts and at 8 p.m. in the Central States.

The networks' aim in broadcasting TV movies is to attract a large and demographically desirable audience. Networks are funded by advertisers who pay for on-air advertising time, and advertisers pay higher prices for programs which attract larger audiences. A network's success in attracting a large audience is reflected in its Nielsen ratings.4 These ratings, expressed as a percentage of all American households with televisions, measure how many televisions are turned on to particular programs. In 1992, each rating point represented 921,000 American households. Therefore, if a movie received a 25 rating during a given half-hour time slot, about 23 million households were tuned in to that movie at that time.

The TV movie with the highest rating on record is The Day After (a movie about the aftermath of a nuclear holocaust) which garnered a rating of 46 when broadcast in 1983. The broadcast of the 1992 Super Bowl, by comparison, received a Nielsen rating of 40.

Making a TV Movie

The networks do not produce their own TV movies but instead contract with independent producers to have them made. Producers must first sell a movie concept to a network. The concepts the producer has to choose from fall into two basic categories: those drawn from fact and those drawn from fiction. A typical fact-based concept for a TV movie might be drawn from national or regional newspapers or a nonfiction book. On the other hand, a fictional movie might be based on a novel, play, screenplay, or simply the producer's brainstorming.

If necessary, the producer must arrange for an option on the story rights. If the movie concept is based on a true-life occurrence, the option takes the form of an agreement between the producer and the rights holder, usually the people involved in the real-life events. In contrast, for novels, plays, and screenplays, the producer merely needs to get an option on the appropriate copyright. In most cases, a fee is paid for an exclusive option. The option then gives the producer the right to buy a piece of material within a specified period of time (e.g., the producer might pay $10,000 for a one-year option to buy the rights to a story for an additional $100,000). Once the producer has the story-rights, he can approach the networks and pitch his concept for the movie.

The networks have several basic criteria for judging potential TV movies. Unlike television series, for which audience loyalty can be built over the course of a season or even many seasons, TV movies are usually a one-shot deal. Ideally, network executives believe, TV movies should be "'believable' and sensational at the same time ... Characters should be simple and simply motivated, heroes familiar, stories full of conflict, endings resolved, uplift apparent, and each act should end on a note of suspense sufficient to carry the viewer through the commercial break."5

If a movie concept generates enough interest from the network, the network will pay a script-writer to develop the idea into a full-length script.

If the script is acceptable, then the network will commit to produce the movie. Typically, the network and production company agree on a licensing fee (usually $2.60 to $2.75 million which covers the bulk of the production costs) for the network's exclusive North American right to broadcast the movie twice in four years. The licensing fee covers the bulk of the producer's production costs.6

Warrington's Decision

Warrington knew that CBC's programming decisions were motivated primarily by ratings. She made a mental list of factors that might affect a TV movies' ratings: the day of the week or month it was broadcast, the broadcasting network, whether the movie had a big-name star, whether it was scheduled against tough competition, or whether the program immediately before it on the same network had high or low ratings. Was the movie conceptfact-based or fictionalone of the factors that drove ratings? Warrington looked down at the regressions which her assistant had brought in (see Exhibits 1 and 2). What did they tell her?

Exhibit 1 Data on 1992 TV Movies*

Variable Description

NETWORK Broadcasting network (ABN, BBS, or CBC)

MONTH 1 = January, 2 = February, ..., 12 = December

DAY 1 = Monday, 2 = Tuesday, ..., 7 = Sunday

RATING Nielsen rating for movie

FACT 1 = based on true events, 0 = fictional

STARS Number of actors or actresses paid over $300,000

PREVIOUS RATING Nielsen rating for program immediately preceding movie on same network

COMPETITION Average of Nielsen ratings received by the two competing networks during the movie's broadcast

In addition, several dummy variables derived from the variables listed here are used in the regressions which follow. Examples are

ABN 1 if NETWORK = ABN,

BBS 1 if NETWORK = BBS,

OCT 1 if MONTH = 10,

DEC 1 if MONTH = 12,

APR-MAY 1 if MONTH = 4 or MONTH = 5,

MON 1 if DAY = 1,

SUN 1 if DAY = 7.

* All 1992 TV movies, not including sequels to old television series, movies that are part of a series, two-hour pilots for television series, or two-hour segments of a television mini-series.

Observation	Network	Month	Day	Rating	Fact	Stars
1	BBS	1	1	15.6	0	1
2	BBS	1	7	10.8	1	0
3	BBS	1	7	14.1	0	1
4	BBS	1	1	16.8	1	1
5	BBS	2	1	14.3	1	1
6	BBS	2	1	17.1	1	1
7	BBS	3	1	15.8	0	0
8	BBS	3	7	16.2	1	0
9	BBS	4	7	12.6	0	1
10	BBS	5	1	13.5	0	1
11	BBS	5	7	15.6	0	0
12	BBS	5	1	12.1	0	1
13	BBS	5	1	15.8	1	0
14	BBS	9	7	15	1	0
15	BBS	9	7	16.3	0	0
16	BBS	9	7	13.3	0	1
17	BBS	10	7	10.8	0	1
18	BBS	10	7	14.4	1	0
19	BBS	11	7	14.4	1	1
20	BBS	11	7	13.6	1	0
21	ABN	1	7	14.6	0	0
22	ABN	1	2	10.8	0	1
23	ABN	1	7	16.2	0	0
24	ABN	1	2	12.8	0	0
25	ABN	1	7	16	0	1
26	ABN	2	7	18.9	0	1
27	ABN	2	2	17.6	1	1
28	ABN	3	7	19.5	1	1
29	ABN	3	2	16.9	1	0
30	ABN	3	7	16.3	0	1
31	ABN	3	7	15.8	1	0
32	ABN	3	7	17.1	0	1
33	ABN	3	2	15.8	0	0
34	ABN	3	7	16	1	0
35	ABN	3	2	11.7	0	1
36	ABN	4	2	14.2	0	0
37	ABN	4	7	18.1	0	0
38	ABN	4	2	15.2	0	0
39	ABN	4	7	13.3	0	1
40	ABN	4	7	15.5	1	0
41	ABN	4	2	16.6	1	0
42	ABN	5	7	16.3	1	0
43	ABN	5	7	16.5	0	1
44	ABN	5	2	16.8	1	0
45	ABN	9	7	15.4	0	1
46	ABN	9	2	14.7	0	0
47	ABN	9	7	15.5	0	0
48	ABN	9	2	14.7	1	0
49	ABN	10	7	15.9	1	0
50	ABN	10	7	13.8	1	0
51	ABN	10	2	14.9	0	1
52	ABN	11	7	12.9	0	1
53	ABN	11	2	15.4	1	0
54	ABN	11	7	14.5	0	2
55	ABN	12	7	12.6	0	2
56	ABN	12	2	11.8	0	0
57	ABN	12	2	12.8	0	0
58	ABN	12	7	16.8	0	1
59	CBC	1	7	14.7	0	1
60	CBC	1	1	11.3	1	0
61	CBC	2	1	13.5	0	1
62	CBC	2	7	12.9	1	0
63	CBC	3	1	13.2	1	0
64	CBC	3	7	12.8	1	0
65	CBC	4	1	13.2	1	1
66	CBC	4	7	13.5	0	1
67	CBC	5	1	17.5	1	0
68	CBC	5	7	11.6	0	0
69	CBC	5	7	12.1	0	0
70	CBC	6	1	15.6	0	0
71	CBC	6	7	12.6	0	1
72	CBC	6	1	11.8	0	0
73	CBC	7	7	12.3	0	0
74	CBC	7	1	14.2	1	1
75	CBC	8	7	11.6	0	0
76	CBC	8	1	13.3	1	0
77	CBC	8	1	13.6	1	0
78	CBC	9	1	12.4	0	1
79	CBC	9	1	13.8	1	0
80	CBC	9	7	11.9	1	0
81	CBC	10	1	14.6	0	0
82	CBC	10	1	15.8	1	1
83	CBC	10	1	15.4	0	1
84	CBC	11	1	13.1	0	1
85	CBC	11	7	12.8	0	0
86	CBC	12	1	15.1	0	0
87	CBC	12	1	12.4	0	1
88	CBC	12	1	19.1	1	0