‘American Idol’ Economics: Loss Leader or Smart Synergy?

TV’s former ‘Death Star’ gets Disney’s playbook and surprisingly strong ad sales as it returns for a reboot with its venerable host facing a harassment claim. “I’ve known Ryan now for almost 16 years. I stand by him,” said Cecile Frot-Coutaz, CEO of the show’s producer, FremantleMedia.

The swan song for American Idol was supposed to be two years ago. That’s when more than 13 million viewers watched host Ryan Seacrest sign off from the Dolby Theatre in Hollywood for the final time. But as many suspected, Seacrest’s cryptic “Goodbye — for now” was prophetic.

Now ABC, which quickly snapped up Idol despite its age and high production cost, prepares to relaunch TV’s one-time “Death Star” March 11 into a primetime landscape that has only become more challenging. And it will do so with an entirely new and untested judging panel and a host at the center of allegations of sexual harassment from a former stylist at NBCUniversal’s E!

ABC Entertainment president Channing Dungey and Cecile Frot-Coutaz, CEO of the show’s producer, FremantleMedia, voice support for Seacrest. “We stand by the results of the investigation,” says Dungey, referencing the independent inquiry E! commissioned that cleared Seacrest. Adds Frot-Coutaz: “I’ve known Ryan now for almost 16 years. I stand by him. Obviously it’s unfortunate. I’m not privy to the details. He seems to be very robust in his defense. And we’ll see where it all goes.”

ABC is investing significantly in the Idol franchise, part of a synergistic play among several ABC/Disney properties. But Idol had, like much of broadcast television, hemorrhaged viewers by the end of its 15-year run. Facing intense competition — including from NBC’s The Voice — the show had plummeted nearly 70 percent in the ratings during the four seasons before a somewhat rejuvenated final season. (In 2003, more than 38 million people watched Ruben Studdard win season two. The series finale in 2016 was watched by 13.3 million people — at the time, Idol‘s best showing in three seasons.)

Yet talent salaries in the final seasons had ballooned to $45 million (Jennifer Lopez was pulling down $20 million; Seacrest, Idol‘s sole constant, was making $15 million). The actual cost of the show was commensurate with a network drama, about $2 million an episode, say insiders.

But the network was saddled with escalating fees that ballooned the budget. By the end of its run, Fox was paying a premium of $1 million for every episode beyond a certain threshold of about 30 hours a season; there were seasons when Fox aired as many as 60 hours of Idol. (ABC has ordered 19 episodes, which will air over 38 hours on Sunday and Monday nights.)

All of this, the media narrative went, had transformed what was once TV’s most invincible property from a money minting machine (at its height, it was commanding more than $600,000 for a 30-second commercial spot) to a red-ink-laden drain on Fox’s bottom line.

Will ABC make money on the reboot? It has surely streamlined its fees, though talent salaries — $25 million for Katy Perry, a little more than $10 million for Seacrest — are as eye-popping as ever. ABC and FremantleMedia executives insist Idol will not be a loss leader. “We’re running a business here, so we certainly are always looking for things to be profitable,” says Dungey.

For the Disney-owned network, Idol is a company-wide play: ABC kicked off auditions at Disney Spring, the entertainment complex at Disney World in Orlando, and contestants are expected to make promotional stops on ABC’s Good Morning America and Live With Kelly and Ryan. In Idol‘s heyday, GMA and rival morning program Today — which both stage outdoor concerts during the summer — battled to land eliminated contestants. And Kelly Ripa’s daytime show also was a “very desirable booking,” notes one Fox source. “Now, it’s extremely organic.”

ABC also will use Radio Disney to promote the show, and there are myriad platforms for shortform spinoff content. “We’ve talked about [whether we can do] a digital show following some of the winners,” adds Rob Mills, ABC’s head of alternative programming.

ABC’s ratings expectations are in line with the current climate. According to media buyers, the network is guaranteeing a 1.8 rating in the key 18-to-49 demographic, which seems achievable with seven days of delayed viewing factored in. ABC is averaging a 1.45 rating (through mid-February) in the demo, putting it in fourth place among its broadcast competitors and down 12 percent from last season. Still, media buyers have been bullish on Idol, a broad family-friendly program, and are ponying up nearly $200,000 for a 30-second spot, compared with a high of $150,000 on Fox during the last season. According to Dungey, the premiere is sold out, while the rest of the season is 75 percent sold.

Idol was a pioneering program for product integration and sponsorship. In 2002, Coca-Cola signed on as an initial sponsor — to the tune of $10 million for Fox. ABC has lined up less sexy sponsorship pacts with retailer Macy’s and Johnson & Johnson allergy medication Zyrtec, with the companies paying reported integration fees of up to $1.5 million. Zyrtec also is a sponsor on Seacrest’s other show, Kelly and Ryan. And Macy’s distributes Seacrest’s Distinction Clothing menswear line. All of this will help ABC amortize its investment.

“Disney as a whole has a lot of ways to help monetize Idol: Disney Radio, theme parks, concerts, cruises,” notes David Campanelli, director of national TV for Horizon Media. But executives at ABC and Fremantle seem irked (and perhaps rightly) by the persistent questions about Idol‘s financial viability.

“If you want a cheap show, don’t make American Idol,” says Frot-Coutaz. “Don’t make America’s Got Talent or The Voice or X Factor. If you want a cheap show, order something in a genre that’s inherently cost-effective. The worst thing you can do is take something that needs a certain amount of budget investment and try to do it at half the price. Because that will fail.”

Frot-Coutaz adds that Idol on ABC is not more costly than other broad competition shows, and sources say it’s not setting ABC back any more than a typical hourlong drama (those come in between $3.5 million and $4.5 million these days).

Producers say the format will largely be the same, but ABC is subtly imprinting its DNA on Idol. There is no designated bomb thrower a la Simon Cowell; indeed, the first episode of the show made available to media features barely a discouraging word from new judges Perry, Lionel Richie and Luke Bryan. “They’re not pushovers, there is no one mean judge. But they are honest judges,” says Mills.

As ABC readies Idol, Fox is doing its best to blunt the premiere of the show. It will unveil O.J. Simpson’s infamous “If I Did It” interview — which was set to air in 2006 before an uproar caused the network to pull it — opposite the Idol bow. “It’s very good counterprogramming,” admits Frot-Coutaz. “Idol is a story of hope, aspiration, the American dream. And then you’ve got O.J. Simpson. So we’ll see what mood people are in.”

This story first appeared in the March 7 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.