Homer and Bart are now cable guys.
In what may be the biggest deal in the history of off-net syndication, 21st Century Fox kept TV's longest-running family, The Simpsons, in the corporate family as its studio sold exclusive cable and digital rights to the animated phenomenon's 552 episodes, to FX Networks.
FX plans to use The Simpsons to build up its new channel FXX, which is comedy-oriented and targets younger viewers. Simpson's episodes will appear on FXX beginning in August 2014.
Terms were not disclosed, but the total price of the deal is expected to reach close to $1 billion.
The Simpsons has aired on the Fox broadcast network for a record 25 years. Re-runs have been syndicated to TV stations—-led by Fox's owned-and-operated outfits—-but the show was contractually kept from cable as long as new episodes were being made for broadcast. That changed earlier this year and cable network groups were brought in to bid last month. (Related: News Corp.'s Enviable Doh!-lemma Over 'The Simpsons')
As a member of 21st Century Fox's family, FX--and more recently FXX, which launched this fall--were seen as the most likely outlet when The Simpsons went to cable, but other big media companies bid as well. FX president of program strategy Chuck Saftler, who spearheads program negotiations, said he didn't know who he was bidding against, but called the competition "robust." (FXX couldn't be given a sweetheart deal because that could trigger lawsuits from creator Matt Groening and other profit participants who are entitled to the best price for the show.)
The month-long negotiations were "very intense at times and very intricate I can only deduce that there was significant interest from the marketplace," Saftler, who is also COO of FX Networks, said. Saftler declined to say for how long FX is committed to running The Simpsons. "It's a considerable length of time," he said.
Most off-net cable deals are done for a per-episode price. Turner Broadcasting acquired cable rights to 2 Broke Girls for $1.7 million per episode, a record for a sitcom last year. But Saftler said The Simpsons deal was done based on a price per week basis. "The cost per episode is really, really tough to pin down. All I can tell you is that with 522 episodes by September of 2014, in the aggregate, it is an enormous sum that is record shattering."
The Simpsons deal was done on a per-week basis "because of the scope of this series and the unpredictability of how many more seasons there will be," Saftler said. "It just made more sense to do it on a per week basis, rather than a per episode basis."
With The Simpsons still going strong on Fox, Saftler says FX is planning to take episodes produced in the future after they appear on broadcast. (The deal starts with 24 seasons in August 2014; the 25th season becomes available the following month, in Sept. 2014.)
The decision to run The Simpsons on FXX rather than the more mature channel FX, where ratings would likely be higher initially, reflects the way 21st Century Fox is investing in its cable networks, which have been driving the company's profits and revenue growth.
Family Matters
This year, Fox said it would spend $150 million to launch new networks including FXX and Fox Sports 1. FXX launched Sept 2. Overall, ratings jumped from what the Fox Soccer Channel, which it replaced, drew. But while some FX originals that moved to FXX, like It's Always Sunny in Philadelphia, drew comparable ratings on the new network, most other programming started out under-delivering the audiences promised to advertisers.
The Simpsons will help to build FXX. "We've got a new network that we need to get sampled and viewed, and at least at the beginning, we're giving the property exclusively to FXX," Saftler said. Across the length of the term we can decide and evaluate if that should broaden."
FX also acquired all of the digital and on-demand rights to the show for its on-demand product FXNow, which means it won't be on Netflix or Amazon. That was important to FX because it is building networks for the future. "We're in a very technologically evolving time," Saftler said. "We recognize that the key to the future is being both an excellent linear network and having an excellent non-linear product as well. And this will ensure we're able to have both."
It might have been less risky financially to allow a non-Fox owned entity to buy The Simpsons from a financial point of view, said David Bank, managing director for Equity Research at RBC Capital Markets, who had been looking for a windfall of more than $750 million when The Simpsons got sold to cable.
"The dealing between the studio and the channels at Fox are independent and they wouldn't sell to themselves at a price cheaper than they could get from the outside when monetizing this kind of an asset that has taken 20 years to harvest," Bank said. (Related: 'The Simpsons' Finally Hits Cable Homer)
"If the FX guys are the highest bid because their model says it can be monetized and it doesn't put upward pressure on prior expectations for programming expenses, I think investors are indifferent," Bank added. "That said, it's cleaner and easier for investors to digest if it gets sold to a non-Fox player."
When The Simpsons goes on FXX, viewers can expect to see episodes stacked in primetime on certain nights of the week.
"We've seen that linear stacking is the best way to exhibit series like this. With a show that has this deep a history, we'll be able to do some really cool and great stunts with it," Saftler said. "Fans take the deep dive. They can choose to watch all episodes in a given night, or they can watch a couple and snack."
Stints could include nights of shows featuring Academy Award-winning guest hosts, rock stars or Halloween-themed "Tree House of Horrors" episodes.
Saftler expects FXX to give the show a big marketing push before its August 2014 launch.
For Saftler, acquiring The Simpsons is literally the deal of a lifetime. "I've been planning to go after this and try to buy it for 20 years at FX now, I'm just glad I'm a really patient man," Saftler said.
"When this show started I was 25 years old. I'm 50. And what's great is this was a show that spoke to me as a young man and this is a show that still speaks to me as a not-so-young man. And what's really great is my teenaged kids love this show. So it's still bringing in new generations of viewers and it's still appealing to older generations of viewers," he said. "That alone is going to allow us to be able to give FXX the type of exposure that gives it great reach and frequency and that to me made The Simpsons the show we had to have.
The Simpsons is a Gracie Films Production in association with 20th Century Fox Television. James L. Brooks, Matt Groening and Al Jean are the executive producers. Film Roman, a Starz Media Company, is the animation house.
In addition to TV revenue, the show has reportedly generated billions of dollars in licensing revenue for everything from lunch boxes to doughnut tie-ins with 7-11 stores. The Simpsons have appeared in a feature film, on U.S. Postage stamps and featured in a virtual roller coaster ride at Universal Studios.
