Weeds of Wisdom

In 2005, CBS (NYSE: CBS  ) subsidiary Showtime premiered a groundbreaking -- Fools might say "rule-breaking" -- new comedy about a suburban soccer mom-slash-pot dealer. Within a few months, Weeds had officially become the premium cable channel's highest-rated series. Fool contributor Rich Smith recently had the opportunity to discuss the program, and show business in general, with series creator Jenji Kohan.

The business of TV
Rich Smith:
Jenji, for the benefit of our readers who are still roughing it with basic cable, can you tell us what Weeds is about, where people can see it, and how it came to be?

Jenji Kohan: Basically, I sold the show on a one-line pitch: Suburban, widowed, pot-dealing mom. As you can imagine, this is a show that could exist nowhere else but on pay-cable TV. Because Showtime is a premium cable channel, financed by its viewers, we don't have to answer to advertisers. We have the artistic freedom to come up with compelling, provocative story lines.

The irony is that pay-cable is one of the last true bastions of free speech. Here, people can vote with their dollars. If they like what we're doing, they watch, they pay. If they don't, they're free to not watch, and to not pay.

Smith: And how is that working out for you? Are they watching and paying?

Kohan: Absolutely. Weeds is the cornerstone of Showtime's original comedy programming. And it's not just on Showtime. We're actually broadcast around the globe in 133 countries.

Smith: Which raises my next question. Here in the U.S., we all identify Weeds with Showtime. It's a show on Showtime, period. But according to answers.com, Weeds gets aired by other media outlets internationally. You're broadcast in the Middle East by Paramount. In Korea by Fox. In Hungary, the Czech Republic, and Poland by Showtime archrival HBO! Is that right, and if so, how does that work?

Kohan: Fascinating! I didn't know about HBO. But the way I understand how this works -- and I'm not an expert on the business end of things -- Lionsgate (NYSE: LGF  ) is making deals for us everywhere it can.

Smith: Even if you're not an absolute expert on the subject, I'm sure you've got better insight into the process than a lot of us mere TV watchers do. So can you tell me how it works? How does a series go from its inception in the mind of the creator to its first airing as a pilot?

Kohan: Sure, I'll try. Well, the first thing is that the show's creator comes up with the concept. Then she pitches it to a network. Assume the network likes the idea. Then you've got two possibilities. A network like HBO, that's flush, might decide to finance the project itself. But if the network suits are nervous about the content, or poor, they might not want to go that route. They might say, "Go ahead and try to find someone who will finance it. If you do, have them come back to us, and we'll buy the rights to broadcast it." Actually, the way it worked for me is unusual. A show creator usually goes into a network with a studio already attached. I did it backwards.

That's what happened with us. We went to Lionsgate, which at the time was trying to break into television production, and they saw Weeds as a chance to do that. Lionsgate financed the show, and Showtime liked it and bought it.

Getting back to your question about the international distribution, well, as I understand it, Lionsgate can then sell [the show] to whomever else they like, as far as I know.

Smith: So a show is licensed for broadcast within one country, for example, and probably exclusively licensed there. But Lionsgate can sell equivalent exclusive licenses in other countries, to other people who like the show.

Kohan: Right. As I understand it, that's how it works.

The business of business
Smith:
Let's shift gears for a moment now. I know that you're more an artist than a businesswoman. But at The Motley Fool, we're investors writing for investors, and I'd like to ask a few more business-oriented questions, which you can just answer to the extent you're able. Speaking of which, are you an investor yourself?

Kohan: Not anymore. I used to be. But I lost my shirt over and over investing in tech stocks and other foolish trends. Honestly, I have no faith in the market anymore. I mean, my husband just invested in a hedge fund [laughs]. But mainly, we stick to money markets, college stock funds, and property -- more conservative stuff than stocks. As far as stocks go, I think the game is rigged.

Smith: Well, it's not an uncommon view. Can I ask you about a couple of stocks, though, that you may have heard of? What do you think about the recent news that News Corp. (NYSE: NWS  ) is buying Dow Jones (NYSE: DJ  ) ?

Kohan: Oh, that's just frightening. I mean, there's a huge risk that this conservative overlord might skew the information that gets reported in the news. I really fear for the objectivity of The Wall Street Journal when this happens.

That said, though, I will admit that I love some of the things that are on [Fox cable network] FX. I mean, it depends on the show. You have to take it on a show-by-show basis. I love Rescue Me, for example. Shows like that demonstrate that [Rupert] Murdoch can refrain from interfering with the content of his properties when he wants to. I just fear he won't be able to resist putting his stamp on the information side of the operation and create another fake-news, anti-journalism monolith like Fox News.

Smith: Again, not an uncommon fear. A lot of people have been saying that, about the concentration of several news outlets under one person's control. Focusing on your forte, though, do you see any similar risk in concentrating entertainment under one roof?

Kohan: Oh, absolutely. As much as I respect some of the work being done on FX, I absolutely think the artist suffers when one person controls all of the available entertainment outlets. I mean, what happens if the artist disagrees with management? Artists part with their employers all the time over creative differences, but where does the artist go if there's only one boss, and he owns everything?

Smith: Yet this has been happening ever since Disney (NYSE: DIS  ) ate ABC, and GE (NYSE: GE  ) ate NBC.

TV trends
Smith:
You've been in this business for a while now, Jenji. Can you talk a bit about how it has evolved over the years?

Kohan: The big-picture evolution is that the artists are losing power, and the executives and corporations are gaining power. Artists used to have a lot more freedom to experiment, even on the networks. Over time, it has become less creative and more like a business. Shows are perceived less as "art" and more as "product." It's becoming commoditized.

It wasn't always this way. Like back when I was working with Tracey Ullman on HBO, we had lots of freedom to experiment. Things are being more micromanaged now. You know, the culture of the various networks changes so rapidly. I've literally worked with all of the major networks by now, both broadcast and cable. And they all change over time.

Smith: At the risk of using the taboo word "product," who do you feel has the best product out there right now?

Kohan: ABC has a good business model. CBS is building on its strengths. NBC ... well, NBC needs to find itself. Maybe its solution will be to become "the reality show network."

From one point of view, the focus on reality shows, shows a lack of imagination. You could call it a desperation move. And there are some schlock reality shows, but others are really quite good. And maybe NBC's decision to go "all reality, all the time" in the 8 p.m. time slot is going to be good for the network. Maybe viewers will say, "Hey, if there's nothing good on over at ABC or Fox right now, and you just want to kick back and relax, come to NBC and watch a reality show." But as a supplier of scripted material, it's not what I like to see happening.

Smith: And the pay-cable networks?

Kohan: HBO is in trouble. They don't have another hit right now, like they had with Sex and the City, Six Feet Under, or The Sopranos. They've canceled great shows like Deadwood and Rome, because the budgets get too bloated at HBO, and the viewership on those shows couldn't support the price.

In contrast, Showtime is very lean. It doesn't pay as well as some of the broadcast networks, of course. But, well, I traded money for freedom when I moved here. The execs put a lot of faith in us and trust that we'll do the job well, and they give us a lot of rein. Sometimes, though, the lack of a big budget means we can't finance everything we want to do on the show. Sometimes, we have to go out and find a product placement and get a little extra money that way, to afford a scene that we really want to shoot.

TV's tin cup
Smith:
Which is another thing I wanted to ask you about. In Weeds, Nancy Botwin is sometimes seen carrying an "It's a Grind Coffee House" cup. The HBO series Big Love often resembles an infomercial, there's so much product placement going on. Talk for a bit about the growing use of product placements in pay-cable television. Don't these guys make enough off our monthly fees?

Kohan: You have to understand that it's not the networks necessarily. It's the company that is producing the show -- in our case, Lionsgate. If it doesn't have the cash to finance something, then we have to raise it ourselves, either by saying "yes" to someone who wants to do a product placement, or actively going out and seeking a sponsor whose product we can work into the story. But I want to make this clear: If the sponsor asks for any control over the content of the show, or how we use the product, the deal's usually off.

Smith: Even before TV, product placements began showing up in motion pictures. In your opinion, what's the single biggest difference between the economics of making television series, and the economics of making movies?

Kohan: TV is leaner and faster. I feel like we're making "little movies" every week, working on a shoestring budget. I mean, we just wrapped our third season of Weeds, and I think we did seven and a half hours of programming at a cost of about $28 million.

Smith: That's the equivalent of four big-screen movies at $7 million a pop.

Kohan: Exactly, and moreover, I think we've got better content on television these days. Motion pictures are just a bloated business, and they're really not better than television. Often worse.

Getting a boost
Smith: Speaking of quality, Mary Louise-Parker won a Golden Globe for best actress on your show last year. What would you say are the financial effects for a program when it wins awards?

Kohan: The obvious bragging rights, of course. Sometimes, the actor who wins the award will get a bonus or a raise.

Smith: And for the company behind the show?

Kohan: Expanded viewership. More interest from advertisers and higher ad rates on network television. In our case, on pay-cable, you'll actually have people signing up to see the higher-profile show.

Smith: You've certainly noticed the rise of the "alternative" viewing experiences offered by companies like Netflix, TiVo, and the various cable companies' video-on-demand services. How are you seeing these alternatives affecting the premium channels like HBO and Showtime?

Kohan: I don't think anyone in the industry -- executives or actors or other artists -- had any idea how big this was going to be, DVDs and video on demand. They're really making a killing on this.

Smith: So it's helping them, not hurting?

Kohan: Oh, absolutely -- [at least] those with the foresight to get into the game and not run screaming back to the old business model. These new avenues of delivery give them more ways to take the shows they already have and earn even more money off them.

But down the road, you know, this could change. Because no one knew how much money would be involved in this initially, the artists' contracts with the studios really discounted the value of these revenues. Now [the artists are] gearing up for a strike and will be renegotiating with the corporations to try to get their fair share.

It's not going to be easy, though. Some of these companies are only staying solvent by virtue of the money they make off VOD and DVD sales. They won't want to let go of that advantage, and it will certainly hurt their profits.

Buy, sell, or hold
Smith: Last question, Jenji. One of the longest-standing interview features at the Fool is a game we call "Buy, sell, or hold." Rather than stock tickers, I give you a concept, and ask you to tell us whether you'd "buy" it if you think it's got legs, "sell"  if it's bunk, or "hold" -- for situations where it's hard to say. And if you could briefly explain your reasoning, that would be appreciated.

I've got three such concepts for you today.

Commercial interruptions on network television.

Kohan: Sell. In the age of TiVo and DVRs, people's tolerance for this is way, way down.

Smith: Product placements.

Kohan: Hold. It's inevitable. But if the product placements are egregious and interfere with the story, then it will cause trouble and viewers to rebel.

Smith: Legalization of marijuana in the U.S., followed by Pfizer, Merck, and GlaxoSmithKline patenting their own favorite strains.

Kohan: Buy. However, I don't know about the Big Pharma model. It seems to me that this will follow more of the business model of the wineries. There are so many good growers, with so many nuanced strains. I think the market would be too competitive for Big Pharma to dominate.

Smith: It would also kill your show, though, wouldn't it?

Kohan: [Laughs.] Yes, it would! I don't know what we would do if pot became legal. Nancy would have to become a pimp or something!

Smith: So there you have it, folks. Jenji Kohan, creator of Weeds, comes out against legalizing marijuana. Jenji, thanks for taking the time to talk with us, and thanks for a great interview.

HBO is a subsidiary of Time Warner (NYSE: TWX  ) , which is a Motley Fool Stock Advisor selection, along with Netflix and Disney. See what other hot stocks Tom and David Gardner have recommended in their market-beating flagship newsletter service -- a free, 30-day trial awaits.

TiVo is a former Stock Advisor pick. Pfizer takes up residence among the picks in Inside Value. GlaxoSmithKline is a current Income Investor recommendation, Merck a former one.

Fool contributor Rich Smith has no position in any of the companies mentioned in this story. The Fool's disclosure policy is always a blockbuster hit.


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