How One TV Startup Thrived in a Shrinking Syndication Market

content licensing business inside and out. They've been partners since two thousand three, when they were brought together by the mission to sell South Park into broadcast syndication. Debmar Mercury today is active in first run syndication as the home of daytime TV staples, including The Wendy Williams Show and Family Feud. This fall, they're taking two big swings with the launch of a daily talk show hosted by Nick Cannon and a magazine show, Central Avenue from producer Will Packer.

As always with and Ira, it's a lively discussion about the business of selling television shows and taking the pulse of the podcast TV landscape in big cities and the heartland. It's a fun and candid conversation from the leaders of one of the most successful TV startup businesses of the past fifteen years. Mart Marcus and Ira Bernstein of deb Mark Mercury, thank you so much for taking the time to speak with us. See here, this is a big year for deb Mark Mercury. You're taking two big swings

in the fall in First Run Syndication. You've got a talk show with Nick Cannon, who is pretty much all over the airwaves these days, and you also have an interesting magazine type show called Central Avenue from producer Will Packer. Let's talk about what it is about this particular year that you see this coming fall, that you see opportunity.

And let's talk about the First Run syndication marketplace, because it's been kind of a sleepy environment for the last couple of years, but you and other companies in the past twelve months have started to really bring some big name and some big talents out. What is it that you're seeing in First Run these days? Oh, you know, I it is a big year for us, but it's not We didn't time it to be. In other words, I think we're a little bit like sometimes if you

have the right show, then you bring it out. So in this case, we we're lucky enough to find Nick Um and then we've been working on stuff with Will Packer, So it just it just coincides with the fact that they're coming out at the same time. Whenn't we We weren't saying, oh, let's put two shows on UM in the fall of twenty but look, we're just we're excited to have Nick. From a standpoint that a lot of times people do talk shows. Not everybody, but a lot

of times they do. When you get some of the big names, they'll do talk shows when they're on the the downside of their career. Maybe they can no longer get a movie as often or a TV roll as often, and they kind of want to then come into the marketplace. I've always wanted to do a talk show. We're getting Nick, he's on the up in his career, so we're really excited about it. I think the issue is it's all kind of I mean, the bigger question is it was

content driven, and we're developing stuff all the time. So I think when Nick substituted for Wendy, which was a year ago now, we were always developing shows, but we literally saw him do the show and we kind of looked at each other and said, oh my god, he looks like he's been doing this for twenty years. It's like it's natural. He's not nervous, he's fun, he's exciting. You want to listen to him, you want to see him again tomorrow. And so that's what started that conversation.

It wasn't we got to have a new talk show for a fall twenty And then in the case of Central Avenue, we've been working with Will for a couple of years developing a number of different things. This one sort of bubbled to the top at this moment. We tested it with Fox. It did really well, but that was an example of the market actually was a little bit crowded, which is why we moved to do a weekend hour. So we kind of backed into the distribution

form of that show because the market was crowded. But again, it was driven by the content that we happened to have created at that moment in time, not by we know, we need a show for Saturday night at eleven or seven o'clock. It was driven by the content and well, Nick is a call it alive. It may not be live, but a lot effectively alive. Daily UM one hour talk

show Central Avenue was driven by what Iver said. We had a lot of it, spent a lot of time Will Packer trying to come up with ideas they wanted to do something with him, and we kind of looked at two things. One because there's no or so few sitcom's coming off the off of the network that stations

can run. Most of the station was certainly the Fox, CW and mind Us stations make most of their money selling airing older sitcoms from six to eight o'clock at night, like Friends or Two a Man or something like that. That's the sweet spot for advertising and the most amount of money that you can make and when most people are watching TV, and those stations make a huge percentage of their profit from sixtight o'clock at night, and they're just aren't any new sitcoms to buy. So it's waning,

has been waning for years. The hits are farther and farther between, and so what's happened is you start to look out into the two years not twenty two years away, but there's there's even less and so plus with the streaming services taking Friends in the Office and those things, and not even sure if they're gonna let them be on, or maybe they will, but the ratings will be lower.

What are these stations going to run? And so when you start looking at availably from six to eight o'clock, we believe that the stations are going to be much more in the business of looking at brand new, original, first run productions for those time periods. Central Avenue was made on the theory that Entertainment Tonight and Inside Edition have gotten really old and and and and honestly too

white as a as a business. Too white. Because the marketplace and that's watching TV, is a much more multicultural viewer. So we set out to and will sent out to make something that would address the needs of the Entertainment Tonight Inside Editions address those people who want to watch that, but take a little more multicultural point of view. Aimed

to air from six to eight o'clock. We just thought it was a little too crowded in twenty and that's why we're going to do it as a once a week show and hopefully we'll work and then we'll bring it out as a five day run show later. And then one of the show we're doing, which we haven't mentioned,

but we're bringing out. We've already sold it. His Ship's Creek, and that's not first run, the rerun rights to rerun rights to that, that's sort of all that's and that's in those in those same spots, and we've already we had already sold that. But but that's kind of an interesting show that has gotten ridiculous number of awards and accolades all over the place. They keep getting them in their sixth season, and we're really excited about that one too.

And that's you know, on Fox stations and clear throughout the country. That's a show that kind of came to prominence in its third season off of Netflix, meaning it was running on Pop, the cable network, and it's produced out of Canada, and all of a sudden, the show became this hot thing. A few years ago we acquired the rights, and now it's in its sixth season, going into its sixth season, and we're all living in this world where the TV business is changing so much, so

nobody really knows. There's not there's very few shows that have been sold coming off of a streaming plat form into a free platform. We we're actually the only ones who've ever sold a original streaming show um and on Netflix, which was bo Jack bo Jack Horseman. We sold it to Comedy Central this one. While it's it's there's been shows sold off cable, which is what Pop is. But Pop is such a small network that almost nobody watched it on Pop and they all watched it on Netflix.

And so now we're going to syndicate this it's coming off Pop, but really it's kind of coming off Netflix. So the question is it's coming off to be aware of by Netflix? Right? So, and by the way, I mean, you know, we're we're realist about this. We think Ship's Creek is absolutely hysterically an amazing show. You think it's the kind of show that should have legs in syndications. It's a little quirky. I mean, it's a little quirky, then say it to enough manners. It's not quite a

straight down the middle shot, but it's legit funny. But it's coming off Netflix, so is that our people are just finding out about it. So we're hoping it catches fire. But you know, like I said, I think we're all living at a different time these days that if this was you know, thirty years ago and Ship's Creek was coming off of CBS and it's as good as it is,

this would be a huge deal. But because it's Pop to Neflix, I mean, we don't know the stations that nobody really knows what the value of the proposition is. But we're all going to try it. You're gonna find out interesting when you sit and talk to a station manager or a station group buyer and you talk about, you know, well, this is coming off of Netflix, or this is coming like, what kind of questions do they ask you because this it seems like this is all

such a world of unknowns. Let me go back to our roots, which is we started the company with with South Park. And so the only thing you can say, because this isn't coming off of it's not an ABC sitcom that you can say, God if it breaks at one point seven rating and it does that for three years, it's going to do this in syndication. This is coming off a Pop which has really low ratings, but it's the highest rated show that they have by a wide margin.

Just like fifteen years ago or eighteen years ago whatever. With South Park. We were sitting there saying, I still remember the presentation because that's how we started the company. It was a three hundred and sixty five percent index to the regular rating on Comedy Central. So when something outperforms whatever its environment is, to that great an extent, we just think you have something. It just means that three and a half times the amount of people that

normally watched watch of this. You know, people come to the right come to find it. So so I think we know that it has that ability to it. But it is also on Netflix, so not exclusively, so you can say, yeah, I'm just gonna watch them and watch them all tonight. I don't mean but but people watch TV differently, you know. So the people that are watching Channel five or Channel eleven, um, you know in this mark it in New York are are watching TV passively.

They're not choosing two on. They may say tonight, after dinner, my wife and I are gonna sit down and we're gonna put Netflix on and watch. Um I'm sure they're gonna watch right, But right now I'm home and I'm flicking around the channels and I've stopped at you know, TMZ or I'm watching Ship's Creeker. I'm and that's how they watch. So it's so hopefully they'll they'll watch naturally like that. The people to watch TV watch that way

and hopefully it will coincide nicely. Even though it's on Netflix. By the way, Friends has been on Netflix, it's been on broadcast, So it is it a different viewer. I mean, no, nobody knows, nobody, There could be all kinds of research. No one really knows what's going on. There's a there's a teutonic shift in what's happening, and yet most the money that's being made is still in the old version and the old live linear. Yeah. I mean, so everything's up in the air. But we're all, you know, trying

to figure out how to stay in business. And there's plenty of business and um, but I do think we're at a time where there's just so many things changing. Um, you gotta keep your hand the ball. What is the mood when you talk to people? I always think of stations. Are the retail level of television in the local markets? When you when you talk to people in local markets, especially outside of the top five markets, UM, what do

you hear? Do you hear concerned? Do you hear handwringing about all of what we've been talking about, or do you feel like there's still that that there is still people still feel very positive about broadcast television. I think the issue is they're all very challenged. Everybody's challenged, but the broadcast TV business operates that depending on what group you're looking at, between you know, A thirty five and its profit margin. So yes, they're all being squeezed because

they're most of these are owned by public companies. So if you're making a billion dollars and you'r the X y Z big, one of the big groups, you know, your whole goal is to make a billion and fifty

next year. So it's really hard to make the billion, and it's even harder in what is basically an amazing business but relatively flat slight growth that extra fifties really hard that if you ask them what was the five year plan on your business plan revenue, most of them would tell you that it's at least flat that they made They at least made it. Yeah, that continue that not their profit, but that their revenue should be around flat like the and they don't think it's going down.

It is soft. There's just so Here's the other thing is that advertising. You know, with all these streaming services, advertiser needs places to go. So the local TV station is still a great you self. I mean, the reason people buy ads on the local TV stations, They've been around a long time now, these local TV stations. The reason people are buying ads is it sells their product. If you want to sell the Toyota on Saturday, there's

a lot of things you can do. But even want to actually pile you know, eight thousand people in your local Toyota dealership, You're gonna take some broadcast ads out because that's on Thursday and Friday. It's right. And by the way, why do the why do the candidates spend so much money on the local team? They want their Toyota. People are watching it and you're reaching a person in

a city. And and again I don't know how far tangent you want to go, but like, what's really happening here is is that on a big picture basis, we all have heard of cord cutting. Well, what what's happened is is that I don't know the year that it was the peak, but let's say that the top cable networks,

it was probably maybe ten years ago. If I had to get I'm not looking at it thing, so I called it ten years ago, they were probably all around a hundred million homes full distribution to it was about eight years ago, I believe about a hundred million homes. Those now are about millions and drop heading to and so when the cable network, if the guy who had a hundred million homes has now eight dropping frat fast can probably in the seventies as we're speaking, um going

to most of them think it's going to fifty. So what happens is those cable there's other than Fox News or CNN or ESPN. Maybe if you're just a general Comedy Central, USA, T and T whatever, they can't get in front of more homes. There's no other option for them. So for the most part, when they're getting cord cut, they're losing. And yes there's some services that are having skinny bundles they're getting some of back, but for the most part, their footprints going from a hundred going down

to fifty. So if you're on a TV station, there's good and bad news. The good news the bad news. The bad news is your cable universe is a little smaller because the cable operator has less subscribers, and your commend that the good news is right now there's twenty two million of people. Don't even I can't believe people talk about this. There are twenty two million homes in the United States then watch their television on an antenna, old fashioned over the air in the back of the TV.

It's really so much. It's more like an Apple device's antenna. But when they say antenna, they also have it's not like the old guy or the you know, the guy I ate TV, but I'll just do the antenna. It's the younger demographic. Actually, that's the cord cutters. So they

might be watching this. Two constituents of antennas. One is the older and that's a bit of what we're thinking about when you think about who watches on antenna, But the majority of it are younger people, you know, eighteen to thirty four, who are cord cutters, who say, I don't want to do a deal with you know, Time, Warner Cable or Cox Cable whatever. I will do my antenna and then I'm gonna buy Netflix. I'm gonna buy Apple, Hulu, um and three other services. By the way, these this

is a growing business. And think about this. Your little Fox station gets a much higher rating in the antenna home than it ever did in the cable and there's not an opportunity ative more than you think. And then again, I don't we don't want to get to Front of the Week. But you obviously have the digit nets, so the multi cast channel. So if you stick your antenna, you do have like thirty five forty channels, but you don't have a hundred, fifty or thousand when you get cable.

And really some of the digit nets are relatively entertaining, and they're decent, they're not as good. They're not spending the kind of money USA or T and T or COMBEDT cential word yet, so the product is older generally, some of the movie prints are a little acting exactly so. But my point is, so if you're a TV station, you're getting some of the people the cord cut are going to an antenna, and not all of them. And then but almost all of them that go to a

skinny bundle get a broadcaster. So as we sit in the universe that we are right now, broadcast stations are still covered in the United States where the cable nets are getting down to So if you're an advertiser, again, where are you gonna go? You got less places to go. Yes, there's there's a lot of a V O D and things like that, But at the same time, networks are fully covered and stations are fully covered. And as the cable net was dropped further, that spread gets even bigger

between antennas skinny bundling. I think the broadcast broadcast business is not going anywhere anytime soon. Well, I think when you look at the upfronts, that's really the most illustrative at this point because every year since I did my first presentation, I think it was like six on how the networks were declining and how could this check demand. It's the same exact thing, you know, thirty four years later because what's happening, and it's even more exacerbated today

because of all these other things. So you have a decline in rating. It's not huge, but it's a slight you know, the chip keeps chipping away. But because the advertisers have to place that money, the increase in the cost per thousand or the cost per point locally is outpacing the decline in the available for some years. Overall, if you look at ten years net net, you're probably up a little bit. As a broadcast Sometimes that sometimes that networks are flat in revenue, but because their rating

drops about the same. In general, if you look at a ten year trend, they're all up as all the stations. If you look ten years ago to today, there's blips, but you're getting more for their a way of with the smaller rating, right or they're getting more per point, so they're offsetting the decrease with a higher higher cost

per point even though the ratings are lower. And the same thing with the syndicated shows, you know, are all of the shows are getting lower ratings than they used to get for the same reasons, but they're getting higher CPMs which offset some of that um default. Let's talk about Let's talk about your company, Denmark Mercury, because I

love your story. You guys came together. You both had long careers in syndication and in advertising more you worked for Disney IRA, you worked for Reischer, and you worked in advertising for many years and through the vagaries of of you know, consolidation and changes in the business, you guys both wound up. You had your own companies late

nineties early two thousand's. You came together in two thousand three for a specific project by comedy Central to come in and help them monetize south Park, which was racking up episodes, had become an institution for them. But and somebody realized, hey, there might be and yet another afterlife for this that could come that could bring in a couple of bucks. Um. And you never intended to build Devmar into the you know, to quite the shop that

it is today. Well, we never actually did a business plan that we never did a power point, and we never did any of those things. We just don't. We still don't. We literally just you know, it's the old fashioned you know, how did you make all this money? Is that? Well, we bought stuff for a dollar and we sold it for two dollars. It's kind of a version of that. And on south Park, mort was acquiring it asked me to join him. I was actually a Lionsgate had a worldwide TV at that point, but I

had Mercury because this was early days of Lionsgate. It wasn't the you know, eight billion dollar company it was today. It was, you know, a few hundred million making some movies and some TV shows here and there. And I had started their international distribution. There wasn't even domestic, wasn't a need for domestic. So I had kept Mercury as a separate company and my deal with them, and this was a couple of years into it, and more approached me and it just seemed like a fun thing to do.

I was allowed to do it. I went back to John Feldheimer and basically it became so much more fun. I said, I'm gonna quit because this is what I really want to do, but I'll take care of you. And I basically made an exit deal with him and hired my replacement and went off and parted with Morton. It was turned out to be a really smart thing, and you know, we have had a good time. I

will tell this is a really quick story. I told it at the Irish Wards, which was that yes, we acquired south Park in two thousand three, but you got to go back five years to get the actual story. It's pretty brief. But I'm working at Disney and President when it was a television running overseeing all syndication. Yeah, for Disney, this show called south Park comes on the air and it's like the most amazing thing I've ever seen.

So I called Doug Herzog, who's the press of Comedy Central, and said, I'll tell you, what if you get to a hundred episodes, I'll pay twenty million dollars and have the syndication rights for Disney will syndicated in sharing the money with you, and we'll all make a bunch of money. And Doug wanted to do the deal. And but he's much wiser than me. He realized I was a little rogue out there as the I was president. I was the president of the division. But it is the Walt

Disney company. So he said more, I respect you a lot, but honestly, I need I just need you to make sure it is the Walt Disney South Park. Can you least ask your boss, if at the time was Steve Burke, if if you can actually make this deal? Because here I am offering twenty million dollars and I didn't even ask anybody. So I got probably a good idea. So

so I called Steve Burke. He hadn't seen it. I sent him a couple of episodes, and a couple of days later I get a response from him saying, Okay, that is the funniest show I've ever seen in my entire life. And there's not a one percent chance you're doing this for the Walt Disney Company and that was the end of that. Five years later, they had yet to sell Comedy Central indsyndication and it was still available. So and so and so South Park is sold. It's a it's a success. You you and I remember at

the time there was like, who's gonna buy this? It's on Comedy Central all day and night. Yeah, we kind of built the company on doing things that any sane person had said, like, there's no chance, not that you wouldn't really succeed at it. You can't even get on the air, forget about it. I remember somebody who still go nameless was like, you're not even You're just not gonna sell it. You're gonna have to realize you're not

gonna sell it. And then it looked like we got some trashally what you might sell it, but you're never gonna get cash. And then we started getting cash when they said, what you might get a little cash, but it's not gonna be like a regular sitcom. You're gonna get like a year or two, and so lo and behold. We sold it for five years cash plus bar the whole thing, and that's how the company was started. And then we the next big thing. It was actually Tyler Perry.

But wait, wait, in between, there must have been a point when you looked at Chather and said, let's keep this going. But one of the things that's interesting in South Park was that time. So we're in the deal, there was a clause that said, if we don't do that well with it, they were actually nervous about it. So there if we don't sell it so deep they even wanted to buy it back because they were concerned it was gonna hurt. Even though they wanted to do it,

they were concerned. They kind of had both sides and they were actually nervous. So it finally goes on the air, and at that so in two thousand three, Duggers I wasn't the president of Comic Central. It was a man named Larry Divney, was a great guy. Divney left and by the time it aired in two thousand five, Duggers was back Central again. As the world turns up by it, and he calls up and he says, I am really really concerned that this is going to kill South Park?

Are you you really have to do that? That we've sold it percent of the United stage fifty stations. It is done it's on. He was really nervous about it. So that was like early September. It goes on the air, six weeks later, were gonna call from Doug. He goes, oh my god, it's helping me. It's helping the ratings because I didn't realize that a lot of people didn't even know that it was on the air, and they're finding it in syndication and they're watching the originals on

Comedy Central and so he goes keep it going. So he didn't even realize that. So they're even back to the same thing with kind of what's probably happened with Pop and Ship's Creek, and we're hoping the same thing will happen with Ship's Creek because still so many people have haven't discovered it yet. But that's what happened. So the broadcasters they're running at the same time, they weren't

hurting each other, they're actually helping each other. And is it still because I know that it is going to HBO Max, so it's no longer in syndication, So so for us that had happened. And I know you're asking the other question, like when did we decide we got to really do this kind of didn't. I still, you know, we were doing South for the Revolution and we got Revolution movie from Joe Rock. But the next big thing we we then decided, you know, well Tyler Perry was

coming up. But in between that and and that time, that was a couple of years. So at this point we're like, I'm selling stock and we're using savings and we're living. There's no money. I mean, you don't you know, you sell a show, you don't get money for a couple of years later. So it was a classic small business. We then incorporate. We did join because we had to

get a loan. So when we had all the receivables from South Park, we said, well, oh my god, we have you know, call it, you know, fifty sixty million of cash receivables. We can actually bank that and take out a loan to actually do this company. So I'll never forget being like I'm in my car driving here and Mort's in l A and the lawyers on the phone and they have to file the papers in order to be a company in order to then file for

the loan. And the guy says, well, okay, I have a couple of questions, Like, first of all, what's the name of the company. And we said, well, you know, we've talked about this. We agree on pretty much everything. We argue about everything, but we ultimately agree and everything. We can't agree on the name of the company. So he's Debmar Mercury. It's called Debmar Mercury. Everybody said, well, that's a silly name, okay, but that's what it. Just

write it down, write it down for the paper. And then he says and secondly like, who are you guys said, well, we're partners, so no, no, no no, you need a title. I have to fill out this form and said, well, it's just we have this one show. I mean, chairman's kind of pretentious. We're presidents, but we're both presidents, so we're co president. Fine, we'll be co presidents. What else you got? And that's how we filed the paper. We then go to get the loan and the bank says,

it's really impressive. You got it's just the two of you guys. Is really great. By the way, we're gonna need your houses to give you the loan. So we literally put our houses as collateral to get the loan. And then as we do working together more, it's thinking, well, Okay, now that our entire lives are on the line, not that they weren't before, but now they really are. What happens if the show doesn't go for more there's like a hundreds of episodes they're in a vault goes well,

what if the volt goes on fire? So we started looking into all of that. It had its own set of problems that had content issues that we the stations were nervous about. And if something really bad happened, maybe advertisers wouldn't be in it, you know, so all your projections could be wrong and had a lot of it had hurdles in its way. We you know, I think we did a really good job, you know. We we we put up we had we created a board from stations who bought it and ran the edits by them.

So when we had episodes that we were trying to clean up a little bit, um, we'd say what about this scene? What about that scene? And they was hacking live with that. I can't live with that. We had we had sec attorneys, um, so we really really went out of our way because the stations understood what they

were bying. They really liked the idea of it, but they also were concerned about it because it is they're pretty rough, pretty It sounds like all this based on your years of knowledge of what your customer would want, what kind of TLC they would want in a situation where they were be some concerns. By the way, did two things. It made them more vested in the show, but it also um allowed us to with confidence to know that we were editing it the way that our

clients needed it. At the end of the day, by the way, we had a hundred and fifty episodes, I think we only three, only lost three. We couldn't air the one one of our favorite, the Ship seven times. You wouldn't have been able to edit that because I've ever seen the ship where they have a counter. Yeah,

So that's definitely the next evolution in the company. The biggest thing was being as Tyler And this is now a year and a half later, and Tyler had come to us through marketing and Wayne Morris because he was frustrated, as we talked about earlier, with the creative process. He was in that process of trying to sell shows shows and could you put a blonde girl next door and you could make his best friend a little redheaded boy, and he was just like, I'm not doing that. If

I fail, I want to fail my way. So, long story short, we we got a business with Tyler. We fund all the marketing. We're still writing our own personal checks to Nielsen kind of thing, which is painful thing to do. And we're now have the Tyler shows and we're sitting there and we had the classic small business because this is now a six in business three years, we have a we have a you know, call it

a five six million dollar line. We've paid half of it down because the cash flow is coming in, and yet we're looking at the projection saying, you know, in six months, we're gonna be out of money, even though we have way more money coming in down the line. And so that's when we decide we got to do something. And then we looked at more new Michael Eisner, we talked to him, we talked to a lot of other people about selling, and then ultimately worked it out with Lionsgate.

Lion Skate came in, sold the company to lions Gate, and fourteen years now and we've done three deals. Because each time you do a deal to do an employment agreement, that agreement comes to an end and basically we re up three time. Some they have been great partners and clearly you have reached the finish each other sentences stage. Yeah, ago, exactly, Yeah,

that's true. Is there a certain yin and yang as I mean, I get the sense you're both very analytical, but is there like, is there a division of labor at all or do you kind of both do do a little bit of everything and here's a little more sales than me. But for the most part, we just any big decision, we're just we just we just basically roll play it out. We make the decision quickly, but we don't always look at it the same way, obviously, and but we try to. It's rare that we really

really really can't come to the same place. It's been pretty good. It's a great business success story, entrepreneurial success story, and you know, be very interested to see what we what is to come this fall from Nick Cannon and Central Avenue. And thank you so much for taking the time to sit and talk with us about the business. Thank you. And by the way, by the way, I will say, you know a lot of people think that, you know, the TV business is mature, and it is,

but we're still bullish on it. We still think there's a real business out there and your end of the distribution is where the rubber meets the road for monetization. So hopefully, thank you, thank you, m thanks for listening. Be sure to tune in next week for another episode of Strictly Business.