Michael Shepard is president of Thunderbird Films, which, with Program Partners in the U.S., distributes Canadian TV shows including Intelligence, Degrassi: The Next Generation, ReGenesis and Da Vinci’s Inquest

Syndication is often misunderstood. Every so often I’ll read an article that refers to the domestic and international syndication of programming, implying that they are one in the same thing, which they are not. In the U.S., the syndication market is more like a barter system – one that, though long closed to non-American shows, is opening up to foreign content.

U.S. networks and cable channels operate very differently from one another. The cables like TNT and Comedy Central have programming teams that license and/or create shows that are beamed out on a 24-hour feed seven days a week. Another team, likely in New York, then sells ad time.

There are only six commercial networks (CBS, NBC, ABC, Fox, MNT and The CW) in the U.S., but 210 local markets served by more than 1,000 individual TV stations in the U.S. Most are affiliated with a network, which mostly only provide programming between 8 p.m. and 11 p.m., plus a few hours on weekdays and weekends. MNT, Fox and The CW provide significantly less, and run none of their own programming after 10 p.m. Monday through Friday.

Because networks provide shows for only a small percentage of the day, the individual stations are left to fill the remainder of their schedules with either local news programming or syndicated programming.

It is important to distinguish network programming from syndicated programming, and the different types of syndication. It can be confusing, because many network shows turn into syndicated shows and are then called ‘off-net shows.’ There are four types of syndie programming:

First-run syndication: Oprah, Wheel of Fortune, Judge Judy. Original shows that air in most of the 210 markets, but are often at a different time in each market. Judge Judy may be on at 3 p.m. in Miami on the CBS affiliate, but at 12 noon in Dallas on the Fox station.

Off-net syndication: CSI, Seinfeld, Frasier. Shows that may still air new episodes on a network during primetime, like CSI, while the older episodes run in syndication on some mixture of the 210 local markets. Of course, Seinfeld and Frasier went off NBC several years ago, yet continue to thrive in syndicated reruns.

Off-cable syndication: South Park, The Shield. Originally produced for cable, the older episodes have moved into syndication.

Off-Canada syndication: Da Vinci’s Inquest, Cold Squad, Stone Under Cover, ReGenesis, Degrassi: The Next Generation. Shows produced originally for Canadian networks and which subsequently move into U.S. syndication.

There are only about a dozen companies that syndicate in the U.S. – simply because the barrier to entry is very high – including Warner Bros, CBS/King World, NBC Universal and our American affiliate Program Partners. Each company has a sales team (usually between 10 and 20 people) that constantly travels to the 210 markets to visit each of the individual stations.

The stations usually do not pay any money to the syndication company for programs. Instead, they barter. The syndication company agrees to provide each station with the program free of charge and in exchange takes a percentage of the advertising time. In many cases it is a 50/50 split.

Unlike in cable programming sales, the syndication company continues to work very closely with the stations to provide promos, recaps, ratings analysis and closed captioning, in addition to organizing the national marketing campaign to launch the shows. In launching Degrassi this year, we took the cast to a number of U.S. cities, including Cleveland, Las Vegas and Phoenix – where they signed autographs and did station IDs for the local affiliates.

The syndicator provides all of this simply because individual stations do not have the necessary infrastructure to do it themselves. Any show that is successfully syndicated has, in effect, created its own national network of individual stations.

The syndication company then sells its share of the ad time to national clients, while the local stations sell in their territories. Many of the syndication companies have their own sales teams, while the smaller ones contract with ad sales companies in New York.

The upside in syndication is huge. Shows with strong ratings like Wheel of Fortune and Oprah generate hundreds of millions of dollars in advertising revenues. On the other hand, the cost of launching a show in first-run syndication is incredibly high. Launching an hour-long talk show designed to compete with Ellen or Oprah would require a company that could sustain what may turn into a $10-million or $20-million loss if the show features a highly paid celebrity host.

Syndication is not as difficult if you have a show like Seinfeld or Frasier. When you have a hit show coming off-net, the stations and station groups line up and agree to favorable barter terms, in addition to paying cash. But taking hit programming into off-net is reserved for the companies that managed to get their shows on the original network in the first place – namely the studios.

For the 2007/08 television season, we will have five Canadian shows in national syndication in the U.S. Four of the five will air on weekends, while Degrassi: TNG, which we recently launched, will air on both weekends and in daily strip (Monday to Friday) syndication.

Our first show syndicated in the U.S. was Da Vinci’s Inquest, which is now in its third year. Of the 158 shows in U.S. syndication in June 2007, Da Vinci’s Inquest ranked 83rd, with a live AA/GAA% of 1.6, which translates into an average of about three million viewers per week.

Our other shows in syndication include ReGenesis and Crimewatch. We recently launched ReGenesis and are optimistic that it will be a success. Crimewatch is a two-hour block that rotates episodes from both Cold Squad and Stone Undercover. In the 2006/07 season, Crimewatch generated an AA/GAA% of 1.4, which translates into an average of over 2.5 million viewers per week.

It’s been a solid run for Canadian programming in the U.S. However, we are keenly aware that the potential audience for syndicated programming has been shrinking each year, as viewers migrate to cable channels and Internet sites, while the costs of doing business continue to increase.

This market contraction represents a huge challenge for us and everyone in the syndication industry. But, like anything in the television broadcast business, it all comes down to two things, ratings and cost. Keep your ratings high and your costs down, and hopefully the ends will meet.