Two years ago, King World Productions Inc. was a tiny, family-run New Jersey company that eked out its existence by selling "Little Rascals" reruns to television stations.
Today, King World is indisputably the hottest company around in the cutthroat $1.2 billion market for syndicated television programs. It distributes "Wheel of Fortune" and "Jeopardy!" -- two of television's top-rated game shows -- and is coming off a lucrative public offering that turned the King family into multimillionaires and the company into a Wall Street wheel of fortune.
The stock, which opened Dec. 10 at $10 a share, closed yesterday at $17.
This rapid rise from "Rascals" to riches is largely the result of the astonishing success of "Wheel of Fortune" -- a show loosely based on the childhood game of Hangman, with contestants taking turns spinning a giant cash wheel for the right to guess the letters that make up the hidden word or phrase.
Since King World began distributing it in 1983, "Wheel" has obliterated most of the competition in its time slots while racking up the sort of ratings that make station managers and advertisers drool. Wheel is the top-rated show in its time period in 127 stations around the country -- fully 70 percent of the markets in which it airs, according to Nielson statistics.
" 'Wheel of Fortune' is the highest rated show in the history of syndicated television," crowed Michael King, King World's president and one of the two King brothers who runs the company. (His older brother, Roger, is King World's chairman.)
King says the company went after the rights to distribute "Wheel" after research showed that, despite constant rescheduling of the show, its ratings always managed to hold firm and grow.
After securing a distribution agreement from "Wheel's" producer -- Merv Griffin Productions -- King World launched a high-pressure, and highly selective, sales effort to place "Wheel" on the right stations in the right markets at the right time slots. The company managed to sell the show nationally despite the absence of stations in New York, Los Angeles and Chicago, the three largest markets. To succeed from that position in television is extremely rare.
The show quickly rose to the top of the ratings charts and King World rode "Wheel of Fortune" into one of its own. Company revenue last year jumped 256 percent over 1983 levels to $29 million, while net income climbed 418 percent to $3.3 million. According to King World's prospectus, "Wheel" accounted for more than two-thirds of the company's revenue.
The company's introduction last September of "Jeopardy!" -- a remake of the successful NBC trivia game show that ran from 1964 to 1975 -- also has met with solid ratings on most of the 115 stations on which it premiered. Now roughly 140 stations covering 90 percent of the U.S. television audience carry the show.
King World not only makes its money by selling the shows to stations; it also reserves advertising time within the shows, which it then turns around and sells to national advertisers. Thus, the more stations that carry a King World show, the higher the advertising fee King World can charge to national advertisers. The company also licenses "Wheel of Fortune" and "Jeopardy!" board games and "Little Rascals" paraphernalia.
While the company declined to make financial forecasts for fear of violating Securities and Exchange Commission's "quiet time" provisions, the prospectus indicates that the company expects to gross at least $150 million a year within two years. There is speculation that King World's revenue will top $100 million this fiscal year alone.
"We can't see any reason why King World can't be a very major company in a very few years," says Stuart Hersch, King World's chief operating officer, who was brought in last year to give the company more professional management.
"If we don't do it now, we miss our chance. It's when you're hot that you have to strike."
Changing public tastes could depress ratings, and, therefore, King World's fortunes. But for now, King World has adjusted comfortably to its nouveau-riche status. At last week's National Association of Television Programming Executives convention in San Francisco, King World hosted a lavish quiz show party at the Hilton based on its "Wheel of Fortune," "Jeopardy!" and new "Headline Chasers" shows that featured a Cadillac El Dorado as the grand prize. The company's $300,000 convention floor booth -- featuring a fountain as a centerpiece and caviar served on silver trays -- was the show's largest.
"Hey -- this business has been great to us," Michael King says. "We wanted to let people know that King World is a major force in this business."
"This is one of the biggest success stories this business has ever seen," says Allan Frank, vice president of programming for WDIV-TV, the Post-Newsweek station in Detroit, which was the first major market to air "Wheel." "These guys are very smart and they're terrific salesmen -- they make terrific pitches."
There's some disagreement as to whether King World is lucky or good, but, as one South Carolina television station manager says, "In this business, who knows?"
King World's recent success means that the company has gone into overdrive as it asks stations both for more money and advertising time when they seek to renew the show. These renewal negotiations have won King World a reputation as a company that doesn't hesitate to play hardball to get what it wants.
"On the record, they're totally unreasonable," says Michael J. Schweitzer, general manager of WCPX-TV in Orlando, Fla., the CBS affiliate that carried "Wheel" last season. "They asked for a 500 percent increase -- from $1,000 a show to $5,000 a show -- plus a doubling" of the advertising time set aside for King World's use.
The Kings don't like the criticism, but they say it goes with their newly won territory.
"There was a story in Variety quoted a station manager who said that we were 'raping and pillaging' in these negotiations -- and that was a station we didn't sell," says Michael King. "I can't ask for more money when 'Wheel's' ratings go down -- I've got to get it now."
The prospectus indicates that, when King World's advertising sales are factored in, renewal revenue for "Wheel" has risen on average from $20,000 per show to $97,000 per show. Industry insiders indicate that next year the show will reap an additional 50 percent to 100 percent increase in per-show revenue as King World sells more national advertising.
But King allows that WDIV, as its breakthrough station, has a "special deal" and was spared the trauma of a renegotiation battle. "This is a relationships business," King says.
According to industry statistics, game shows usually have a successful life span of from four to seven years, so King World is likely to enjoy fairly prosperous times for the foreseeable future. The company has already grown from 15 to 50 employes in the last year and has expanded from a single office in Summit, N.J., to offices in New York, Los Angeles and Chicago.
Fat with cash after its public offering, the company now is on the lookout for program libraries to acquire, says King World's Hersch, preferably programs that can be run and rerun into perpetuity -- just like the "Little Rascals."
"I still think it's the best show we have," says King.