In the early TV network days, TV shows were produced by a studio which paid affiliate TV stations to broadcast them on their channels. The studio would then receive a portion of advertiser/ sponsor dollars to cover their costs.
Raising capital for TV production
In simpler times, networks bore the majority of production costs of TV shows. They had the infrastructure and financial clout to do so.
Today, the production costs are increasingly shared between networks and producers to mitigate financial risk. Independent production companies may finance a pilot or a few episodes, but they generally lack the financial muscle to bankroll an entire TV series.
There is also a newer phenomenon of investment funds covering the majority of TV production costs through a mix of equity and cashflow. These hedge funds tend to be awarded to high profile producers rather than networks. TV networks are increasingly acting as production facilities and/or distributors.
The role of product placement and product integration is also appearing in TV shows; but not to the same extent as feature films. To date, only mega brands are funding major TV shows in this way.
Debt funded TV shows
In the old school model of DEBT-FUNDED TV shows, networks often overspend and rely on advertising and subscription/ streaming dollars to drive them towards a profit. These are the primary markets so TV shows cost a premium.
Paradoxically, the primary (or first look) markets rarely post a profit, especially with scripted TV shows. Unscripted or semi-scripted (reality) TV shows are often an exception to this rule due to lower production costs.
Financial Syndication of TV Shows
The concept of Financial Syndication was introduced as an anti-trust measure in the 1950s so that a TV show could be competitively shopped around to include their non-parent TV production studio. This isn’t such a major issue these days since the production and exhibition units of a studio function as distinct business entities under a media conglomerate umbrella.
Financial syndication became a source of contention among producers and investors because sometimes the secondary markets weren’t exploited to their full market potential. There were cases of TV networks having sweetheart or grandfather deals with studios. These arose when syndication didn’t have the financial impact that it does today.
The financial impact is further amplified when networks purchased entire libraries of TV series from non-originating studios or financial controllers.
Typically, the 100 episode mark, is the tip over point, when a TV series turns a profit. After that, a show is sold into FINANCIAL SYNDICATION in the global market. This means that the show is sold to other broadcasters (secondary markets). TV shows are typically financed on a per season (often 13 or 26 episodes). However, in the newer TV and mobile streaming models, some seasons run anywhere from 6 -10 episodes.
Foreign markets fall into a hybrid of primary and secondary markets depending on the TV show and where they are in the broadcasting cycle.
Modern TV Revenue Streams
Online TV is the new frontier of TV viewing. Despite fledgling business models, budgets are generally more sober, producers have a greater creative control and there is no such thing as syndication. Once posted, episodes exists online in perpetuity. There are some geographical differences in when shows go live. Revenue is a mix of advertising, subscription, pay per view and sponsorship.
Many traditional TV networks generate additional revenue and TV show awareness online. They either run repeats and second screen material for a monthly fee or pay per view basis.
The cable TV business model is undergoing a radical change. They are faced with a generation of cord cutter and replaced by streamers; i.e. Netflix, Hulu, Amazon TV, Apple TV, AOL, Sling, YouTube and the like. Furthermore, major internet providers and traditionally non-broadcast media companies such as print media are becoming bona fide TV production studios and shifting their TV shows from cable TV to online platforms.
The streamers are acting as both primary and produce original TV shows and secondary markets by buying second run TV series.
There is some recent activity for an a la carte, pay per view business model where viewers can opt to view 1 or more episodes for a usually small fee.
I’ve also seen cases of smaller TV streaming providers, who provide users with free TV laden with advertising. They can pay a monthly subscription fee to watch their favorite TV shows ad free.
And don’t for forget the mobile device market either.
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