Reading this NYT article on the cancellation of Sheen’s show, I’m confused by the economics. If 30 second commericals are sold for only $200,000, how does the show pay for the $4 million/episode costs (not sure if that even covers all the costs)? Obviously some money comes in from future sales of re-runs, but assuming 9 minutes of commercials for a 30 minute show, the adverts only bring in ~$3.6million.
http://www.nytimes.com/2011/02/26/business/media/26cbs.html?partner=rss&emc=rss
I could very well be reading this wrong, but it looks like syndication brings in another 4.85 million per episode.
As you point out, the syndication rights are vastly more profitable than the first-run airing. That’s why networks will latch on to a successful show and run them into the ground in order to attain at least 100 episodes.
Nobody gets paid a million dollars an episode the first season, but once something is headed for syndication, they can demand far higher salaries based on the expected future revenue. For example, the six principles of Friends earned $22,000 each per episode for the first season. By the end, they were earning $1 million each per episode. Even with Friends’ ratings, they weren’t earning anything close to production costs, but by that time they knew the thing was going to be airing reruns for the next 3000 years.
Also, on top of syndication, there’s DVD sales.
And product placement fees.
I think that’s for domestic syndication. They’ve also sold the show all over the world.
America has much to answer for.
Unless they own the show, networks don’t profit from syndication. The production company does.
Let me add:
The network makes its money from selling the ads. The costs of the episode are carried by the production company. So the episode sets a price per episode and the production company budgets accordingly, factoring in the income from DVDs and eventually syndication and foreign sales.
A show much cost $3 million to produce (the number in the article), but the network doesn’t have to cover the entire amount. In addition, I believe the show gets a payment of some sort when the show is rerun, so the income per show is potentially doubled (probably not – they might not be able to get that much for a rerun, but I can’t imagine the producers allowing the network to get two chances at earning money when they only get one)
But the network license fee doesn’t normally cost them nearly as much as what a successful show brings to them in advertising.
I don’t know how much CBS is paying WB for TAAHM, but let’s say it’s $2 million for first-run episodes and $1 million for reruns. If CBS can get $3 million in commercial revenue for first-run and half that for a rerun, then it’s making money, and has an incentive to keep the show on as long as the ratings hold up.
Meanwhile, Warner Brothers is actually losing money on each episode. But their payoff comes once they have enough episodes produced to syndicate it. At that point, except for duplication costs and contracted reidual payments, the studio is simply using the same inventory over and over again.
At some point it becomes a game of chicken for both the network and the studio. NBC bet that putting Jay Leno in prime time would result in a show with a smaller audience (and hence, lower ad rates) but a much lower cost per episode, ending up with the same or even higher profits. That turned out to be true, but NBC didn’t realize that Leno’s low ratings would drag down the entire schedule, not just that single time slot. While Leno’s show by itself was profitable, the network’s revenues as a whole suffered.
Just want to report that the site requires a login to view the story. It took me several tries with Bug Me Not to be able to read it.
Anyone know how many people are now out of work because of the early hiatus?
I thought it was interesting that they shut down production instead of giving a shot to a Sheen-less Two and a Half Men. All I know of the show is countless jokes about its lowest common denominator and toilet humour; as long as the gay jokes still fly fast and free, would the target audience really care if Sheen was written out and replaced? I realise it would take awhile for the ‘script’ ‘writers’ to come up with a few shows but wouldn’t it be worth it for the network to give it a shot?
That’s up to Lorre. The article states that he refuses to continue the show without Sheen, despite the apparent hostility expressed in Sheen’s remarks.
Personally, I think the only other really well-known actor who could pull off the “Charlie” persona and still work in the context of the show is David Duchovny- and he’s already got a show in which hot women throw themselves at him for no readily apparent reason.
i wonder if the show might be more interesting if Sheen’s character also goes off the rails and one of the episodes is titled “Put the Hooker in the Closet”.
Or it gets the hose again?
CBS cares
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