I understand how movies make money…box office revenue, etc.
But how does a television show make the big bucks? TakeFriends , for example. It’s making enough to pay the stars what, $1million an ep each? Plus all their overhead: sets, staff, etc etc etc. Where does that money come from? That’s a lot of money, and I can’t imagine revenue from television commercials brings in that much.
If it comes from the ratings, well…how? Who pays that money to the studios so they can pay the show? The cable companies?
The cable or broadcast network pays the TV production company a set price for each episode (negotiated depending on the ratings). The network does indeed usually cover its expenses from the money from commercials. They can get the millions necessary – if the show had enough viewers (they set their ad rates according to ratings and demographics).
The big bucks for the production company is the syndication money. If the show stays on the air long enough, episodes are syndicated and sold to cable networks and individual broadcast stations. That can be a nice fee if the show remains popular. And now that DVDs are catching on, that’s likely to be a big cash cow for any production company.
HBO and Showtime are slightly different in that they get their money from subscription fees. But any original programming company is paid a set fee per episode.
Sometimes the fee is renegotiated. It’s quite clear that USA is paying the producers of Monk more this year than last – better production values, better sets, and a Randy Newman theme song. Of course, since ABC also pays to run the show, they’re doing better.
First, the production company is responsible for the costs of a show. Networks will pay them a price that is almost always less than the actual episode by episode cost, but presumably equivalent to the amount of money they expect to make via advertising.
When a show is a hit, the network will increase the payments to the production company because it can therefore raise advertising rates. This extra money is used to pay the increased salaries of the stars or better production values or whatever else the production company needs. There are always battles between the two. Always.
One hit syndicated show can cover the losses for a dozen other losers. Or a hundred others. The really big sitcoms (which work the best in syndication over dramas for the most part) will make hundreds of millions of dollars in syndication fees. That pays for a bunch of failed pilots. (And stars are increasingly “creators” or “executive producers” which qualifies them for a big chunk of this back-end money.)
A couple of years back the restrictions on networks owning their own shows were lifted. You will therefore see many more shows making the schedule which are owned by the network so they can get both the front and back end gains. Cynics will of course say that this means that awful shows will be given a better chance if they are owned by the network than if they are owned by a production company. I say, how can you tell?
Ultimately, of course, you pay. You buy the products that the advertisers sell.
