When a new movie is released, there is a lot of excitement about its budget, earning etc and it can be tracked over time to know if it is a hit and if it made good money for its producers. But the case of Television shows is quite different. Since the Box Office calculations don’t work for TV shows, their earning method remains a mystery to most people. In this article, we will try to demystify the financing of TV shows.
TV shows are announced in advance and marketed by the networks. Based on the network’s average calculation of how much money they can make in a particular segment, for example, comedy, they pay for a pilot episode to be produced. Based on the TV ratings of the viewership and general feedback, they may order for more episodes. In this way, a TV show goes from a pilot episode to a season.
The Networks use Neilsen’s rating to gauge whether a show is popular in the targeted segment or not. If it is popular, more advertisers sign up to show their ads in that slot and the networks make more money.
If a show gets really popular, it may even tie up with some brands for product placement. This will also generate additional revenue for the show. When a TV show receives a cult status, the producers may start to sell the show-related merchandise. This becomes another big form of revenue generation. Take the case of the Big Bang Theory. The series made millions by selling Sheldon bobbleheads and other merchandise.
TV show producers also make a major chunk of their money by syndicating a show. The best example of this is The Seinfeld show. Jerry Seinfeld became multimillionaire out of just one series because it got so popular and has been syndicated worldwide.
With the advent of streaming companies like Netflix and Amazon Prime, the ad revenue model is no longer an optimal measure. These giants can actually track the viewership numbers very accurately and base their decision on those numbers. Of late, there is a massive upswing in the number of shows being commissioned by the streaming giants, indicating there is a bubble in TV show production. How long it will last is a question for the future.
When a show gets very popular, advertisers will line up to pay a premium to get a spot. The best example is, of course, The Game of Thrones, which is creating history in terms of production costs and revenue generated.