Wonder

Research Outline

Prepared for josh k. | Delivered November 8, 2019

Business Model of TV Production

Goals

To understand the business of TV production from end-to-end, including each entity involved.

Early Findings

 Traditionally, creatives make the content then license the rights to media/distribution companies. There is usually a revenue share (royalties) on the license.
TV shows are often created by a production company, purchased by a network and then distributed through the network or its subsequent partnerships with cable companies or SVOD brands.
As the Internet grows, the "choke point" that used to be around distribution has been removed and now it is much easier for content to reach audiences through hundreds of means.
There is a shortage of creative professionals and demand is high for content. As such, content producers can charge a premium price.
Some distributors seek to collapse the value chain and instead acquire their own production companies.
Netflix reportedly also help revolutionize the business model of TV production by offering producers upfront contracts for 1-2 seasons (never done before) and develop shows with almost no input from Netflix. 
This also allowed them to introduce the concept of "binge watching", or releasing an entire series/season at once for people to watch on demand. TV networks are now experimenting with less-traditional release schedules.
TV production in the US in 2018 made $37 billion.
Unscripted shows generally earn around $300-400,000 per episode, paid upfront as a licensing fee, which content makers use to fund the production. Their profit margin is around 10%.
 Discovery, at the forefront of unscripted TV distribution, recently changed the way they paid producers. Now, producers are required to self-fund production (in advance) and Discovery will only pay upon the delivery of a complete series.
Networks usually also wind up paying for any reshoots needed, though Discovery's new model could cut this.