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