You Asked For It! - TV & Money

Nate Winchester asked... 

So here's what I'm wondering: 

Master D, you've spoken often (at length (repeatedly)) about how dysfunctional movie money managing is (that is my entry for understatement of the year BTW). 

But... how is the management of money when it comes to TV? Is it a bit simpler? More straightforward? Has a net profit been spotted somewhere near I Love Lucy?

And could that be another factor in this? Are stars jumping ship because it's becoming a better deal? (meaning capitalism wins again?)

Okay, that means it's time for all of you to dip your collective ignorance in the infinite cesspit of my wisdom!

TV money is a little different than feature film money, whether it's more straightforward or simpler is in the eye of the beholder.

To understand how money in television works you have to understand how television is made.

It all begins with the pilot.

As you probably know pilots are essentially prototype episodes. Most of the time production companies and studios take a script to a network, and if the network likes it they'll commission a pilot episode. When they commission a pilot, they're paying for it to be made.

Rarer cases involve studios and production companies making their own pilot and shopping it to networks. We're getting into hen's teeth territory with that method.

Anyway, let's say the pilot gets picked up and given the green light to go to series.

The network pays the production company a license fee to make each of the ordered episodes. This license fee covers the production costs, and fees of those who make the TV show.

In exchange for this license fee the network gets to keep all of the money made from the advertising for the show's initial airing and 1 off-season rerun airing. (Though fees are paid to the makers for that rerun.)

Now we come to where the real money in television comes from.

Off network reruns.

When a show accumulates enough episodes to be able to air the reruns without repeating them too often, usually 66 to 100 episodes for a network show, it can then be "syndicated."

Syndicating is when local stations, cable channels, and foreign networks buy reruns from the production company. All of this money goes to the production company and is then divided into what are called "residuals."

Before I get into what residuals are I have to explain something. Syndicated rerun money is literally ALL PROFIT.

Remember, the network paid to make the show in exchange any profits made from the initial airing. So the amount the studio/prodco have invested in the show is literally zero and they get to keep all the money made from syndication.

Which brings me to residuals.

When the revenue from the reruns comes in the usual formula is for the studio/producers to keep 80% of the money while the stars and top-line creative staff, like writers, the pilot's director, and others, divide up the remaining 20%.

Desi Arnez and Lucille Ball who owned I Love Lucy made so much from license fees, rerun revenues, and residuals that they were able to buy RKO studios, turning them into the TV production juggernaut Desilu Productions, before selling the company to Paramount.

Now it's pretty hard for studio/prodcos to claim losses when a show is successfully syndicated. That's not to say they won't try.

Universal Pictures tried to get out of paying back residuals to Jack Klugman the star/producer of the long running crime drama Quincy, M.E.. The show ran for eight seasons and 148 episodes, and despite being off NBC for almost 30 years was still airing in reruns on cable and in at least four foreign markets.

Universal claimed that the series lost money, despite its initial airing being paid for by NBC, and having a robust run in syndication for most of the 1980s and 1990s where the money was pure profit.

Realizing their defence reeked of more bullshit than a rodeo dressing room floor, the studio paid an undisclosed settlement to Klugman.

Then there are other practises that threaten to, if not kill, could wound the golden goose. Since many studios, networks, and cable channels are connected via mutually shared parent companies, they will play all kinds of screwy games.

Let's say Studio A sells a show to Network A and both are part of the A Media Empire. The show is a big hit and has a long run. Around the time of the 3rd season they start making syndication deals for the series. 

Studio A then sells the reruns to local stations owned or affiliated to Network A at a discount from what they might sell it for to another station owned by Network B. They also sell the show to A Channel, their big cable outlet at a discount.

Now the deal with A Channel on cable is that they will pay less per episode every time they air it. That's why you see cable channels air a single episode three times in 1 day. They're filling time and forcibly reducing the amount they will have to pay for future airings. Thus you end up with the stars of hit TV shows looking at residual cheques of $0.02 per episode.

So while TV money is not completely without dysfunction and shady business, it's not the complete cluster-fuck that feature film money has become. Which makes it a much more tempting deal.

I hope that answers your question.