Commercials are the only way that broadcasters can earn money, which will in turn allow them to keep providing their services. When a new movie is released, there is a lot of build up about its budget, earnings, 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 when it comes to Television shows, things tend to get more complicated. Since Box Office calculations don’t work for TV shows, their earning method remains a mystery to most people. TV shows are announced in advance and marketed by the networks.
Leveraging the network’s average calculation of how much money they can earn in a particular segment, for example, for a comedy when 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.
Even if you are someone who has never aligned well with the television industry, you ought to have heard about TV ratings. It is everything that people talk about when they are discussing the success of a TV show, but what are they and how do they work?
Nielsen Media Research is an organization that has been gathering TV ratings since the 1950s. How this works is that Nielson chooses a random sample of households and tracks their viewing habits. According to Nielson, there are over 120 million TV households in the US alone. These ratings can help calculate the amount a network should charge the advertisers for certain programs. So, the question that comes to mind is:
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What is a Good Rating?
The simple answer to that is to first understand how many households are watching that show and comparing it to other shows that are being aired at the same hour. Note that if more people are watching the show regularly, it means that it is good. The number of people watching the show should also keep on growing or the ratings can start to decrease.
You also need to understand that if a show has low ratings, it doesn’t necessarily entail cancellation because it might be generating profit from other mediums such a social media and streaming deals. If you are an avid or even a casual TV watcher, you will understand that there are far too many commercials in an hour. For this reason, viewers always try to opt for DVR because it helps them skip the advertisements. Any cable provider that does not offer DVR services will not be able to operate for a long time.
According to reports, every hour of TV programs has 20 minutes of commercials and this simply means that you are only watching your show for 40 minutes. With the current formula that is used, each view only generates one dollar of revenue.
If you do the math and have 30 million viewers, it will bring you a total revenue of $30 million, which is later split up. Presently, running an ad on primetime TV can cost around $20 CPM (Cost per thousand), but when more than half of the viewers start to skip the ads, they become more expensive. As a result, the networks need to reduce the price of the ads by half which is not at all ideal for growth.
4 Smart Ways TV Shows Make Money?
In addition to commercials and the answers above, there are also a few other revenue streams for TV Shows and they include:
1. Show Syndicate
TV show producers also make a major chunk of their money by syndicating a show. With the inception 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.
2. Format Sales
This can be for selling their formats to other territories. For instance, BBC makes an estimated $500m per annum from licensing the ‘Top Gear’ brand, which they own. In fact there’s a whole global conference dedicated to format sales.
3. Merchandise (often produced under licensing deals)
Some TV shows also generate funds through merchandise and stores selling popular show paraphernalia. Fancy a ‘Game of Thrones’ bottle of wine anyone?
4. Program Licensing
For TV channels that produce content in-house (or who commission content from production companies but still own all of the rights), they can also make revenue through licensing their programs through other channels – e.g. Any of the IPTV platforms, such as the BBC licensing (or selling) their content to other networks or TV channels internationally
How Much Do TV Shows Really Make Yearly? (Profit Margin)
According to an AdWeek report, the most-watched comedy on television leads all season-long shows in cost per 30-second advertising spot, easily outdoing the second most expensive spots on television: The Voice at $264,575.
Even though the NFL football still dominates the pricing structure—a late Sunday afternoon game on Fox will fetch $595,000 and NBC’s Sunday Night Football crushes primetime by demanding $570,000—the season doesn’t last the entire year, even if each game does stretch for hours.
Note that Parking football on the bench for its seasonal structure, steers us right back to a mix heavy in comedy for the 10 shows that top $200,000 per 30 seconds. The Voice is renowned for making the list twice: in addition to the main Monday show, its follow-up Tuesday show earns NBC an additional $229,167 per half-minute commercial.
The top four shows represent the four big networks, with CBS roosting on top, NBC’s The Voice with a slight edge over ABC’s Modern Family and Fox’s The Simpsons. Have it in mind that eight of the top 10 shows are either The Voice or a comedy — ABC’s Grey’s Anatomy ($206,075) and Scandal ($200,970) are the only two dramas to make the list. Scandal is also the only 10 p.m. show in the top 10.
A trio of new shows have gained some grounds (and money), with NBC’s The Blacklist earning $198,667 to top all newcomers, CBS’s Robin Williams-led The Crazy Ones ($175,200) leading new comedies, and Marvel’s Agents of S.H.I.E.L.D. ($169,730) grabbing a new demographic for ABC.
However, with the top 10 all exceeding the $200,000-per-30-seconds threshold, there are still trendy places for any media buy, with 32 shows charging more than $100,000. Of those in the $100,000 to $200,000 range, there are specifically eight of them on Monday and six each on Tuesday, Wednesday, Thursday, and Sunday. While for Friday, which might be where the thrifty ad buyers are, with no show charging more than $85,000 for 30 seconds.
It can be very challenging to point out the exact amount of revenue TV Shows Make, especially because when a show gets very popular, advertisers will line up to pay a premium to get a spot. The best example is The Game of Thrones, which is creating history in terms of production costs and revenue generated.
However, the reign of traditional cable TV is coming to an end because the online on-demand services are quickly taking over. This is because viewers prefer to watch their shows according to their schedule and not have to follow the network’s schedule.
All of these changes have made it quite difficult for networks to make money off of the TV Shows. Howbeit, earning money from TV shows was already very complicated because viewers don’t like the idea of commercials interrupting their experience after every few minutes.
Some shows have even more ads than others, and it gets the viewers all riled up. As of now, commercials are the only well pronounced way that TV shows can make money, and that is not going to change in the foreseeable future.