Commentary

Will TV's Valuable After-Markets Turn Into Afterthoughts?

by Wayne Friedman , Staff Writer, March 5, 2009

Keepers of the TV and media math are running into hard-to-solve financial equations: What happens when a broadcast TV show costs $3 million to $3.5 million an episode to produce -- but the studio only get $1.3 million to $1.8 million episode in a license fee from the network?

In the old days, there was an easy answer: "deficit financing," a well-honored business practice where money could be more than made up from growing after-markets, like international, DVD, and U.S. domestic syndication revenues.

But what happens in today's climate, with after-markets getting severely hammered? The poor economy doesn't look to offer up much respite any time soon.

Don't think webisodes, video on demand, and other newfangled media platforms will save the day, either. Those markets are still not ready. Not only that -- but they have been taking financial hits as well, due to an overall slowing of media advertising dollars.

What to do? More reality shows? More layoffs? More cheaper-to-produce late night talk show hosts making their way into prime time? All of the above seems to be the answer.

Production costs are a big concern. Even Comedy Central was considering a massive 20% cut in the budget of "The Sarah Silverman Program," a move countered by public resistance from the show's star and producers.

But the Viacom network found a way to stretch the soup and balance out some production costs with an extra, shared viewing window with Viacom's lesbian and gay targeted network, Logo.

In a related story, the bigger networks are also cutting back: CBS and ABC, for example, have begun trimming back on the number of pilots they use. Overall the after-markets seem to be in serious flux.

U.S. domestic syndication could also suffer, as an increasing number of TV stations may find it difficult to pay any license fees for off-network programs or high-profile first-run shows in the coming years.

One thing for sure: After-markets aren't after-thoughts in the minds of TV producers.

4 comments about "Will TV's Valuable After-Markets Turn Into Afterthoughts? ".

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Terry Heaton from Reinvent21, March 5, 2009 at 12:30 p.m.
Great stuff, Wayne. Love your posts, and I agree with you here. But I have to wonder when we'll start asking about those "production costs," rather than assuming they are absolute. This is a controlled, artificial economy that needs a shot of fresh air.
Reply

David Beckert from Martin Group Marketing, March 5, 2009 at 1:11 p.m.

I'd argue that we, a la Wal-Mart, eliminate the middleman who brings little if any real value to the party and go right to the source. Why have duplicate delivery systems? Eliminate cable as well as over the air infrastructures, and make everything web accessible. That flips the bulk of the cable bill (if not all of it, since my Internet bill is separate from my cable bill) from a dead delivery system which we don't need anymore to actual payment for programming that I literally find worthwhile. Clearly this won't happen in my lifetime - far too sensible, but something like this has to happen, since the current system is clearly going the way of the Dodo.

Todd Koerner from e-merge Media, March 5, 2009 at 1:59 p.m.

Wayne, I really enjoy your commentary but you stopped short in this observation. By any measure of comon business sense, the current means of television production is unsustainable. That is what happened to the music business and is almost completed in the newspaper industry. The guilds - especially SAG - are scrambling to preserve the legacy of ad-supported television with a robust secondary market in syndication. But the emerging means of distribution via the internet and the mobile web put secondary markets at risk of being either unprofitable or unmeasurable. Until the television industry is able to better define the revenue streams of secondary markets, the declining ad rates for first-run programming will be insufficient to support current programming budgets.

Paula Lynn from Who Else Unlimited, March 5, 2009 at 5:03 p.m.

Glad to see all of you are burying the concept of "free" where it should remain in the valueless pit. Everyone needs to be paid. It is the determination of value in how much, when and from where are heart of this comunication process.