Commentary

No Accounting For Profit? TV Shows' Puzzling Financial Picture

by Wayne Friedman , Staff Writer, July 12, 2010

TV shows make and lose money in varying degrees. But the specifics are not always apparent. Should they be? Yes. The big problem is sifting through the sometimes-dramatic maze of Hollywood accounting.

A recent court case against Disney and its longtime game show "Who Wants To Be A Millionaire?" revealed that the big media company's 10-year-old show -- first a network series, and more recently a Monday to Friday syndication series -- was a money-losing effort.

Or so we are led to believe.

A complaint filed by Celador International said Disney withheld profits. When the case moved to the trial phase, one attempt by Disney said the show operated at a $70 million "loss."

Of course, it's not possible for any show with a lifespan of over a decade to operate at a loss. That's just preposterous.

All this goes to the heart of broadcast TV business. Senior executives will tell you virtually every network prime-time show operates at a "loss."

As we all know, this isn't the complete equation. When network owners of TV shows add in after-markets revenues -- U.S. syndication/cable deals, international program deals, DVDs, iTunes, other digital outlets, and merchandising deals -- many long-time programs can find themselves in a profitable situation. For example, CBS can then tell investors the "CSI" franchise is a billion-dollar-plus money-maker.

Just a few years ago, perhaps a third of all prime-time shows could be found to make money from their prime-time network airings. But that is no longer the case.

And the financial picture is even more complicated for original prime-time cable shows.

One can't look at just advertising sales against the original airing of a cable drama -- but subsequent repeats. Not only that, but a second stream of revenues -- cable subscriber fees -- need to be factored in.

The big question: How important is it for the public, industry journalists, and others to know all the financial specifics of a big TV show -- beyond just ratings? Should accounting procedures still be under a big cloud?

Since its goes to the core of how TV operates, more details are needed if we are to judge the business value of TV show. Otherwise, it just winds up being a prime-time mystery -- with no dramatic season finale.

3 comments about "No Accounting For Profit? TV Shows' Puzzling Financial Picture ".

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Douglas Ferguson from College of Charleston, July 12, 2010 at 11 a.m.
Can it be the everyone has forgotten how James Garner got cheated out of money for The Rockford Files? He sued Universal in 1983 for $16.5M (the studio allregedly charged every expense it could think of to keep the show in the red so that it wouldn't have to share profits with Garner). There was an 1989 out-of-court settlement for an undisclosed amount. The lesson was: Don't do a deal for a percentage of the profits because studios use creative bookkeeping. Here we go again.
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Kevin Mirek, July 12, 2010 at 11:03 a.m.

If it was not profitable, in some way, it would not exist. Somewhere, downstream, there's always money in a continuing program. Why do we care what is the source of the revenue? If it's illegal, we have law enforcement for that. Creating content is generally not a charitable endeavor.

Paula Lynn from Who Else Unlimited, July 12, 2010 at 11:48 a.m.

Investors need to know about all financials. Those involved with the production need to know about financials. The rest of us, not so much and journalists need a balance of information.