How do Television Studios Make Money

Question

I’ve never understood it. Is it based off of viewership? If so how does that work? I’m not paying a fee to watch individual episodes. Does it comes from Advertisements? If so, why would it matter how many people watch the show?

In: Economics

Answer 1

Broadcast/non-paid TV mostly makes money from selling ads.

Or, more precisely, they make money by selling *audiences*.

Let’s say you have a thing you want to sell. You can buy a spot to put your commercial in the middle of two shows: one that regularly gets about 100 viewers, one that regularly gets about 100,000 viewers. If both of these commercial slots cost the same and you could only buy one, which one would you buy? I think it’s pretty obvious.

But of course they’re not priced the same. That show with 100,000 regular viewers is worth a lot more than the one with 100 and the people who make it know that, so it costs more.

(This is also a simplification – in actuality there can be a complex chain of ownership and cash flow between ‘the network affiliate selling spots in the local market and paying a percentage of their profits to the network’ and ‘the studio that produced the show’. But it basically comes down to this. And so does Twitter and Facebook and, yes, Reddit.)

There is also another way for a show to make some profit: merchandise. Do you like Game of Thrones? Cool! Do you want a toilet seat cover with a picture of the Throne of Swords? No? How about a shoulder dragon based on one of Danerys’ baby dragons? No? A t-shirt maybe? Pins for whichever House you like? A full set of Funko statues? A full set of action figures so you can stage your own version of the ending where they are suddenly saved from the White Walkers by your collection of My Little Ponys? Replicas of the characters’ swords? Part of the profit on selling you all of those things goes back to HBO; some of it goes to Increasing Shareholder Value, some of it goes to pay for shows that don’t end up becoming giant successes.

(And yes I know HBO is a pay channel. It’s the currently popular show with a ton of merch.)