Television Program - Budgets and Revenues

Budgets and Revenues

Most television networks throughout the world are 'commercial', dependent on selling advertising time or acquiring sponsors. Broadcasting executives' main concern over their programming is on audience size. Once the number of 'free to air' stations was restricted by the availability of channel frequencies, but cable TV (outside the USA, satellite television) technology has allowed an expansion in the number of channels available to viewers (sometimes at premium rates) in a much more competitive environment.

In the United States, the average broadcast network drama costs $3 million an episode to produce, while cable dramas cost $2 million on average. The pilot episode may be more expensive than a regular episode. In 2004, Lost's two-hour pilot cost $10–$14 million, in 2008 Fringe's two-hour pilot cost $10 million, and in 2010, Boardwalk Empire was $18 million for the first episode. In 2011, Game of Thrones was $5–$10 million, Pan Am cost an estimated $10 million, while Terra Nova's two-hour pilot was between $10 to $20 million.

Many scripted network television shows in the United States are financed through Deficit financing: a studio finances the production cost of a show and a network pays a license fee to the studio for the right to air the show. This license fee does not cover the show's production costs, leading to the deficit. Although the studio does not make its money back in the original airing of the show, it retains ownership of the show. This ownership retention allows the studio to make its money back and earn a profit through syndication and DVD and Blu-ray disc sales. This system places most of the financial risk on the studios, however a show that is a hit in the syndication and home video markets can more than make up for the misses. Although the deficit financing system places minimal financial risk on the networks, they lose out on the future profits of big hits, since they are only licensing the shows.

Costs are recouped mainly by advertising revenues for broadcast networks and some cable channels, while other cable channels depend on subscription revenues. In general, advertisers, and consequently networks that depend on advertising revenues, are more interested in the number of viewers within the 18–49 age range than the total number of viewers. Advertisers are willing to pay more to advertise on shows successful with young adults because they watch less television and are harder to reach than older adults. According to Advertising Age, during the 2007–08 season, Grey's Anatomy was able to charge $419,000 per commercial, compared to only $248,000 for a commercial during CSI, despite CSI having almost five million more viewers on average. Due to its strength in young demos, Friends was able to charge almost three times as much for a commercial as Murder, She Wrote, even though the two series had similar total viewer numbers during the seasons they were on the air together. Glee and The Office drew fewer total viewers than NCIS during the 2009–10 season, but earned an average of $272,694 and $213,617 respectively, compared to $150,708 for NCIS.