The way that production companies make money off of television shows in America is a disorganized hodge-podge of business methodologies that were obviously slapped together as quickly as possible by the Federal Communications Commission in conjunction with a number of legal and business representatives while attempting to maintain the integrity of the United States anti-trust laws.
The situation isn’t as difficult in other countries where they were able to look at what had been done in the States, and then formulate their own system without the complexities that had developed through the spurious period of adaptation to a new form of technology.
Today we are seeing this same response in the techniques being used by production companies to try and capitalize their products within the digital medium. Internet distribution is rapidly becoming just as needlessly complex as the American television distribution system due to the speed with which corporations are being forced to adjust their core business practices.
However, the American broadcast system does provide a surprisingly reasonable framework upon which to base the evolution of Internet based production distribution.
In order to operate within the laws of the United States, no business may control more than a certain percentage of a total market. This means that the major television networks are not allowed to own all of the individual local stations within the country. The business repercussions of this are remarkably similar to the situations inherent in on-line distribution where a variety of individual sites are competing on a global scale.
There are three primary ways for a production company to make money off of a television show that they have produced in the United States.
The first is called First Run Syndication. This is where the production company signs an exclusive agreement with a network to air new episodes of the show while it is being made.
The second is called Off Network Syndication, or Second Run Syndication. This is colloquially referred to as “reruns”. This is the aspect of American distribution that most closely resembles Internet distribution. In this phase the show is sold as packages of multiple episodes (one to four seasons worth) to all of the individual local stations around the country.
The specific purchase arrangements will vary from one station to the next. However, there are two specific methods that can be seen as viable to the digital medium. These methods include straight sales and bartering.
In straight sales the production package is sold for cash with the station taking all advertising rights within the show.
In bartering the show is given to the station for free, and the production company keeps the advertising rights in order to make their profit off of the sale of commercial time when the show is airing. This method will usually have a contractual agreement stipulating that the show will have a specific time slot.
The third way of making money is non-broadcast sales. At this time that primarily consists of selling collectors sets of DVDs. While it can be very lucrative for a successful show it is not directly relevant to this discussion on conducting business within the on-line market.
Now, if we look more closely at the system for Off Network Syndication we can see how the overall structure is quite closely related to Internet distribution. And, how the evolving business methodologies are reflections of the predecessing sales structure.
At first, on-line video distribution involved no commercials or any exchange of money. It was used primarily as a vehicle for gaining publicity. Just as television shows were originally free, because they were actually trying to sell the television sets that people were using to watch the shows.
Then, some enterprising individuals began adding commercials to on-line videos. This quickly developed into a system nearly identical to Off Network Syndication.
Now, we are seeing the more successful digital distributors (such as Hulu) beginning to produce their own First Run shows. This then opens the door for other production companies to begin selling their shows to the larger digital distributors for First Run Syndication.
The important aspect of this is that the digital platform allows the audience to choose what they want to watch at any time. Prime Time slots are now irrelevant. Additionally, the major networks were always constrained to the number of hours in a day. The digital platform does not have this limitation.
A digital distributor could, in all plausibility, launch 300 First Run shows at the same time. Then, only keep the ones that get strong ratings after the first season.
While it does mean a drastic reduction in the amount of money available for production costs, it has one huge benefit. In an increasingly tight market where production companies are constantly fighting for airtime it is now possible to give every show an equal chance.
The potential for increasing revenue by allowing every consumer to choose which shows to watch instead of leaving the choice for airtime up to a small focus group is exponential. It also allows for a drastic shift in the way that shows are made.
Small production companies with great but unknown writers can now have the same opportunities as large companies that get away with cranking out over used material just because the producer is friends with the right person at the network.
It brings the success of a production company back to a merit based system. And, most importantly, it opens up new doors for fiscal gain through proven techniques that can now be refined.
Quite frankly, I think the next decade of digital entertainment is going to be a lot of fun to make. And, I’m really going to enjoy the additional revenue it is going to generate.
No comments:
Post a Comment