How Do TV Shows Make Money? TV Income Sources Explained
What does your favorite TV show have in common with a blockbuster movie? It needs to turn a profit for its producers. While movies make money from ticket sales, that’s not their only stream of income. But how do TV shows make money without any ticket sales?
In this article, we’ll list all the different ways a TV show can earn money. We will also compare movies and TV shows in terms of profitability so you have a clearer perspective on the topic.
Keep reading for more insight and some fun trivia!
How Do TV Shows Make Money?
Let’s explain each manner of earning that TV networks and shows implement to get rich.
Commercials
Like most people, you’re probably used to seeing commercials on TV. But have you ever wondered how those commercials get there? Well, almost since the dawn of television, TV shows have made money by featuring commercials. As a rule, every time there’s a commercial break in the middle of your favorite show, the network you’re watching it on is making money.
Here’s how it works: when producers make a TV show, advertisers pay big bucks to have their products seen by the millions of people who watch TV every day. The amount of money spent depends on the time slot, the number of viewers, and what demographic those viewers are in.
For example, a popular show that airs during prime time will be able to charge more for its commercials than a less popular show that airs during the day. Also, a show with many teenage viewers will be more expensive for advertisers than one with an older demographic.
Subscriptions
For years, TV networks have been making money off of viewers, but now they’re getting even more creative.
In addition to charging for cable, TV networks and their parent companies have been working hard to get people hooked on streaming services like Netflix, Hulu, and Amazon Prime Video. And despite the fragmentation of the streaming market, it has worked like a charm thus far.
But how do streaming services make money from your binge-watching addiction?
Well, let’s take Game of Thrones as an example. GoT is one of the most popular shows ever, but the only way to watch it is to subscribe to the premium network’s streaming service, HBO Max.
And as mentioned, broadcast and basic cable networks are also running ads during shows, many of which are owned by their parent companies, but more on that later.
Investors
Did you know that a big chunk of TV show budgets come from investors? How does that work? Well, suppose you have an excellent idea for a new TV show. You take your pitch to a group of potential investors and convince them to give you some money.
If investors agree, they’ll give you the funds you need to produce your show. They’ll receive a percentage of the show’s future earnings. If the show is a hit, they’ll make their money back plus a tidy profit. And if it’s a flop, they’ll at least be able to recoup their initial investment.
So, while you’re watching a TV show, best believe that a group of silent investors is keeping their fingers crossed, hoping for a big payday.
Syndication
Believe it or not, syndication is one of the most significant sources of revenue for TV networks. But what does syndicated TV mean? Simply put, syndication in TV broadcasting means that a show is sold to multiple broadcasters across the country or internationally. Of course, the fee varies depending on the popularity of the show and the size of the network’s market.
Depending on the schedule, a syndicated show may air at different times and days on each network or station. It increases the show’s popularity and keeps filling the original network’s pockets long after the show is over — as long as the network’s parent company owns the show.
Syndication — both first-run and repeat — is usually reserved for popular shows with broad appeal. Some examples of TV syndication include first-run shows like The Ellen DeGeneres Show, Live with Kelly and Ryan, Jeopardy, and Wheel of Fortune. Repeats of beloved shows like Two and a Half Men, The Big Bang Theory, and Seinfeld are also part of syndication.
More Interesting Facts About Syndication
When Seinfeld was syndicated in 1998, it was sold for $1.7 billion. That’s a lot of guacamole! Even though syndication revenue and deal opportunities tend to decrease after a show is no longer trendy or relevant, Seinfeld tops the list of most profitable sitcoms of all time! In 2019, Netflix landed the global streaming rights for this popular show in a five-year deal reportedly worth north of $500 million.
Syndication can be a very lucrative deal for some shows, but others don’t perform so well. The type of episodes comes to play here — it will attract more viewership if each episode is self-contained. That’s why you’ll often see repeats of crime procedurals like NCIS and Law & Order on cable networks.
And finally, do reality shows make money from syndication? Absolutely! Just look at COPS, Wife Swap, or Fear Factor. However, the deal is the same as with other types of shows. Self-contained episodes are more successful than shows that have to be aired in a marathon run, such as America’s Next Top Model or similar reality competition series.
Bidding Between Networks
How do TV networks make money by bidding for a show? After all, bidding is all about spending money, right? Not necessarily.
When a new show is being created, multiple networks will often bid on the rights to air it. The network that offers the most money will usually win the bid. This allows them to make money off of the show from the very beginning.
Of course, this means that they also have to pay more for advertising their brand-new TV series, so it’s not always a sure thing. But in general, the network that pays the most for a show is the one that stands to make the most money from it.
So next time you’re wondering why your favorite show keeps moving around on the schedule or has recently jumped networks, remember that it’s all just business!
Syndication Bidding Wars
Bidding comes to play in syndication, too (scroll back up and refresh your memory if you don’t remember the TV syndication definition). A bidding war can result in some programs fetching a high price tag, sometimes even more than the original network paid to produce the show.
So how much money do TV shows make from bidding in syndication? Well, remember Netflix’s Seinfeld deal from the previous section. And here’s yet another example. NBC originally aired the famous sitcom Friends, but the show’s production company Warner Bros. stands to profit from it.
Now, when Friends landed on streaming, Netflix paid $120 million for the rights to air all 236 episodes and an additional $80 million more to keep streaming it for another year. As of 2020, the exclusive streaming rights to Friends have reverted to Warner Bros. The company launched HBO Max that year, and the legendary 90s sitcom is an integral part of its catalog.
Crowdfunding
The traditional model of television production relied on advertisers for funding. However, more and more people are using ad-blockers and spending less time watching live television. As a result, television producers have had to look for new ways to secure TV show budgets. One popular method is crowdfunding, so let’s explain how tv shows make money through it.
There are a few different ways this can work. In some cases, fans can make donations directly to the show’s producers. Alternatively, they can pledge money to Patreon accounts set up by individual cast and crew members. And in still other cases, fans can buy special support memberships that come with a whole array of perks, from behind-the-scenes footage to private meet-and-greet events.
The TV show with the most extensive crowdfunding campaign to date is The Chosen, a series about the life of Jesus Christ. It raised more than $10 million for the first season. And, if you were a fan of Veronica Mars, you probably know that the Veronica Mars movie was entirely crowdfunded through Kickstarter, raising upwards of $5 million.
Crowdfunding gives fans a sense of ownership over the show and allows them to support the thing they love directly. In this way, crowdfunding is a win-win for both fans and producers.
Merchandise
Merch is another way that TV networks make money from their shows. And fans love it! Merchandise examples include t-shirts, hats, mugs, action figures, and even toys. The networks will often sell this merchandise on their website or stores.
By buying merchandise, fans can feel like part of the series and show their friends and family which characters they like the most. In addition, many people collect merchandise as a hobby.
For example, there are entire websites dedicated to people who collect pop culture collectibles in the form of Funko Pop! toys. So the next time you see your favorite character on a coffee mug, remember that it’s not just about fandom — it’s also the network’s way of making money!
Ad-Supported Streaming
Some streamers rely on cash from both ads and subscription plans. Let’s take HBO Max as an example. How does HBO make money? Besides cable subscriptions, the network’s streaming service gets the largest share of the revenue from subscription fees (more than $7.7 billion as of December 2021), but they also generate income from airing commercials during their shows.
The ads are only included in less expensive tiers to offset the lower subscription cost. Hulu, Paramount Plus, Peacock, and many other streamers also have ad-supported and ad-free tiers.
And what about Netflix? How do Netflix shows make money? To know all the details, check out our article on the topic. Spoiler alert: the streaming giant is considering introducing ads.
DVD and Blu-ray Sales
When did you last buy a DVD? If you’ve been following industry news, you’re aware that DVD sales have declined over the last decade, so it wouldn’t be strange to ask why we’re even mentioning this. How do TV networks still make money from selling shows on DVD and Blu-ray?
Unsurprisingly, some fans want to own their favorite movies and TV shows on DVD and watch them at their leisure. Unlike a cable TV or subscription service (or video on demand), a DVD is a one-time buy with no strings attached. Plus, you don’t have to worry if you’ve missed an episode or two. It’s all there — insert a disc and press Play.
Let’s go back to Game of Thrones for a second. According to Slate, the first season sold 350,000 copies in the first week of release. That’s a significant number, considering the show had a relatively small, niche viewership in its infancy.
Sponsorships
How does a TV show make money by featuring different products? It’s simple. Sponsors will often pay to have their product featured on a show to increase brand awareness. This can be done in several ways. A character can use a product on the show, or the product can be prominently featured in an ad.
While product placement can be subtle, it is becoming increasingly common, especially in reality TV shows. For example, Coca-Cola was paying to have its products featured on American Idol for 13 years (until 2014).
How much money does reality TV generate this way, you may ask. The exact numbers aren’t easy to determine since the final sum depends on the show, broadcast time, and the network. Brands can expect to pay upwards of $50,000 (and sometimes even millions) to have their product featured or used in a reality TV show.
And how do TV game shows make money from sponsorships? Game shows ingeniously use sponsorships. They make money from brand deals and product placement, but they also often use products from sponsors as awards for the winners.
Licensing to Other Media
TV networks can also generate revenue from licensing their shows for use in other media. For example, a network may license a show for use in an online video game. Star Trek and GoT are some examples. And when characters on The Big Bang Theory wear t-shirts with pop culture references, like Star Wars or Marvel, those are licensed products the show earns a commission on.
Movies vs. TV Shows: Which Is More Profitable?
There’s no doubt that movies are a big business. They’re made with huge budgets and have the potential to make a lot of money back in box office and home video sales. However, movies have a higher overhead: they cost more to produce and market and generally have shorter theatrical runs.
TV show budgets are usually smaller, and TV shows don’t always make as much money back. But that doesn’t mean they’re not profitable, as TV brings in more money overall. TV shows can keep making money for years through TV syndication and streaming deals, while movies are a one-time event.
Of course, not all types of TV shows can benefit from the same strategies. Luckily, when it comes to making money, there are a few ways to make a buck. Commercials, subscriptions, investors, streaming, syndication — these are just some of the ways shows can keep earning revenue long after they’ve stopped producing new episodes.
Frequently Asked Questions
How much profit do TV shows make?
With audiences of millions tuning in week after week, TV shows can be highly profitable. Selling ads is just the tip of the iceberg. Thanks to syndication, streaming deals, merch, and other revenue streams, It’s not uncommon for a hit TV show to bring in hundreds of millions of dollars each year. Of course, not all TV shows are quite so lucky. Some struggle to find an audience and eventually get canceled. But even those shows can be profitable if the fandom is big enough.
How much money do TV shows make per viewer?
Licensed television programs can make a lot of money per viewer, but it depends on the show, when it airs, and where it airs. Generally, though, estimated ad earnings for the TV industry are $1 per viewer. Live sporting events or highly-rated dramas that air during primetime on major networks can command higher advertising rates than shows with lower ratings. Additionally, syndicated reruns of popular shows can generate significant revenue for the show’s producers.
How are TV shows funded?
TV shows are typically financed through advertising, licensing fees, government, public, or commercial financing, philanthropy work (most shows on PBS), and crowdfunding. Advertising is the primary source of revenue for network TV shows, while cable TV shows rely more heavily on licensing fees and ad and sponsorship sales in case of basic cable networks.
And how do TV shows make money from licensing and syndication? Well, the licensing fees are paid by distributors, such as cable companies that carry the channel or streaming services that air a show. Syndication deals are typically struck after a show has aired for several seasons and proven popular. In a syndication deal, a production company sells the rights to airing a show to one (exclusive deal) or multiple (non-exclusive deal) distributors.
