How Do Tv Networks Make Money

How do Television Shows Make Money?

It is safe to say that television revolutionized the way we consume media. Before the TV was invented, people normally went to cinemas to watch their favorite shows or needed their own projectors, which were expensive at the time. However, when the TV came, everybody was able to watch their favorite shows from the comfort of their couches. Over the years, many changes came to the way we use TVs to consume media. In 1999 ReplayTV and TiVo were introduced, and that took us into the age of DVR.

The problem with these systems was that they were good for the consumer but hurt the providers because it allowed viewers to skip commercials, which had a negative impact on the revenue stream. Later on, another product hit the market, which is known as the Dish Network's Hopper, and what made this product different was that it completely eliminated commercials from the video stream.

For a viewer or content consumer, all of this sounds like a dream come true, but it became a nightmare for content creators and broadcasters. Commercials are the only way that broadcasters can earn money, which will, in turn, allow them to keep providing their services. So, here we are going to talk about how television shows make money.

How Much Money Do TV Shows Make per Viewer?

If you are an avid or even a casual TV watcher, you will know that there are far too many commercials in an hour. For this reason, all the viewers tend to opt for DVR because it helps them skip the advertisements. Therefore, any cable provider who does not offer DVR services will not be able to operate for a long time. According to statistics, every hour of TV programs has 20 minutes of commercials which means that you are only watching your show for 40 minutes. With the current formula that is used, each view only generates one dollar of revenue.

So, if you do the math and have 20 million viewers it will bring you a total revenue of $20 million, which is later split up. As of now, running an ad on primetime TV can cost around $20 CPM (Cost per thousand), but when more than half of the viewers start to skip the ads, they become more expensive. As a result, the networks need to reduce the price of the ads by half which is not at all ideal for growth.

What Do the TV Ratings Mean?

Even if you are someone who has never worked in the television industry, you must have heard about TV ratings. It is everything that people talk about when they are discussing the success of a TV show, but what are they and how do they work. Nielsen Media Research is an organization that has been gathering TV ratings since the 1950s. How this works is that Nielson chooses a random sample of households and tracks their viewing habits. According to Nielson, there are over 120 million TV households in the US alone. These ratings can help calculate the amount a network should charge the advertisers for certain programs.

So, the question that comes to mind is that what is a good rating? Well, the simple answer to that is that we need to see how many households are watching that show and compare it to other shows that are being aired during the same time. If more people are watching the show regularly, it means that it is good. The number of people watching the show should also keep on rising because then the ratings can start to decrease. You also need to understand that if a show has low ratings, it doesn't mean cancellation because it might be generating profit from other mediums such a social media and streaming deals.

Conclusion

The TV media industry is one of the biggest there is in the world. Everyone wants to watch their favorite TV shows, and for a long time, TV was one of the best ways to do so. However, the reign of traditional cable TV is coming to an end because the online on-demand services are quickly taking over. This is because viewers want to watch their shows according to their schedule and not have to follow the network's schedule. All of these changes have made it quite difficult for networks to make money off of the TV shows.

Earning money from TV shows was already very complicated because viewers don't like the idea of commercials interrupting their experience after every few minutes. Some shows have even more ads than others, and it gets the viewers all riled up. As of now, commercials are the only way that TV shows can make money, and that is not going to change in the foreseeable future.