The Economics of a Hit TV Show
priceonomics.com
priceonomics.com
At first glance, that isn't a terrible idea, but even if it were their eventual strategy, I still think it makes sense to spend big bucks on top shelf series to start. For one thing, they weren't totally "blind": If you believe their spin, they spent a lot of time analyzing their audience to target exactly the kinds of shows they should make, and they have a lot more data to go on than, say, AMC had seven years ago. For another, if they wanted their subscribers to take them seriously as an HBO-like content producer, it helps to actually produce some HBO-level content right out of the gate. Once subscribers trust that you can make Emmy-worthy shows, they're more likely to tolerate your ultra-targeted but cut-rate test-batch series.
Even so, I'm not sure how the suggested strategy is supposed to play out: Say they made 100 cheap shows instead of 5 expensive ones. In order to be more interesting to any particular audience to overcome the fact that they aren't (yet) Hollywood-quality, one would think they'd have to appeal deeply to a narrow audience (I'd give a science fiction show about a generational ship a chance no matter how cheaply it was produced, for example). But now your show is in a trap: It's too focused, and will have a hard time gaining an audience even when the production values go up (and how do you "scale" to more expensive actors?) Time travel geeks loved the movie "Primer", which cost about the same as a small car to produce, but a million-dollar-an-episode show based on the concept has roughly 0 chance of making its money back.
At the end of the day, the $100M for HoC was a big bet. It was a signaling tactic, a marketing tactic, and a bet on top-tier talent. But it was a bet, nonetheless, and an expensive one. That it seems to have paid off (to an extent? jury is still out) shouldn't fool us into 20/20 hindsight bias. It could just easily have busted.
"So as I understand it, the author is suggesting that NetFlix produce a bunch of low-rent pilots (or half seasons or so) throw them against their wall of subscribers with a bit of recommendation-targeted magic, see what sticks, then spend the money to produce the "grown up" versions."
Not necessarily, and I should clarify here. I think pilots can be shot for a lot less than they are, and I think audiences are proving themselves quite receptive to previews and other short-form "pilot" systems as proofs of concept. A lot of movie trailers are increasingly being made before the movies even start shooting ("teaser" trailers). I think there are ways Netflix can take the guesswork out of the development process, even if production is still an expensive endeavor.
You have to pay for a quality product, but the system right now also pays heavily for the risk in the pre-production process. That process can probably be de-risked considerably.
I would not recommend testing 100 half-baked concepts to see what sticks. But I do think Netflix could test or tease concepts in development to determine which ones to develop, and/or how to present new shows to the right early adopters.
Something I probably wasn't as clear about as I could have been: half the battle in finding a hit is developing an audience, not just a show. Netflix has better audience-development capabilities at all stage of the production equation. It doesn't need to guess quite as much as networks do.
Maybe -- to your point -- Netflix's audience-segmenting capabilities give it the ability to play the big bets game more than networks can. But historically, people have been shockingly bad at predicting what will actually hit and what will miss. Star Wars was laughed out of every major movie studio in town, for instance, and at the script level, it sure didn't look like "quality" to the eyes of the execs reading it. On the other end of the spectrum, a show like Firefly -- which fans (including myself) consider one of the most brilliant things ever made, has repeatedly failed to gain mass appeal beyond its limited niche, despite many attempts at re-marketing home video, a feature film, etc. The operative lesson here is that "quality," as an objective concept, is hard to parse and hard to pin down. "Quality" is more of a function with a lot of variables, and many of the biggest variables are on the production side and the audience side -- not the development side.
Tldr: People are over-investing in development, when they could be investing more heavily in production -- whether at greater scale, or in greater depth per project.
I made some edits to my reply, and I think the answer I can best come up with is this: spend less money on development, and reallocate more of that money to production (either of more series in general, or on fewer and better series, or on licensing of exclusives from shows on other channels). Money in production seems to have better ROI, while money in development is a spin of the wheel.
Another thought: a lot of great shows get canned from the networks simply because advertisers don't grok them, or networks bungle the marketing and scheduling of them. Perhaps Netflix can get into the business of picking up these wasted opportunities? That seems to have been the operating logic behind its investment in Arrested Development, and I don't see why that model wouldn't work for other shows like it.
Small anecdote from personal experience: when I worked in development at NBC, we invested a ton of money into a high-profile Aaron Sorkin dramedy about life at a TV network. It was a fantastic script, by a confirmed creative genius with a track record ten miles long. As bets went, it was about as much of a sure thing as anybody had seen. That same year we spent a much smaller sum on a quirky workplace comedy about life at a network.
Of the two shows: Studio 60 lasted all of a season. 30 Rock ran for seven. As great a show as 30 Rock became, it wasn't all that great from the get go. A lot of the magic happened in production, with the hiring of a fantastic writing staff and the time to let the whole thing gel and find audience fit. I'm not sure what the operative lesson is from that experience. But it did teach me quite a bit about how you can't tell quality when you supposedly see it. Especially early on. :)
I suspect I'm not the expert on this that you are, but the latter could be a problem, particularly from a "career preservation" point of view at the networks. If Exec Bob's show is picked up by Netflix and turned around from a flop to a hit, that tends to imply some things about Exec Bob's management of said show that he might not want to risk being implied.
But in my experience, at least, once a network cancels a show, they're usually happy to let it go. Especially if it's been dead for a few years or more. And Exec Bob is likely to have switched jobs or moved up by then, anyhow. There's a ridiculous degree of fluidity in the "musical chairs" that is the creative executive career track.
Also: once a show has moved from development to air, the show changes stewardship from the Development department to the Current Programming department -- so there's a different executive in Bob's place now, who is responsible for the day-to-day operations of the show. Bob can absolve himself of responsibility if the show makes it to the air and then gets canceled. Bob is responsible if not enough shows make it to the air in the first place, or if not enough of his shows seem to last beyond a season, or find audiences.
In general, though, Bob is judged on his hits (or lack thereof) more than his misses. He's incentivized to take a lot of swings at bat in order to land a home run. Home runs can often be career-making, even if they were sometimes just luck of the dice.
>As great a show as 30 Rock became, it wasn't all that great from the get go. A lot of the magic happened in production, with the hiring of a fantastic writing staff and the time to let the whole thing gel and find audience fit.
I'm generally not very receptive to arguments along the lines of "OK, this show isn't great now but you owe it to the universe to give it six months" but I also don't really disagree. I confess to also liking 30 Rock but never quite putting it in the must see bucket. (In all fairness, I've really sort of gotten away from sitcoms period.) Certainly, I imagine we'd all like to see good shows get the opportunity to work out kinks rather than putting all the burden on one pilot.
I'm curious. Are there good examples of a really "knock them dead" pilot that didn't translate into a halfway decent show. Smith might be one possible candidate although I liked the show as a whole more than people in general apparently did.
[EDIT] Related question. For a relatively big budget show, how expensive is making a pilot relative to non-pilot development costs?
That's not really the argument I was trying to make. I apologize if I wasn't clear enough! Usually my fault. Rather, what I was trying to say is that hindsight is 20/20, and at the outset, nobody at the network -- hell, nobody in Hollywood, including Tina Fey herself -- would have imagined that 30 Rock would outperform Studio 60. I was simply making a broad illustration of the difficulty of predicting winners, even based on (ostensible) quality of a script.
"Are there good examples of a really "knock them dead" pilot that didn't translate into a halfway decent show. Smith might be one possible candidate although I liked the show as a whole more than people in general apparently did."
There are some fantastic pilots that never even got made for various reasons. As for "best pilot that became a bad series," I think Studio 60 is up there. I'd also nominate The Sarah Connor Chronicles, a show with an ostensibly built-in fanbase and a great pilot that just ran out of places to go. Also, call me completely f'ing crazy, but I thought the pilot for SeaQuest DSV was really solid. The show itself? Kind of a massive, bloated embarrassment for all concerned (including Spielberg, one of the show's executive producers).
I'm sure there are plenty of others, but the problem is that -- as with most instances -- we suffer from a bit of a hindsight issue here. Also a bit of a selection bias. Because a lot of good-pilots-turned-crappy-series got canned after a few episodes, we don't remember them as much as we do the shows that lasted a season or longer.
"Related question. For a relatively big budget show, how expensive is making a pilot relative to non-pilot development costs?"
Pilots are usually more expensive than episodes of a show, for a number of reasons. The biggest reason is economies of scale. A running show has its scripts planned out in advance, a regular staff, a cast, and a series of continuously operating parts that reduce the marginal production cost of each episode over the course of a season. A pilot is more like making a small movie: you incur a lot of ad hoc and one-time costs to build something, and you gain no economies of scale. You set up the production, make the episode, then tear everything down and put the whole thing on pause until May.
Another big reason is talent costs. It's not uncommon to convince a prestigious film director or major actor to work on the pilot of a show to help sell it to advertisers and audiences. These folks won't stick around for the show itself, but spending money on them for pilots -- basically, as a form of insurance -- is an age-old tactic.
I won't violently disagree with any of your pilot examples. I thought all those were OK shows (especially Sarah Connor for as long as it ran--on a tangential topic, some shows would really just be better as 20 show or whatever runs) but I'll agree they didn't really ultimately live up to the promise of their pilots.
Ugh, and please let's not judge Star Trek TNG on its first season. Yikes!
"The Naked Now" still makes for excellent comedy viewing every now and then. Let's be honest. It's sort of like The Room of TNG episodes.
Perhaps this is a great example of a bad pilot that grew into a decent series?
The first two seasons were just OK, but after that something clicked, and the show became really engaging. With some loose ends, but it made me pleasantly waste much more time than I should have on it :)
Maybe I owe it to myself to give B5 another go at some point.
I pretty much agree with your take on DS9 even though I ultimately think it became one of the better Trek series.
B5 continued to have some pretty clunky acting in some cases and low-rent special effects but, given your tastes expressed in other posts, you'd probably enjoy it. My only caveat would be that it's somewhat one of those "mystery" shows (run off to the discussions about what this revelation meant) and I'm not sure how well that translates to after-the-fact binge viewing.
A good example would be early-series Lost: lots of interesting mysteries left open to interpretation, giving the impression of more to come, and of a consistent logic to the way things were going to unfold. Bad example would be late-series Lost: it became pretty obvious they'd written themselves into a corner about halfway through the series, so they started making up increasingly convoluted ways to tie it all together, eventually winding up, as far as I can tell, somewhere in the Dr. Who universe.
But if you really want to do that, you could surely find some plot summary of the first seasons to quickly get the main "facts".
I'm not trying to be smartass, just that having been around the industry there's a lot of companies below the top tier that are quite direct about their intent to just make something that sells for more than it costs.
That doesn't mean crap doesn't get through the system, though. Some networks (cough VH1 cough) and production companies seem to specialize in churning out low-effort crap with a high expected return. That's a legitimate business model, I guess, but it doesn't seem to be the prevailing logic at broadcast networks or premium cable companies.
The operative problem is that quality is very hard to ascertain. A lot of our perceptions of "quality" are drawn from hindsight -- and from the heuristic bias of looking only at the winners, thinking their wins were obvious and preordained.
That means a rabid fan base and buzz is far more important than broad popularity. That's why shows like Arrested Development and Orange is the New Black have been so good for them, because they have an in built audience they can bring reliably.
I'd argue the opposite from you which is that Netflix is worse than traditional TV at developing audiences. For someone to adopt a new show on Netflix, they have to be interested in the show AND a subscriber of Netflix or so interested in the show it would compel them to subscribe to Netflix vs just switching over to the right channel at the right time to check it out.
Instead, Netflix's strength is in supporting a pre-existing audience.
Netflix makes 0 marginal dollars on a hit show, but for Netflix, this isn't about the marginal dollar. This isn't even about adding more subscribers per se. This is an attempt to preserve subscribers in the face of a rapidly diminishing content library.
As I mentioned in the article, a lot of the networks and movie studios are raising their rates on Netflix, or pulling their libraries altogether. In the long run, Netflix risks becoming a "dumb pipes" commodity business, no more special or different from Amazon, iTunes, and all the rest, if it doesn't have something exclusive to keep viewers interested.
That's why they're betting the farm on original content. HoC won't appeal to everyone, but it signals to Hollywood and to tastemakers that Netflix is a serious buyer, and that it's in town to buy a lot more where that came from. Hollywood has a strong signaling / social proof system in place, and moves like this are often great ways to break the ice and establish credibility in a town that will shut up and listen to money. :)
"That means a rabid fan base and buzz is far more important than broad popularity. That's why shows like Arrested Development and Orange is the New Black have been so good for them, because they have an in built audience they can bring reliably."
Correct, and I don't see us in any disagreement here. This is what I mean about Netflix's home-field advantage in "audience development." Netflix knows its niches better than networks know theirs, and furthermore, it can afford to be in the niche game, because it's not dependent on mass advertisers. This is a significant advantage Netflix can draw upon.
Just saying "focus group" doesn't really provide much insight on the level and utility of feedback networks receive.
How big of an opportunity do you feel there is for more/better data?
But more to the point, the real magic isn't in the data networks may or may not be able to use ahead of time. It's in the data they should capture from the shows: how they're trending, how they're being talked about, what channels people use to discover them, conversion rates from various channels, marketing efficiencies in various channels, cohorts among viewers based on spending patterns, sentiment, word-of-mouth likelihood, etc.
My overall thesis is that less time and money should be spent on (80-90% useless) development research, and more money should be spent on analytical marketing post-launch. I think TV networks can learn a great deal from video game publishers, for example: similar business model, similar hit dependency, similarly huge budgets -- but a complete mastery of distribution and marketing channels.
Nielsen ratings, of course, get looked at and scrutinized daily. But those are lagging indicators, they're approximations, and they're not actionable. And changes made to shows can't be directly attributable in the following ratings.
A strong counterargument to this logic -- and I feel I should give it its due say -- is that overanalysis will lead to design by numbers. And that's a very real danger. But I think the greater present danger is on not being analytical enough. We've got a long way to go before we're designing shows by numbers. That'll be a bridge too far, but the bridge isn't even in eyeshot yet.
Thanks, that's extremely useful market data, albeit only one data point.
(I'm a microbudget show producer, so I'm very interested to hear this sort of thing.)
Something like The Starlost?
Especially because the authors don't seem to be their staff (I could be wrong here). What motivates the writers to come up with content that must surely take a lot of time to research & write?
Question for the author (or anyone else really)... What about what Amazon is doing at studios.amazon.com? That seems like a new way to build programming.
I tend to be somewhat skeptical of open-submission systems, or of voting systems, because they suffer from the same prediction problems that Hollywood's development model does. Plus, they're more prone to GIGO problems (Hollywood actually does a pretty good job filtering crap out before it goes into the system).
Amazon might be focusing on the wrong thing (development) rather than the right things (production, support, distribution exclusivity). At least in the short term. If I were them, I'd probably use my significant capital reserves, buyer power, and Hollywood's resentment of Netflix to my advantage. I'd cut exclusive deals on proven or undervalued material that's already been produced (and could be scaled up, or reinstated, or spun off).
Personally, I think the smartest thing Amazon is doing is tying Amazon Prime to free VOD streaming. A la carte content purchases are probably going away in the long run, and Prime is a great transition vehicle into more subscription-based services to compete with, say, Netflix.
Here is where I'll put on my Purely Speculative Futurist hat, and I'll wade out a little bit into the choppy waters of broad generalizations. But I think that a la carte purchases, especially for entertainment products, are in many ways a relic of physical media. That's the way you had to buy physical media, for the most part. But it's a relic that cloud technologies and streaming services are obviating the need for. From a consumer standpoint, I experience zero marginal cost to watch an episode of Breaking Bad on Netflix (whereas I very much experience the feeling of paying $2.99 for it on iTunes).
Netflix is in a tough spot because it has lost a lot of great content, as well as competitive windows against services like iTunes. iTunes is (currently) a much better place to get the new stuff while it's new, and that's a big liability for Netflix or other subscription services. All other things being equal, subscription is a better value proposition than ownership for many categories of goods. It's also more convenient.
Breaking Bad's $400,000 per ad spot, at 10 million viewers, is noted as being remarkably high. That's $40 CPM.
Whilst a lot of people are very cagey about their YouTube earnings, if you do enough asking around the numbers tend toward $2.50 CPM. It's frequently noted that popular shows which are able to sell show-specific advertising make a lot more than that.
Even if you assume that a Breaking Bad-level YouTube success would only get a 4x multiplier to its ad value, that's still $10 CPM - only 4 times less than the on-TV Breaking Bad. I would have expected the difference to be considerably greater.
I don't actually know the answer to this question:
Can you get 10 million ad views on a youtube ad in a tv-show-length of time?
I've been thinking about the rise of cable channels versus network tv when it comes to the cultural impact of their shows.
They certainly seem to get it right in that respect a lot more often than the networks do, based upon my anecdotal evidence (totally lacking any real data), cable shows like Game of Thrones, Walking Dead, Breaking Bad, American Horror Story, Mad Men, etc
It seems to me (not that I have any real data to back it up with) that the shows people talk about online (and amongst people I meet) are basically all cable shows, from back with the Sopranos to shows airing today like Game of Thrones, Walking Dead, Breaking Bad, Dexter, American Horror Story, Homeland, Mad Men, Boardwalk Empire etc, have a much greater cultural influence than what the networks are offering apart from a juggernaut like American Idol (which seems to be fading away these days aswell) and perhaps something like Big Bang Theory.
I think it's an interesting shift, if there is indeed a shift and not just something I'm making up.
It's a question of management bandwidth. If you're at the kind of scale Hollywood's at, there's just not enough to go around. Not enough cash, not enough rockstar executors. James Cameron can only make so many movies.
Netflix simply realized that they can put all their eggs in one basket, then watch it extremely carefully.
Especially because the authors don't seem to be their staff (I could be wrong here). What motivates the writers to come up with content that must surely take a lot of time to research & write?
You raise a good point. Indeed, Netflix went pilot-less, but they still paid network-level prices to make the show. Essentially, they skipped the pilot and went straight to the series order (and 2 full seasons at that). In some ways this was a riskier move than the network model.
My argument is mainly that Netflix has the tools at its disposal to get smarter about this process. To be fair, I believe a lot of that $100M was a signaling tactic -- both in Hollywood and as consumer-facing PR -- almost as much to do with marketing the fact that Netflix has originals as it had to do with investing in them.
But the investments needn't always be that big up front.
The point I am trying to make is that, they got a sense of what the show was going to look like, who it will appeal etc because they had carried the BBC HoC for a while in their inventory. I am assuming, that they had some viewership data from this.
The bar chart isn't perfect, and certainly less so out of context. But I should clarify my intent behind it. The final episode of Breaking Bad pulled in roughly the same numbers that your average primetime hit (or even indexed basket of hits) pulls in every night. So when we're talking about the primetime averages, we're talking about indices with viewership figures roughly comparable to Breaking Bad's final episode. The point was that Breaking Bad was able to put a significant price premium on its finale relative to the nominal size of the audience it drew. It punched above its weight, so to speak. (Finale or otherwise, we're talking about 10 million Breaking Bad viewers vs. 11 million CBS viewers.)
Is the comparison totally fair? In that specific context, in illustration of that specific point, I believe so. Would it be remotely fair if it were used, say, to illustrate a point about Breaking Bad in general vis-a-vis the market? Considerably less so. The point was more about its value to AMC, and less about the show's ostensible superiority to any other network show.
To that point, I like your idea about contrasting Breaking Bad (finale, ordinary episode, etc.) with the average cost of an ad on AMC (though we'd have to control for the skew exerted on that index by Breaking Bad itself). That might be more apples-to-apples in certain respects, and it might have driven the point across a little bit better. Duly noted, and in as much as I am considering a followup, I may want to address that specific concern.
Anyhow, thanks for the feedback. I very much appreciate it.
Before I go read it would someone please verify that it's spoiler-free? (beyond the initial image which spoils something about Walt/Skylar's relationship)
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SPOILERS BELOW
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I'm partway through season 4 at the point where Skylar makes Walt return the fancy car he just bought for Walt Jr. saying that "someone has to protect the family from the man protecting the family". Jessie is riding shotgun with Mike and Hank is starting to regain interest in the blue meth case.
Thank you.
I suggest you edit your spoiler out and just state the last episode you watched and ask if the article deals with story segments you haven't watched yet.
To the grandfather: Just post what you wanted, and get rid of the spoilers section. Sheesh. You're not amusing anybody, or adding anything substantial to your original point.