The economics of television

Cite this Article
Larry Ribstein, The economics of television, Truth on the Market (February 26, 2011),

I was forced to watch my first episode of “Two and a Half Men” last week.  Family members drugged me unconscious and then bound and gagged me, locked my head in the direction of the television and taped my eyelids open. 

The most horrible moment came when I realized that this was neither satire nor science fiction but a real, top-rated sit-com.  Also, I wasn’t sure about the math.  Who was the “half”?  Shouldn’t it be, say, “One and a quarter men”? 

It turns out that Bud Fox (“Newsflash: I am special, and I will never be one of you”) has misbehaved (or, perhaps, is auditioning to be the next dictator of Libya) and he was canned. The show was then canceled (apparently nobody was interested in “.75 men”).

I will now turn to the interesting part — the economics.

According to the WSJ, the producer (WB) will lose significant revenues from sale and syndication of the show, but the network will lose little or nothing.  CBS will make plenty of money showing reruns (will the audience even notice?).  Also, an analyst told the WSJ that CBS could make more money by replacing the show with one it produces itself rather than paying the high fees to WB (again, will the audience notice?).

This suggests that only producers and not networks make money from hit shows. So why don’t networks show any crap they can come up with on their own, instead of the crap they buy from production companies?  Or, in other words, how do networks make their money apart from production?  Is there enough demand for television shows now that producers are able to suck out all of the profits?

Also, it looks like Charlie Sheen was underpaid, since it seems the show couldn’t go on without him. In other words, two and a half minus one = zero