The Top Ways Your Favorite Television Shows Make Money

Thirty years ago, Ted Danson earned a then-record $450,000 per episode for his role as baseball player-turned-barkeep Sam Malone on “Cheers.” A perennial darling in the ratings – the show finished No. 1 in the 1990-91 season — “Cheers” presented production house Paramount Pictures Corp. with a major dilemma.

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How could it recoup the $1 million loss it took per episode? Paramount spent $2.2 million to produce each installment of “Cheers,” largely because of high cast salaries, but NBC paid just $1.25 million for the broadcast rights. Paramount’s solution: Ask NBC to increase its payments by 284% to $4.8 million per episode, the Los Angeles Times reported then.

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The two sides eventually agreed, and “Cheers” went on to run for two more seasons – 11 in all. But hearing the 30-year-old story begs the question: Just how do our favorite TV shows make money?

Last updated: Sept. 30, 2021 

Paramount stayed in the “Cheers” game because of the money the show brought in through reruns. In its first seven years of syndication, Paramount took in more than $315 million, the Los Angeles Times reported. The company behind another NBC staple, “Friends,” also lost money on the cost of production against the licensing fees the network paid to Warner Bros. 

Forbes estimated, however, that “Friends” has made $4.8 billion for Warner Bros. Television through selling reruns domestically and internationally, as well as the eventual shift to streaming services. That money didn’t go straight in the bank for the production company. The cast and the show’s creators have reaped millions through deals established for the reruns.

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The ability to stream television shows and movies on our devices has changed the way we consume media. We no longer set the DVR to save reruns of some of our favorite shows airing on one of our local stations. With streaming, our entertainment is available on demand through the services we subscribe to — some for free on certain platforms, depending on the show.

In one of the streaming industry’s first megadeals, Hulu paid dearly for the rights to “Seinfeld.” Newsweek reported Hulu paid somewhere between $130 million and $180 million in a six-year deal for the 180-episode story arc of Jerry, George, Elaine and Kramer. “Seinfeld” debuted on Hulu on June 24, 2015 and aired for the final time this summer. The series is now scheduled to begin its run on Netflix on Oct. 1, with the streaming giant reportedly paying production company Sony Pictures Television $500 million for a five-year exclusive deal.

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In 1977, the VHS system was introduced in North America, revolutionizing how we watched television. We could now pop a chunky cartridge into a machine to record appointment viewing, or go to the video store and pick up a movie on VHS for date night or family movie night. By 1997, the DVD was introduced in the United States, offering a higher quality picture and greater ease of use. The last movie released on VHS came in 2006, according to Kodak.

The introduction of streaming services hasn’t delivered a knockout blow to the DVD. In fact, the DVD format has benefits streaming can’t offer, such as a better quality product and availability at your fingertips. Despite the vast collection of streaming services, titles you might want to watch at that moment might not be available. Industry publication Media Play News reported the pandemic spurred an increase in DVD sales. In the three-week period ending May 9, 2020, DVD revenues rose 14.4% and in-unit sales were up 12.5% over the same period in 2019.

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That Ninja Turtless sweater your kid has worn since they were six was produced under a merchandise licensing agreement between the owner of the show and the company that commissioned and distributed the sweatshirt. Agreements typically call for the show owner, called the licensee, to receive a royalty of anywhere between 2% and 20% from the distributor, known as the licensor.

Those percentages add up, too. New York-based Licensing International reported that in 2019, global sales revenue of licensed merchandise and services hit $292.8 billion. The entertainment/character sector led the way, bringing in $128.3 billion (43.8%) of the licensing pie.

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When a network pays a producer for the rights to broadcast content, the network keeps the money from ad revenues. Consider this. Earlier this year, CBS, ESPN/ABC, Fox and NBC signed on — to the tune of $89.5 billion – for the rights to televise NFL games for the next 11 years. And the networks will largely pay for that contract through ad sales, which they keep to help pay the bill to the NFL.

Revenues from ad sales go to the network, and not the producer, under most contracts. That’s why networks are increasingly looking into producing their own original content. Bloomberg reported that Tubi TV, a free streaming platform that shows television reruns and older movies, was considering an entry into the production game, which would allow it to keep all ad revenues and have content for years to come. Tubi, owned by Fox, was still in the conversation stages in March, when Bloomberg reported the ad-supported network could be looking at spending $4 million an episode on a series.

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