How Do Television Shows Make Money?

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Ever wonder why that new smart phone that hasn't even been released appeared in an episode of your favorite television show, or why you have to sit through 15 minutes of commercials for every hour of television you watch? In the same way that magazines make the bulk of their revenue from advertisement pages and advertorials, television shows make most of their money by selling products in a few similar ways.

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In the early years of television show production in the United States, television sets were not as available to the masses as they are today. As the availability of televisions and the innovation behind them grew, a new system developed. It consisted of "centralized sales, distribution and production services which lowered costs for individual affiliates…(and) was geared towards generating advertising revenue as well, because advertisers were interested in the ability to reach nationwide audiences,” states an article on the Duke University Libraries website.

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The cost of television show production is covered by advertising. In their article published in "The Quarterly Journal of Economics," Michael Spence and Bruce Owen claim that “consumers are given a free product (the program) in order to generate audiences that are then sold to advertisers.” Television shows offer commercial slots that advertisers pay for depending on factors such as demographics and ratings. For years, advertisers have entered bidding wars for Super Bowl commercial slots because of the game's high ratings. Newer forms of integrated advertising such as product placement promote products more inconspicuously through dialog or appearances, while promotional merchandise is directly related to promoting the show's fan-base rather than external products.

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If you happen to spot a specific product or hear a character mention a specific product, chances are good that the product's manufacturer paid for the plug. Promotional merchandise has an insignia or something closely associated with a show to make it easy for fans to support their favorite show. Some commercials get special prominence with a hallmark introduction that sounds similar to “this program was brought to you in part by,” signaling that the product or company may have paid a little extra for that commercial slot. Some of these advertising tactics may be harder to spot than others.

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Do you ever need to step out of the room but can’t bear to leave the television because you don’t want to miss a second of what’s happening? The best time to leave is always during a commercial break. Although sometimes people prefer to fast forward through commercials and become annoyed with how many times someone uses a specific product, these advertising forms let people know what products are available, which in turn fuels the economy.

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In order for a television show's cast, crew and network employees to be paid, and for the show to turn a profit, viewers, in exchange for entertainment, have to endure 15 minutes of commercials or the appearance of specific products in each episode. In addition, promotional materials such as memorabilia and DVD sales provide other revenue and promote the show. Television programs also make money through syndication, which "is the practice of selling rights to the presentation of television programs especially to...a television station, a cable channel, or a programming service such as a national broadcasting system," according to an article on The Museum of Broadcast Communications' website.

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