how-do-tv-networks-make-money

How Do TV Networks Make Money?

The first television network to maintain regular service was launched by the National Broadcasting Company (NBC) in June 1947.  The NBC initially served New York City, Philadelphia, Washington, and Schenectady, with the network spreading west across the United States via interconnected partner stations. By 1951, there were four different networks in operation with most only broadcasting for a few hours each day. This number increased in the following years as television sets became more affordable for the average consumer. Today, television is a staple form of entertainment for billions of consumers around the world. This has attracted multiple and varied monetization strategies.

Advertising

Advertising is the primary way TV networks make money. Networks that do not create their own television shows instead purchase shows from producers that they believe will be popular.

Advertisers then pay the network for exposure to consumers during commercial breaks. In most cases, these commercial breaks run for a total of twenty minutes every hour. In Western markets, each consumer is worth about 23 cents per hour to the network in advertising revenue. To get an idea of potential revenue, consider that in the United States, the average consumer watches television for as much as 280 minutes per day.

Advertising revenue has been falling in recent years as consumers record television shows to watch later or download them on the internet.

Subscriptions

Television networks also sell subscriptions to consumers. Cable networks like HBO offer access to exclusive content if the consumer is willing to pay for the privilege. Note that in most cases, the cable network still earns money from advertising revenue too.

Some cable providers use this revenue to develop content of their own to keep consumers subscribed. Though strictly not a television network, the subscription-based revenue model has also been used to great success by Netflix.

Merchandise

Like any brand, television networks can also make money selling merchandise from television shows where they are licensed to do so.

HBO operates an online Game of Thrones merchandise store where it sells sweaters, shirts, mugs, framed prints, and dragon eggs, among many other items. 

eCommerce sales have added an important additional revenue stream for TV networks, removing the middleman and allowing fans to interact with the network directly.

Sponsorships

On occasion, the television network may accept sponsorship money from another brand to have its products featured during a show. This is another form of advertising known as product placement.

Cookie brand Oreo has an established partnership with the sitcom Modern Family and was also featured on Friends. AMC period drama Mad Men also advertised Heineken beer throughout its seven-season run.

Several sponsors may compete against each other to have their products featured, which maximizes profit for the TV network.

Key takeaways:

  • The first network to maintain a regular TV broadcast was the NBC in 1947, with the popularity of television entertainment spreading across the United States as televisions themselves became more affordable.
  • Television networks make money by selling advertising spots to brands looking for exposure to large audiences. Some also sell premium subscriptions in addition to advertising revenue.
  • Television networks that own the rights to certain content can sell branded merchandise through online stores. Many also sell sponsorships to brands that want their products featured in television shows.

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