With cable TV shows, I often wonder how they’re making back their money (if they in fact are doing so). So I appreciate Broadcasting and Cable doing an in-depth piece on Mad Men and the financial position of its network and production company. Though they don’t have official figures on how much money the network is losing, it’s fairly certain that it is (so is its production company, Lion’s Gate, but running deficits is pretty normal for a production company), and much of the piece is really a step-by-step attempt to show that there’s no way for AMC to recoup its investment yet. The show costs $2.3 million per episode; the commercials are higher-priced but there are only ten minutes of them — you may recall that Matt Weiner rebelled when the network suggested making the show shorter to fit in more ads — and AMC doesn’t get the ancillary revenue that would come from owning the show. And it’s not just AMC that’s in the red; John Landgraf, who has developed many of the big projects at FX, is quite blunt about it, telling reporter John Lafayette that “we don’t even come close to break-even.”
So why do networks invest heavily in shows that can’t make a profit? Landgraf hints at the reason when he lets the reporter know that “original programming represents just 8%-9% of FX’s primetime ratings and less than 20% of its primetime revenue.” The most profitable things on a cable network are usually the things that aren’t very prestigious or new: reruns, mostly. AMC is still primarily a network that shows chopped-up movies with lots of commercial breaks. (Mad Men, Breaking Bad or no, it’s a shell of its ’90s self most of the week.) Even a network like USA, with some of the most-watched original shows on cable, is a rerun centre a lot of the time. But it’s difficult to brand a network using reruns, and it’s difficult to get advertisers interested in a bunch of repeats. The idea of producing original programming is that if the programming is good, wins awards, gets good reviews, then the name brand of the whole network is increased. This happens on pay cable, too; HBO is obsessed with “brand enhancer” shows that can tempt people to subscribe to the network and watch their sports events and movie reruns. But it may be even more important for ad-supported cable networks, because the brand enhancement can lead to companies buying more expensive ad time on the whole network, not just on the originals:
According to Nielsen, revenue from Mad Men accounts for only 1.5% of AMC’s ad dollars, but ad buyers say that to advertise on Mad Men and other originals, the network encourages sponsors to buy other programming, pushing up prices for its movies as well.
So while it’s impossible to know, absent balance sheets, how much cash AMC is losing on Mad Men, it also makes sense that they’d want to do it: the only way you can survive as a cable network is to have something that sets you apart from the others. With very few exceptions, that simply can’t be your selection of reruns; it has to be original stuff.
Another example of this is mentioned in the article: TV Land, which used to be a Nick At Nite spinoff specializing in old television programs, found it could no longer survive on reruns alone. (The existence of DVDs and Hulu, which allow viewers to watch their favourite episodes now instead of waiting for them to come along in the rotation, have made repeats a tricky game.) So it has begun producing original sitcoms that are kind of like the ones they used to show — except they’re new. This is working for them so far, and it’s necessary: the value of their reruns can only be increased by the presence of more original programming on their network.
(The Canadian version of TV Land, by the way, has rebranded itself as “Comedy Gold” and is trying to sell itself as a home for sitcom reruns — it’ll be interesting to see whether rerun selection can still work as a “brand” in and of itself.)