TV shows account for big part of Hollywood profits

Jennifer Collins Sep 23, 2011

TV shows account for big part of Hollywood profits

Jennifer Collins Sep 23, 2011

Steve Chiotakis: The 60s-era drama “Pan Am” debuts on ABC
this Sunday. It is a lavish production and one of many examples this fall of how Hollywood is relying on the small screen to pay the bills.

Marketplace’s Jennifer Collins reports.

Jennifer Collins: “Pan Am” has all the makings of a big budget movie, a well-known actress — Christina Ricci — flashy special effects, and punchy dialogue.

Christina Ricci: Can we roll out gentlemen? I’m getting tired of waiting.

Pilot: Did you just fly in on a helicopter?

Ricci: Well, I like to make an entrance.

So does this television show. The pilot — and by that I mean the first episode — reportedly cost $10 million to produce — for less than an hour of television. That’s more like movie-budget territory.

Edward Jay Epstein is author of The Hollywood Economist. He says TV is where the money is.

Edward Jay Epstein: Television is the engine that drives the entertainment business.

Big studios are making fewer movies, not all of them make money. And slumping DVD sales also cut into profits.

Epstein: So television now probably represents between 85 and 95 percent of the profits of the five largest studios.

A lot of those profits come from fees paid by cable operators and advertisers. Ad rates are up around 10 percent this year at the big networks.

And analyst James Dix of Wedbush Securities says one TV series can have many lives.

James Dix: You can sell it to the broadcast networks, then you can sell it to the cable networks in the U.S. and then the rising number of international networks.

There’s growing demand for TV shows to fill the digital libraries of Netflix, Hulu and iTunes. Those second run rights are usually more valuable for scripted shows, and there are a lot of new ones this season — “Prime Suspect,” “Person of Interest,” “The Playboy Club.”

Dix: You have actually seen a surprising commitment to scripted programming. And I think in part that relates to some of the economics.

But those economics all depend on whether Pan Am or any of these shows —

Pilot: Ready Boys?

— take off in the first place.

I’m Jennifer Collins for Marketplace.

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