This is a departure from my normal content, but I love the economics of television scheduling, so here goes. TV renewal season is coming up, and I've got to thinking.
There are some truly inspired shows out there right now with poor ratings. To name a few, Friday Night Lights is the best show I've ever seen, but it has terrible ratings and it keeps getting renewed only because a) DirecTV recognizes that its fans are so diehard that cutting a deal for first premiere in exchange for financing the show actually gets people to sign up for DirecTV and b) NBC realizes that the writers, directors and producers are so good that keeping them around to sub in on other shows actually improves the quality and viewership of the network's other shows.
Similarly, Kings is a ratings flop, but it's a tremendously clever and well-done show with a growing number of diehards. Chuck is hilarious and critically acclaimed, but lives on the cancellation bubble. The Office took multiple seasons to pick up viewership, but even in the early going, fans of the show were rabid supporters. Although I don't love 30 Rock the way I love the others on this list, it is also widely critically acclaimed but took at least a season to pick up steam. How I Met Your Mother is a similar case - brilliant show, die-hard fans, but lives on the cancellation bubble. I only watched a couple episodes of Firefly because I'm not a huge sci-fi person, but it definitely qualifies as high-quality programming with a relatively small number of dedicated fans. The list goes on.
The problem is that networks are incentivized to churn out mediocre shows with a large but largely uncommitted and uninspired viewership (Deal or No Deal, for example), because they are paid on number of viewers. From a utility economic point of view, getting 30 million viewers to watch the show who get 1 utility point (fictional unit) net of opportunity cost is significantly worse for society than getting 7 million viewers who receive 8 net utility points from the show. However, the way TV currently works, the first show will typically be renewed, while the second show will likely be cancelled unless it's so inexpensive that the network still makes money off of a small number of viewers.
The question, therefore, is how to restructure the market to make a maximization of public utility in the interest of networks, rather than a maximization of viewers.
There are two standard solutions, and they are both boring.
Cable television or other service-charge possibilities is one frequently-used solution for this. Committed fans will likely pay the extra dollar-per-month to get a channel with their favorite show, and that dollar per month can supplement ad dollars to make a cult show profitable. This is the DirecTV reason for why Friday Night Lights is still on the air. Similarly, it's why a show like Burn Notice, which is a cable hit, can be considered a "hit" with 6 million viewers, when that level of viewership makes Kings one of the most expensive flops in NBC history.
The other standard possibility is a pay-per-view distribution mechanism (even an iTunes type of distribution), which economically functions in a similar way- gets diehards to pay more to see the show. That's how boxing makes money.
However, I'm interested in other solutions. Networks often finance the creation of new shows themselves (as with Kings, Bionic Woman, Lost, etc), so these shows cannot be placed anywhere other than on the network. Cable and standard pay-per-view solutions don't work for broadcast networks.
Here's where I'd like some interesting ideas. What can a broadcast TV network do to make more money off of shows with a small but committed group of viewers, thus enabling said shows to stay on the air?
I've been thinking about this, and short of things like "merchandising and promotional tie-ins", I'm at somewhat of a loss. Can anyone think of anything clever?
Been thinking a little about the role of cable networks. Part of the reason cable networks are still profitable is they face low costs. Syndication is less than production, and even original shows are usually cheaper than broadcast network shows. Perhaps broadcast networks could create more cable networks, or use cable networks they already have that fit the show, and use high quality cult shows as tentpoles?
This works particularly well if cable companies (Comcast, Time Warner, etc) move towards a la carte channel picking instead of the traditional bundling