TV networks earn money from two main revenue sources: 1) subscription fees and 2) advertising. Cable providers (like Comcast and Time Warner) charge customers about $80 per month to access the basic cable networks or channels. The providers then pay a portion of that $80 subscription fee to each network for the right to broadcast their content.
You see, cable providers usually don’t make their own content. And Comcast can’t just broadcast MTV or The Food Network for free. They have to pay them a set amount per monthly subscriber. These fees will vary in size. A brand new station may get $0.25 from each cable subscriber’s $80. ESPN, the world’s most valuable network, gets about $5.54 per subscriber. The next highest fee payed is about $1.20 (TNT).
Quick Fact: The Walt Disney Company owns 80% of ESPN. The Hearst Corporation owns the other 20%.
The other way that networks earn money is from advertising. Companies know that people are tuning in to watch these TV networks. So they purchase commercial slots to advertise their products. The more popular a show is, the higher the commercials will cost advertisers. The 2014 Super Bowl had an average 30-second ad rate of $4 million. That is over $133,000 per second! Why so expensive? Because this year’s was the most watched Super Bowl in history with 111.5 million viewers. The more people who watch a show, the more the TV network can charge for advertising. It’s a numbers game.
Networks also earn money from DVD sales and allowing their shows to stream on places like Netflix, Amazon Instant Video or Hulu.
Points to remember:
- Networks earn money from subscription fees paid by cable providers.
- Networks earn money from advertising dollars paid by companies for commercial shots.
- The more popular a TV show is (measured by ratings), the more the network can charge for advertising.
- Paid networks like HBO and Showtime have a different business model; they don’t show ads. Since cable customers pay extra for these networks, HBO and Showtime get much higher subscriber fees (like $10 per household) than regular cable networks.