GHJ recently completed an in-depth study of key financial performance indicators (KPIs) in connection with television production and distribution. These KPIs shed light on the challenges and opportunities faced by producers, distributors and investors across the television industry. Overall, the analysis explores various relationships among key elements of television distribution.
Some of the KPIs evaluated connection with television series (on an episodic level) include: made for network, basic cable, pay TV and streaming (SVOD) media:
- Domestic initial license fee
- Production costs
- Average initial license fee as a percentage of average production costs
- Average annual revenues after the initial broadcast of the series
- Average annual net profit (MAGR)
- Average annual distribution expenses
- Distribution expenses as a percentage of revenues
- Residuals as a percentage of revenues
- Interest and overhead as a percentage of production costs
- Average distribution fees
- Average production overhead fees
- Average annual streaming (SVOD) license fees (for television series made for network, basic cable or pay TV)
In connection with those television series included in our analysis (which number over 100 series released on various media from primarily from 2005 through 2018), the following compelling general observations were noted:
- Substantially all network and most basic cable series are licensed for a fixed, (negotiated flat) initial license fee
- The initial license fees for most pay TV and almost all SVOD series are much higher than the fixed licenses fees and are calculated as a percentage of production costs
- The average increase for the initial license fees during the first four seasons is minimal; For the fifth season, however, a significant increase occurs
- Several network and basic cable series that began with fixed initial license fees converted (mostly which occurred in Season 5) to fees based on the percentage of production costs)
- While SVOD series may have a higher initial license fees (as recovery of production costs due to the “cost-plus” approach), subsequent television sales appear lower than traditional network or basic cable series.
For more information about the survey results, please reach out to Michael Sippel, Ilan Haimoff or a member of GHJ’s Profit Participation Services Team.