The numbers game

These are not trivial sums of money. Big sprawling epics with huge sets, star actors (or actors who become stars during the show’s success), exotic locations, and a multitude of special effects can be expected to cost this much. (Of course it should be noted that at its peak episodes of Friends were said to cost $10m each.)

HBO is known for big-budget shows. Rome, cost a reported $9m per episode, True Blood around $3m-$5m, and Boardwalk Empire was another at the roughly $5m level (though the pilot was believed to be closer to $18m). And when your channel is devoted to shows like this (HBO’s slogan for a time was “it’s not TV; it’s HBO”) you’ll want to chase the most money to make a profit.

Traditionally this means selling a subscription to a channel, usually as part of larger bundle of channels or as an ad-hoc addition. This is the cable TV system in the US. HBO is offered as an additional channel on a number of cable providers. Using this model, HBO is guaranteed money from the providers. When US-based tech blog The Verge went shopping it found Comcast had the best offer for a package of internet only and HBO, and this cut-down service still averaged to $71.99 per month (over 2 years).

To get an idea, let’s look at Under the Dome, a sci-fi show on CBS with an estimated cost of $3m per episode. Website, The Vulture, broke down how CBS made back the money for the show before even selling any advertising.

• CBS struck a deal with Amazon that would let Amazon Prime members stream episodes of the show 4 days after they debut on CBS, while anyone with a credit card will be able to download episodes on a pay-per-view basis. [Amazon] will pay CBS a whopping $750,000 per hour-long episode — that’s roughly one quarter of the show's estimated production cost, instantly covered.
• International sales have become increasingly important to the TV business; in the same way global box office is now just as, and sometime more, important to the financial health of American feature films. And Dome has turned out to be a massive hit with overseas networks: Vulture hears the show will pull in around $1.9 million in license fees paid by foreign broadcasters.

Amazon made similar deals with the History Channel for its hit show Vikings that allowed UK viewers to watch the show before it was on regular TV.

So there is clearly money in streaming services, for example, Netflix has paid between $400,000-$600,000 for recent episodes of popular TV shows. And of course Netflix makes its own shows too: Hemlock Grove costs $4m an episode, Orange Is the New Black just under $4m, while the critically acclaimed House of Cards is estimated to cost more than $4.5m per episode.

Netflix obviously sells these shows to non-US TV broadcasters to recoup some of its costs, but it’s not using the “cable” model for the basis of its earnings. All of this seems to point in a single direction: streaming content is the future.

About the author:

Hadyn Green is a geek. He loves shiny new tech and the chance to try to break it. Because it's the kind of thing people ask, here is the tech Hadyn currently uses. Phone: iPhone 5s Tablet: iPad Air. Music player: Spotify. Headphones: Sony MDR-G55 (for walking because I hate earbuds) and Beats Studio noise-cancelling (for sitting at my desk and tuning out the world). E-Reader: Kindle Touch. Gaming: PS4, PS3, Xbox One and Xbox 360. Internet Service Provider: Snap.