X-Raying The Studio-Network Nexus
All six television broadcast networks– CBS,
NBC, ABC, FOX, UPN, and WB– are now owned by the
corporate parents of the movie studios. This nexus
has resulted in the networks becoming the cash cows
for the movie studios.
To begin with, the networks pay
the studios a licensing fee for the right to show studio-produced
movies, cartoons, and television programs over a limited
time period. Last year (2003), these network fees totaled
$5.1 billion, which was $1.2 billion more than the studios
received from the entire American box office. What makes
this a real windfall for the studios is that they do
not have to pay any advertising or marketing costs out
of the proceeds, as they do in their movie business.
So the licensing fees flow directly into the studios’
coffers as almost pure profit
.
In addition, networks help establish television series
and movies for syndication to local and foreign television
stations. So after the networks’ licenses expire,
the studios can sell the same programs over and over
again. And a hit series can be extremely lucrative:
the 125 episodes of The Cosby Show has earned a half-billion
dollars for Viacom to date, according to its chairman
Sumner Redstone. In 2003, this local aftermarket provided
studios with another $5.5 billion. Aside from the small
percentage that gets paid out in residuals to actors,
directors, and writers, the take from these sales goes
directly to the studios’ bottom line.
This bonanza explains why studio executives are not
unhappy that the percentage of Americans who go to the
movies every week nowadays is only a fraction of what
it was 50 years ago. The audience that is staying home
in droves is now their main source of profits.
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