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Through this structure, the production company retains the majority of the rights. For example, though new episodes of "Modern Family" air on ABC, the show is actually produced and distributed by divisions of Twenty-First Century Fox.
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Many networks license shows from production companies. The production company then makes money through licensing deals, syndication and other opportunities, especially if the show is a big hit. Netflix did not immediately respond to a request for comment.Ĭompare that with a traditional television licensing deal, in which the network airing the first run of the show pays a fee of only 60 to 70 percent of the show's production cost, according to one executive who negotiates TV deals. Three of the people said most standard deals get about 30 percent on top of production costs, though bigger studios have been able to negotiate larger percentages. That means the creators sign away most of their future revenue opportunities, which can mean tens of millions of dollars going to Netflix on the most successful shows.įive people who have sold TV shows to or have been in negotiations with Netflix said the company typically offers a "cost-plus" model, which covers the cost of production plus more on top. The downside for creators of these new shows is that Netflix then seizes more of the upside on big hits. Plus, because Netflix does not have to worry about upsetting advertisers, the streaming giant can give show creators more freedom to create the show they want. These contracts change the model of how shows are typically licensed and offer way more money up front than networks usually pay to have these shows on their channels.