How Media Companies Make Money

How Media Companies Make Money and How that Effects the Type of Content They Make

We are going through a huge change in media--maybe the largest in the history of the film medium. While it may seem confusing in many ways, if you just look at the way the various media conglomerates make money you can see their motivation and how they will make money in the future.

Network TV (ABC, NBC, ABC)

How they used to make money: sell ads that displayed during “commercial breaks.”

Resulting content: TV shows that were made to keep your attention until the next commercial break, so you would sit through the commercial and “tune in next time.” The TV shows Friends, Siegfried, Happy Days, and The A Team are good examples of this technique.

Cable TV (TBS, CNN, MTV Etc.)

How they make money: Cable fees and Commercial Breaks

Resulting content: Specialized content that particular demographics absolutely needed (“I want my MTV”) so cable providers would carry the channel and pay the station the resulting $1-3 fee per a subscriber.  Also, they make money through on-air ads, but the cable fees carry the ship.

YouTube (Google)

How they make money: By running click ads on top of videos and in video content. Ironically YouTubers, while making some money directly from YouTube, make most of their money from sponsored listings. This creates a disconnect between the interest of YouTube and the interest of the content creator.

Resulting content: short and sharable content that is catchy and interesting long enough for a click ad to display or for a short five second commercial to run before the add. Since the content relies on being “shared” for distribution, it is important that the content has a viral quality.

Amazon Prime Video (AKA Prime Video)

How they make money: By selling Prime memberships, which in turn increases the likelihood that you will buy most of your household purchases from the website. They don’t need to make any money from video or music content because they can make money from selling you everything else in the world. So, the goal of the Amazon Prime Video is to get you to sign up for Prime. That’s why it’s in the title.

Resulting content: Content with a social component that is of global interest. The TV show “Grand Tour” is a good example. This catchy buddy comedy that centers around cars  --previously BBC’s “Top Gear”-- has global reach and global appeal. The show has plenty of “water cooler” moments so it is a must see for men so that they can talk about cars.

Netflix

How they make money: Subscription fees globally

Resulting Content: Netflix started making its own content because it was too difficult/expensive to negotiate the distribution rights for a movie for 36 countries. So, they said “screw it, we will make our own content.” The result is they want content that will play well globally and be “binge worthy” and talked about. They want you to say “You must see House of Cards. It’s amazing” to your friend and then your friend will sign up to see it. You can see this with many of the shows they create trying to be the House of Cards for various demographics. Netflix hardest task is they try to be everything to everyone, being the first truly Global TV station. This is in contrasts to HBO NOW which I will talk about next.

HBO NOW

How they make money: Subscription fees from the 5% richest members of society.

Resulting Content: HBO is the elite’s TV Channel. They make content that is charged and provocative because they want you to keep paying a subscription fee even if you don’t watch it every week or month. They put on “must see documentaries” that are “thought provoking” so the 5% can talk about it with each other. Their TV series are generally shorter than Netflix which targets minutes watched on its service, not impact. So that’s why HBO doesn’t mind losing people from its audience by repeatedly decapitating people on its shows (Westworld/Game of Thrones). As long as it affirms the values of the 5% and is provocative, they win. HBO’s CEO spoke to my girlfriend’s work and he said because they only go for the very top of income demographic, they don’t view Netflix as competition.

Disney

How they make money: Theme Parks

Resulting Content: Once you realize that Disney makes virtually all of its “operating profit” off of Disneyland, Euro Disney, Disney Curses etc., all their content choices make sense. Operating Profit means what Disney actually make money on. Unlike all their cable channels (Disney Chanel, ESPN etc.) and movies were they basically break even. The goal of the animation and live action is to create a character and stick it in a theme park. This is also why other animation or family- oriented content is difficult for other companies to make. They may create a hit like Fern Gully, but they don’t have the global theme park network to charge families $160 a ticket the way Disney can do with Tinkerbell.  So, Star Wars, Marvel, Disney Animation, and Pixar are all cranking out characters they can stick in theme parks that become must-see attractions.

As you can see much of our media world is built on how Amazon wants to sell us diapers, Netflix want to sell us subscriptions, and Disney wants to sell us vacation packages. With this knowledge, we can be better producers of content and see the goals they have in mind. Or, at the very least, if your filmmaking goals don’t line up with theirs then you can do something else and/or try to find a partner that fits with the type of stuff you want to make.

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