Lately, I've been doing some thinking (and table-napkin math) regarding ad-free streaming TV programming. The average 1-hour TV show costs about $2 million per episode to produce. While there are some outliers, such as Game of Thrones that cost as much as $8 million per episode, we're going to start small. To pay for that average show's production costs alone with subscriber money, it would cost about 70¢ per subscriber, assuming we can get an average audience size of 2.8 million viewers per episode. For the sake of our thought experiment, we're going to assume a season of the show will consist of 13 episodes. In addition to the production costs of the show, we also need to fund distribution (servers and bandwidth) as well as advertising. We're not going to be able to get 2.8 million viewers per episode if we don't have an ad campaign, at least for the first season. Let's triple our per-episode estimate to $2.10 to cover production, distribution, and advertising. That leaves us with one season of one show at a subscription cost of $2.10 per episode, for a grand total of $27.30. How many new shows will you watch in a year? We'll assume 5 new shows. Assuming the same costs for production, distribution, and advertising, that means we'll have to be willing to pay $136.50 per year for 5 new shows.
What about older shows? The dirty little secret of TV production is that shows get more expensive to produce as time goes on because salaries increase. Actors demand more money when they sign new contracts. The show that costs $2 million for the first season might cost $3 million for the second season. Audiences tend to get smaller for subsequent seasons on most shows. The 2.8 million who watched each episode of the first season might fall to 2.5 million for the second season. For the older shows that are still in production, let's assume $2.60 per subscriber per episode to cover production, distribution, and advertising. How many older, in-production shows are you going to watch each year? If we assume 5 shows, that means we'd be paying $169 per year for those shows.
Now, let's toss in some older shows that are no longer in production. We can eliminate the production cost but we'd still have to pay for distribution and maybe a tiny bit for advertising. For the sake of argument, we'll say 25¢ per episode per subscriber. Assuming 5 older, out-of-production shows for the year, that's $16.25. All of this leaves us with an ad-free streaming entertainment package of $321.75 for a year, or $26.81 per month.
Most people watch far more TV than that.
For our fledgling ad-free streaming network we're also going to need development money. For every show that makes it into production, many more don't make it past the pilot stage. Fresh ideas cost money. That money is going to have to come from subscribers.
I'm not saying ad-free streaming TV isn't possible, I'm just saying there are financial considerations. If we want the same production values as we've gotten used to, we're going to have to pay. Visual effects cost money. Sets cost money. Location shooting costs money. Actors cost money. Servers and bandwidth cost money. Advertising costs money. Disney will be able to do it because they can merchandise the hell out of their franchises. Most others will struggle and fail.
We could quit overpaying actors, producers and directors...
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