Mad Men and the Death of the Networks

A winner

Today I am cancelling part of my Time/Warner cable package – the part that pays for HBO and Showtime and all that other stuff that I don’t watch.

Between the web and Apple TV I am rapidly moving ‘off the grid’ and ‘onto the web’ full time.  I have connected not only the AppleTV but also my Mac Mini to the plasma monitors (what we used to call TV sets) and what with Roku, I can no longer tell the difference between TV and cable and the web. Nor do I care. This is what we call convergence, and in the not too distant future you won’t be able to differentiate between webcast and broadcast, nor will it matter.

This has enormous implications if you are a TV network.  Death-like implications.

What, after all, does NBC bring to the table?

It used to bring a big thing – the only way to get into 100 million households.  Without NBC (or ABC or CBS) your content was worthless. Watch it at home and show it to your friends.

With the advent of cable, this monopoly became something of an oligopoly, as a few hundred other players divided the pie – but the concept was the same.  The network (ABC or Discovery Channel) bought the programming and then aired it and made the profits on the commercial sales and back end stuff.

The leverage that all those networks and cable operations had was access to people’s homes. With NBC airing your stuff you were guaranteed to get into 100 million homes. Pretty good.

But then along comes the web and it’s new ability to carry streaming video in real time.

Suddenly, the barrier to entry that NBC had has been blown away.

Now, anyone can get into 2 billion homes worldwide with their video – and for free (or nearly so).

Wow.

That’s a big change.

The leverage used to be with the networks – they were the gatekeepers.  But now, the gate is open.  Everyone can stream through.

So where does that leave the leverage?

It is where it really belongs – with the content creators.

Let’s go back to Mad Men, as a case study.

Mad Men was designed by Matthew Weiner, who was a writer on The Sopranos. It was his idea. He wrote the script.

It was produced by Lions Gate, a major production company in Santa Monica.  The show is budgeted at $2.7 million per episode, making it expensive, but clearly worth the risk.

AMC purchases the series from Lions Gate for $2.7 million an ep, and Weiner and the rest of the actors and staff take their income from that purchase.  As the show is now so successful, Weiner gets a bonus deal, $30 million for a contract that keeps him with the show for another 3 years.

Pretty good deal.  Or is it?

In a recent  Marie Claire interview with January Jones, who plays Don Draper’s long-suffering wife she noted the limits to that financial success when it comes to the actors: “We don’t get paid very much on the show and that’s well-documented. On the other hand, when you do television you have a steady paycheck each week, so that’s nice.”

But how much revenue is there from a hit like Mad Men?

Sales from home video and iTunes could amount to $100 million in revenue during the show’s expected seven-year run, with international syndication sales bringing in an additional estimated $700,000 per episode. That does not include the $71 to $100 million estimated to come from a Netflix streaming video deal announced in April 2011. And of course, none of this includes AMC’s current income from subs and ad sales.

Pretty good.

But when you look at those numbers, Matt Weiner’s $10 million a year doesn’t seem like so much. In fact, it looks like a pittance, considering what he has delivered

Well a pretty good product.

But now comes the critical question – in an internet/video convergence world, who needs AMC? Or NBC?  What do they do, exactly?

If they are the ‘banks’ that finance the productions -well, there are easier and less complicated ways of doing that.

Wouldn’t it be better for Lions Gate just to put Mad Men on Lionsgate.com, or Madmen.com? And then own all the rights?

Or maybe make a deal with Seagrams, who could fund the shows and then stream them on Seagrams.com with click and buys for scotch all on the sides?

There are lots of other ways to ‘broadcast’ these days – and lots of them don’t need the baggage and the overhead of a conventional TV network.

And shouldn’t Mr. Weiner be better compensated than AMC?

It seems not only fair, it seems the right thing to do.