Chapter 2

New Business Models and Platforms

All revolutions depend on history. Without social and political strife, without precedent, there would be no need for change. Let’s go back and put all of this in historical perspective for a moment. Ordinarily, glossaries come at the end, but hey, we’re thinking outside the box and bringing these anachronisms and acronyms upfront so you can quickly grasp all that follows.

Then …

Given how fast the digital television revolution is happening, the following is a tongue-in-cheek crash course/history lesson for future generations on The Way Things Used To Be. Not only were there boxy TV sets, there was also an entire industry devoted to the television business, with its own rules, protocol, and vocabulary.

Glossary of Anachronisms

ACT BREAKS: Due to commercial interruptions, content creators were required to write mini-climaxes, known as “cliffhangers,” into their 1-hour or half-hour shows. The scripts for content were divided into “acts” and each act break was designed to retain viewers by means of a potential crisis that invariably turned out to be a false alarm, aka “schmuck bait.” This practice was mandated by the TV networks to prevent viewers from changing the channel due to boredom and/or distraction by other platforms. See also: Channel Surfing and Time Slots.

APPOINTMENT TELEVISION aka “Must-See TV”: Content deemed so exciting that viewers would make sure to be in front of a TV screen at a prescribed time so as not to miss the show’s very first air date in its original, premiere time slot. With the exception of live sporting and music events, this phenomenon occurred prior to on-demand viewership—although many viewers continued to watch their favorite content at the same time. Back in the year 2015, the powerful content creator—known as Shonda Rhimes—was a leading showrunner with several different TV series all airing on the same night in consecutive time slots, and the fans of this content were addicted to a social media app called “Twitter.”

BASIC CABLE NETWORKS: Advertiser-supported niche networks that existed for many years to serve the Bundled Cable Package. After the digital television revolution, all offered their content online, digitally on-demand as AVOD (more on this below).

BUNDLED CABLE TELEVISION: Before the year 2017, viewers were required to pay for content on “channels,” even if they never watched that particular channel. The cable and satellite TV companies of that era—Time-Warner, Charter Communications, DirecTV, DISH Network—monopolized the airwaves and, if viewers wanted access to a variety of programs, they had no choice but to adhere to unreasonable demands that were akin to paying a ransom every month. Eventually, the cable and satellite carriers consolidated for further monopolization, but viewers rebelled and “cut the cord” on their providers in favor of digital television and TV “a la carte.” Anyone with an Internet connection and/or WiFi hotspot could watch digital TV without paying for cable television. However, ironically, the very same cable companies and satellite TV providers still vastly control all Internet connections, making them the main gatekeepers of digital television, and leading to the exponential demand for bandwidth for all. Naturally, the cable and satellite providers lobbied mightily in Washington, DC to deregulate the Internet and create an elite “toll road” for higher speed Internet. At this point the FCC (Federal Trade Commission), whose rules did not govern wireless content, chose to pivot and designate the Internet as a utility akin to the telephone. The cable/satellite providers argued that they were beneficially eliminating Internet traffic jams and delays when digital content was “buffering.” Indeed, but for a price. It was a battle between David (the TV viewers who overwhelmingly demanded equal access to the Internet for all) and Goliath (the monolithic corporations). Fortunately, in a landmark ruling, the US Supreme Court sided with the people and struck down deregulation, allowing Net Neutrality to prosper to this day. However, in yet another irony, essentially the “Bundled Cable” has merely evolved into the Re-bundled Cable, appealing to audience’s need for economy and efficiency. As we all know, ordering a la carte is always more expensive than a fixed price menu.

CHANNEL SURFING: Before on-demand, a la carte, and agnostic viewership, a typical viewer would sit in front of his/her TV with the “remote control” in hand and flip from channel to channel to see “what’s on.”

DVRs: Electronic devices—small, flat boxes—plugged into the back of a TV screen enabling viewers to record content in its allocated time slot and watch it at a more convenient time, at which point they could also fast-forward or jump over commercials. Despite the growing popularity of these devices, for many years advertisers continued to pay exorbitant fees to air their commercials anyway.

LEAD-IN SHOWS: Back when rigid time slots still existed, the program that aired prior to a new show was called the “lead-in.” This co-dependent programming strategy was conceived to carry over viewers from a proven, hit series to an unproven series. But very often, once the new series moved to a new timeslot, the show would collapse and be canceled. Back when the Nielsen overnight ratings system was still the lifeblood of the broadcast and basic cable networks, the failure rate of all new shows was an astounding 90%.

MID-SEASON AND SEASON FINALE CLIFFHANGERS: A heightened version of the “act break” or end-of-episode crisis, calculated to compel the viewer to return for another episode. Mid-season and season-end cliffhangers usually involved the removal of wigs/masks; shocking revelation; and unspeakable acts of violence and/or sex. As mentioned, this TV “season” used to span 8 months, September–May.

OVERNIGHT RATINGS: A ratings system used by TV networks to determine how much to charge advertisers by measuring how many viewers were watching specific content—including when, where, and how they were viewing it. Back in the 20th and early 21st centuries, a company called Nielsen was the dominant, most trusted method of measuring viewers’ habits. “Nielsen families” were chosen, via a secretive selection process, and each family would: a) keep a diary accounting for every minute of their viewing time; b) be provided with a “set unit” (and or “People Meter”) that would report viewing data and demographic information via their “landline” telephones. For decades, TV shows lived or died based on overnight Nielsen ratings. Back in the 1970s, in what was branded as the Golden Age of Television, top-rated broadcast network shows could earn a 40 share, indicating 40% of all households using televisions had tuned in. By 2015, broadcast viewership had eroded, and even a successful “hit” series would garner less than a 10 share. During the digital television revolution, overnight Nielsen ratings—aka the “overnights”—became irrelevant to both digital and broadcast networks, and a new, more expansive ratings system was instituted to measure audience levels for 3 days beyond a show’s original airdate. See: Time slots.

Unfortunately, the ubiquity of time-shifting digital content made even this “Nielsen C3” untenable, and all TV networks threatened an exodus from the Nielsen service to competing, more expansive, ratings measurement companies, such as Rentrak. It seemed, for a time, that the Nielsen Company would become irrelevant and extinct. But as we all know, Nielsen is still a dominant pervasive—some say invasive—presence in all of our lives. What became extinct were people meters, the overnights, and Nielsen C3. Today, all audience measurement data is instantaneous. This practice began in 2015 when Nielsen began monitoring “IP addresses” (Internet Protocol) to track viewing and buying habits via TV screens, tablets and smartphones. Publicizing high-rated content energizes and creates buzz which, in turn, can elevate the ratings. One thing that has never changed in the TV content landscape is: public perception equals market reality.

PILOT SEASON: Based on the successful outcome of pitching season, the networks would determine which pilot scripts—with the requisite stars, director, producers attached—would be produced and made into a pilot episode. During the network “Up fronts,” held each May in New York City, each network would present their most promising new pilots to their affiliates: TV “stations” across America, who would then commit to airing the content. Despite its inefficient economics and dismal results, Pilot Season lasted for decades, costing networks billions of dollars on programs that were too often abandoned and never aired. For every 10 pilots completed, perhaps 3 or 4 would ever air. Of those few pilots green-lit in May for a September premiere, 90% would fail by December.

PITCHING SEASON: This occurred every summer, June–September, when the TV networks would invite established and “hot,” up-and-coming content creators to present their ideas for new series. Eventually, as of 2017, networks were buying pitches all year round. Most pilots (prototypes for new content) were developed with established and aspiring content creators at a 10 to 1 ratio; meaning that for every 10 pilots developed, maybe 1 would actually be produced.

PLOT RECAPS: Prior to the digital television revolution, everybody watched content on their TV sets—which was a one-way conversation. So if viewers missed an episode or two, the networks would provide a recap at the top of each episode encapsulating what occurred in the previous episode(s). This would usually be accompanied by voiceover narration (often by the main character) with the words, “Previously on …”

PREMIUM CABLE NETWORKS: For decades, these subscription networks provided the highest quality, most desirable content—for a premium, monthly subscription fee. But following the digital television revolution, all of them eventually severed the cord and offered their content online. Not beholden to advertisers, these premium networks were able to offer uncensored content, including nudity and coarse language—sometimes gratuitously.

PRIMETIME: The once coveted time slot between 8–10pm when viewers watched the most linear television, and advertising rates were at their most expensive. Before on-demand digital programming, primetime was primo. Now it’s irrelevant.

PROCEDURAL DRAMAS WITH SELF-CONTAINED ENDINGS: Content that orbited around doctors, lawyers, and/or police. Each 1-hour episode (47 minutes of actual content) featured a legal and/or criminal or medical case (aka Illness of the Week) that was introduced during the “first act” of the episode, often during a prologue known as the “teaser.” Each case, or multiple cases, would be solved by the end of the same episode by a team of experts, who had flawed personal lives. Despite their formulaic nature and wholly predictable endings, procedural dramas were wildly popular before the year 2020. For decades, TV networks strongly favored this type of self-contained, plot-driven content because it could be aired in any sequence, versus serialized content that requires contiguous viewing to follow the evolving characters’ journeys. (See also: Syndication). FYI: legal/crime/medical dramas that also featured ongoing serialized “character arcs” were referred to as “hybrid procedural dramas.”

RERUNS: Decades ago, there were only 4 broadcast TV networks—ABC, CBS, NBC and Fox—who, given the relatively light competition for viewers, were only obliged to create new content during “Sweeps” months. These same shows were repeated during the off months, which were usually during the summer. It was the law of supply and demand, and viewers grew accustomed to watching reruns. They had no choice other than to turn off the TV altogether. Nevertheless, many viewers cherished the opportunity to re-watch a favorite episode and/or catch up on ones they missed. Today, all reruns are on-demand and, despite an abundance of original new content, many viewers still find comfort and joy in repeat viewing.

STAFFING SEASON: During the Up fronts, TV studios and networks would get busy hiring writers and producers (in TV, most upper level producers are also writers). In some cases, studios/networks had to hire showrunners, too, but usually they were already established as content Creators and/or Head Writers. Back in the day, Staffing Season occurred once a year, with a limited number of job openings on both new and returning series. And, like “musical chairs,” an old fashioned game based on the law of diminished returns, once all the slots on each writing staff were filled, staffing season was over. The process usually lasted only a month and caused a great deal of anxiety among screenwriters who, despite major advances in science, are still the most neurotic people on Earth.

STANDARDS AND PRACTICES: Corporate censorship to shield broadcast and basic cable networks’ once-coveted advertisers from morally objectionable content. Of course, “morally objectionable” is in the eye of the beholder, and as TV viewers have gained control of what, where, when and how they watch content, standards have lapsed and practices have loosened.

SWEEPS PERIODS: Occurred seasonally 4 times per year (February, May, July and November), when networks determined their advertising rates based on Nielsen ratings. Most shows resorted to heightened, sensationalized plot twists and/or “stunt casting” during sweep months to goose the ratings, and aired “promos”—commercials about upcoming content—to hype the show; the phrase “A Very Special Episode” was frequently employed. Back when Sweeps still existed, it was extremely rare to see a rerun during the 4 designated months; in fact, it was rare to see a new episode in any other month. Almost all “reality series,” which used to be called “unscripted series,” desperately tried to showcase either their premieres or finales during these periods.

SYNDICATION DEALS: Back in the heyday of broadcast television, all scripted content was deficit-financed by TV studios, that were subsidized by the networks via licensing and programming fees. For a time, this was a mutually beneficial arrangement: the studios operated at a loss during the first 4 to 5 seasons of a series, but when and if a series was able to bank a library of 100+ episodes, it could be sold into syndication for hundreds of millions of dollars to another network. Everything changed, however, when digital television networks emerged, hungry for both original new content and reruns of old ones. “Second windows” (sites for viewers to watch repeats), foreign sales to major studios who operate their own channels around the world (e.g., the Sony network) and retransmission fees all negated the need for deficit financing a TV series, even in short order. If at least 80 episodes had been the benchmark for successful syndication, in 2015, as few as 8 episodes would nicely qualify for a second window on Hulu, Netflix and many others. In the third so-called Golden Age of Television (starting with Mad Men and Breaking Bad in 2007–2008 through 2016), the actuality of losing money producing a TV series became a rarer occurrence.

Another by-product of the digital television revolution was: the once-powerful trade unions (DGA/SAG/AFTRA/WGA) started making front-end deals with content Creators, that negated back-end compensation, and the Creators’ ownership of their shows. In this way, digital networks self-financed and retained full ownership of their own libraries of content, able to offer an ever-increasing menu of programs, both original and archival. As Michael Wolff points out in his provocative book, Television Is the New Television: “A key aspect of every entertainment company is the value of its library.” At the same time, digital networks started their own studio and production units to cut out the middleman studio,1 bringing the end of traditional syndication deals. The classic TV series Seinfeld (1989–1998) has made several billion dollars via the traditional syndication model and by auctioning off its digital streaming rights to the highest bidder, Hulu.2 Seinfeld’s move to Hulu followed Netflix’s costly acquisition of another once hugely popular TV series, Friends. Ergo: Seinfeld and Friends are examples of very old media capitalizing on “new media.”

TIME SLOTS: A specific day and time each week, set aside for scheduled or “programmed” network content on “linear television.” Every episode of a show was designed to fit neatly into either a 30- or 60-minute time slot. In the old days, if you missed a show’s one scheduled airdate, you could only view it by waiting for it to “rerun” at a later, unspecified date and time. Content that aired during the hours of 8–10pm was known as “primetime” when advertisers paid higher rates to insert their commercials inside content. If you were watching free, “broadcast network” or “basic cable,” your content would be interrupted approximately every 15 minutes by a capitalist enterprise trying to sell you something that you usually didn’t need. Commercial breaks would cut into the actual content and diminish its running time, so a “1-hour” program was actually only 47 minutes, and a half-hour program was only 22 minutes.

On “premium cable,” or on what used to be called the “digital networks,” you could choose to watch content at your convenience for a monthly subscription fee (known as SVOD, more below) without commercial interruption. TV series on SVOD were also either 30 or 60 minutes in duration, which had been the industry standard for decades. It’s almost impossible to imagine it now but, at one time, all content had to be of uniform lengths. See also: Books.

22 EPISODE SEASONS: Back in the year 2015, many broadcast network TV series spanned a lengthy 22 episodes per season, which ran from September–May, and the “mid-season cliffhanger” would occur at the most advantageous time for the networks (see Sweeps). Larger series orders were fiscally much more lucrative. Such long series orders were advantageous to networks back when the syndication system was still a viable model for reruns. Many actors enjoyed the steady work, but A-list stars were wary of committing to such a rigorous schedule and time commitment, which eventually gave rise to the shorter orders of 13-, 10-, or even 8-episode seasons.

WATER COOLER MOMENTS: When rigid time slots still existed and mass, communal viewing was at its peak, the day after a hit show aired was a big deal. Employees would physically go to an office (this was many years ago, when people actually did that) and stand around the water cooler discussing their reactions to last night’s show. As of this writing, water cooler moments have been replaced by live Tweets, binge viewing, and “Don’t Tell Me!” spoiler alerts. See also: Appointment Television.

WEB TV: Back to the advent of the digital television revolution, the prognosticators’ prevailing wisdom was that the television set would become the be-all/end-all for all our computing and entertainment needs. Of course, that never happened. For a while, our “smartphones” and “tablets” fulfilled those obligations. Eventually, holographic and memory chips superseded all hardware. Today, the term “on the air” is now literally on air.

What’s in an Algorithm?

If programmers use code to tell a computer what to do, the algorithm is the set of steps to accomplish that task. Confused yet?

At its simplest level, think of code as a computer language, and an algorithm as a recipe, e.g. baking a cake. An American recipe would tell us, in English, the series of steps to: mix the cake batter and in what order, how to bake and how to know when it’s ready. In an application involving choice, it’s somewhat like a flow chart:

You and I want to go to the theater tonight—which movie should we watch?

  1. Google what’s on this week >
  2. Compare results with what we both like >
  3. Narrow down to a shortlist >
  4. Check which theaters are showing those movies >
  5. Which still have good seats available..? >>>

A>B>C>D>E>>>, and so on. It would be so useful to have a computer algorithm to find you a perfect match of what to watch, when and where, wouldn’t it? It should be a cool new feature on Fandango. But wait—when it comes to home theater, or simply screening in your private movie palace for one, the digital networks have already mastered the algorithms to cut through the choice and find you exactly what you want to watch. For an algorithm to be successful, it needs to be both correct and efficient, and Netflix were the pioneers of the “Cinematch” algorithm, which was born from the data the company first gathered from its red envelope DVD rental by mail service. Cinematch enabled them to figure out what’s popular, match their viewers with what they wanted, even predict demand and plan ahead for what else their audience might like (Weeds + The L Word + social commentary stories = ?).

As viewers rate more and more, the algorithm grows more powerful. For information really is power. Hungry for more accuracy and speed, Netflix held a competition in 2006, which offered $1m to the brains who could boost Cinematch’s level of predictiveness by 10%.3 The winning experts developed a system so advanced that it could practically discern your preferences from how you watched, not even just what you watched. Who you rewind to see again, which scene, which evenings or daytimes are your favored viewing times. Without you doing anything—except occasionally clicking on that number of yellow stars to rate a show or movie—Netflix was able to develop a robust version of Cinematch that was the gamechanger that brought subscribers over to streaming, and helped confidently order shows for viewers. It knows what you want before you know you want it. (Spooky, eh? Touching on creepy.) It wasn’t just the licenses and the availability of content—think about the tyranny of choice every time you want to choose mayonnaise at the grocery store—the algorithm offered the perfect positioning to bring the right mayo to you, whether egg free, soy free, low cal, and it would get you that mayo fast. The right marketing + the right product, cutting through directly to you. Early competitors didn’t stand a chance.

Since 2006, many streaming platforms have caught up and developed their own algorithms, but Netflix’s is arguably the most sophisticated. Even if it takes you a little longer to find something you wish to watch, you always still discover something good. To break it down, take my very crude rendering of how that early algorithm might have functioned:

  1. You’ve watched a lot of political thrillers; let’s quickly suggest more political movies to you >
  2. No joy in finding something? We’ll suggest adjacent genres fast, e.g. good spy thrillers >
  3. You’re renting or viewing again? Great. We’ll line up more related titles >
  4. Oh, you’re struggling to find the right thing? Wait, you rented the DVDs of The Usual Suspects and Fight Club, you like Kevin Spacey and David Fincher, right? Hmm, we only have a few Spacey titles, but let’s present these. Happy yet? >
  5. (what only our analysts see) Maybe we can make a show to satisfy your tastes? >>>

Today it feels like a no-brainer, but 10 years ago, multiply by millions of subscribers unwittingly telling the algorithms telling the analysts telling the execs and marketeers the same thing, and … Algorithms have catalyzed the digital television revolution.

… And Now

The digital television revolution ushers in a new vocabulary, which adheres to our cultural shift in keeping information and communication short and sweet. We tweet, we text and we love our insider-speak shorthand.

Acronyms in the New Age of TV

AVOD: Advertising-supported Video On Demand, including Sony Crackle, CW Seed and Hulu’s Limited Commercials plan.

CDN: Content Distribution Network. The middleman between a content provider and its customers. They help expedite the transmission of large amounts of data.

CPM: Cost Per Mille, aka CPT—cost per thousand (in Latin mille means thousand); commonly used as a measurement in advertising; television and online ads can be purchased on the basis of showing the ad to 1,000 viewers. It is used as a metric to calculate the relative cost of an ad campaign. Typically, the CPM is calculated by dividing the cost of ad placement by the number of impressions (aka opportunities to see), measured in thousands that it generates. For media without countable views, CPM reflects the cost per 1000—the industry standard—estimated views of the ad. This traditional form of measuring advertising cost can also be used in tandem with performance-based models, such as percentage of sale, or cost per acquisition (CPA).

CTCPC Act: The Cable Television Consumer Protection and Competition Act (aka the “must carry rule”). Up until 1992, cable providers were required by law to carry broadcast network stations: ABC, CBS, NBC, Fox. After 1992, the cable and satellite TV providers would choose to opt out. This change effectively gave broadcast network parent companies greater leverage over cable bundling; if one of their subsidiaries was not receiving what the parent companies deemed as fair treatment, a behemoth corporation could now threaten to blackout, for example, CBS from a cable/satellite provider’s menu. Hell hath no fury like a football fan or NCIS (a billion dollar CBS franchise) viewer scorned. In a showdown between CBS Corp. and DISH Network, and between AMC4 (purveyor of the behemoth basic cable hit The Walking Dead) and DirecTV, the cable/satellite were forced to back down in both cases. The zombies won!

DMCA: DMCA, or Digital Millennial Copyright Act, is a US Copyright Law that provides further protection for digital artists against their pirated content showing up on YouTube and other websites. Signed into law by President Bill Clinton in 1998, the DMCA criminalizes infractions and bestows MCNs with the means to effectively take down any unauthorized content—here today, gone tomorrow. Google and YouTube have become self-policing platforms, cracking down on illegal sharing, and having much more to gain by licensing user-generated content.

DRM: DRM, or Digital Rights Management, refers to technologies that control or restrict the use/access of digital content on electronic devices. Content owners can use these technologies to control access to digital data such as software, music, movies and hardware.

D2C: Direct to (2) Consumer. Content marketed directly to the audience on a transactional basis, such as iTunes. Case study: Louis CK’s self-produced, self-released, self-marketed standup comedy special from December 2010, Live at the Beacon Theater (his fourth). Like Hilarious— his previous comedy special—Live at the Beacon Theater was produced independently and directed by CK. However, unlike his earlier work, it was distributed digitally/transactionally /exclusively via his website, www.LouisCK.net, and sidestepped all cable and digital TV networks. CK released the special for $5 and without DRM (Digital Rights Management). With his strong direct relationship with his fans, CK’s plan was to simultaneously bank all the proceeds and deter piracy. The sales of the special from CK’s website earned him over $1 million. It’s a gambit that has surely paid off, albeit without the cache of, say, HBO’s imprimatur.

EST: EST, or Electronic Sell Through, is a digital distribution model for content owners to monetize content from legitimate downloads.

GIF: The Graphics Interchange Format that was introduced by CompuServe, in 1987. GIF images are compressed, which reduces the file size without degrading the visual quality. This technique was patented in 1985. Controversy over the licensing agreement between the software patent holder, Unisys, and CompuServe led to the development of PNG (Portable Network Graphics) standard—small enough to email, view on loop on websites and quickly go viral.

IPTV: Internet Protocol Television: Distribution of TV signals over the Internet versus via cable or satellite.

ISP: Internet Service Provider: Controlled by cable companies (Time-Warner, Comcast, etc.) and satellite television providers (DirecTV, DISH). Ironically, even “cord cutters” are still tethered to their local cable or satellite provider via their IP (Internet Protocol) address.

LIV+3: Overnight Nielsen ratings, plus 3 additional days of digital viewers also accounted for as a new metric … which will certainly continue to change with the times. Aka Nielsen C3.

MCN: Multi Channel Network. Niche digital networks which interface with video platforms—predominantly YouTube—and assist with product, programming, funding, cross-promotion, partner management, digital rights management, monetization/sales, and/or audience development, usually in exchange for a percentage of the revenue from the user’s channel. Anyone, from an individual to a big company, can establish an account with YouTube’s CMS (Content Management System), which provides access to the content provider, and allows the user to monetize videos they upload on their channel.

Prominent current MCNs include: AwesomenessTV, Fullscreen, Machinima and RoosterTeeth. Although Maker Studios started as a collective of YouTube creators, since Maker’s acquisition by the Walt Disney Company, the company now self-identifies with the more expansive moniker as the “united artists of the web.” Advertisers on MCNs relish the prospect of gaining endorsement by YouTube personalities (via product placement and association in their videos), which brings increased audience engagement. Advertising to the coveted 18–34 demographic is rapidly transitioning from traditional television (broadcast, cable, premium cable) to MCNs, targeting youth in the digital playground where they’re most likely to hang out. MCNs provide the added benefit of block and track functions; “block” prevents access to videos, and “track” allows content owners to monitor re-uploads and copyright infringement.

MEME: a Mimicked Theme that helps spread ideas and cultural phenomena—including song, dance, catchphrases, fashion, art, political gaffes, celebrity mishaps—via the Internet. Popular memes tend to go viral and can mutate, e.g. covers of hit songs, riffs on Gangnam Style and “twerking” dance moves, and the principle that imitation is the highest form of flattery, with a proliferation that enters the zeitgeist. Less popular memes can rapidly lose traction, trend out and become extinct.

MVPD: Multichannel Video Programming Distributor. SVOD via a cable, satellite or IPTV service provider.

MSOs: Multiple Systems Operator. Those enormous corporations that control the major cable companies, such as Comcast. At press time, Time-Warner Cable was being acquired by Charter Communications, pending FCC approval, for over $78 billion.

OTT: Over-the-Top. Content available for viewing/downloading via the Internet (Netflix, iTunes, Amazon, Hulu, Sony Crackle, Vimeo) versus via cable or satellite provider. It can be AVOD, SVOD or a combination of both. For the foreseeable future, virtually all Internet will continue to be provided by cable and satellite companies, whether an actual, hardwired cable connection is used or not.

PRA: Pre Roll Ads. Commercials that play only at the beginning of the episode.

P2P: Peer to (2) Peer: P2P systems can be used to provide anonymous routing of network traffic, parallel computing environments and distributed storage. Most P2P programs are focused on media sharing and P2P is therefore often associated with piracy and/or copyright infringement. Many such applications allow users to control the parameters of operation, including member connections (who to grant access, who to block); which services to offer; and the amount of system resources to devote to the network. Some connect to a subset of active nodes in the network with little user control. The promise and pitfalls of P2P networking were brought to light to the public in the late 1990s with the advent of Napster and its successors Gnutella and BitTorrent, which substantially disrupted the traditional transactional acquisition and consuming of media. P2P networking can also tie up bandwidth and potentially expose users to malware and hackers.

SVOD: Subscription-supported Video On Demand. Netflix is most prominent in this space, with 65 million subscribers. Amazon Studios offers SVOD for the price of an Amazon Prime subscription, which also entitles the subscriber to free shipping on all merchandise ordered on Amazon.com. Hulu has a SVOD/AVOD hybrid model. Vimeo offers its content on an SVOD basis (sans ads) via their Vimeo Plus platform. Until recently, Hulu differentiated between Hulu and Hulu Plus, but now it’s all simply Hulu.

TCS: Transactional Consumer Space (such as iTunes).

TVE: TV Everywhere—via xBox, Apple TV, Roku, Sling etc.

UGC: User Generated Content. Funny cat videos on YouTube, for example.

Vines: 6-second videos (usually comedic) that can be shared, or “re-vined,” via the Vine’s social network, Facebook or Twitter. Vine was founded by Dom Hofmann, Rus Yusupov and Colin Kroll in 2012. The company was acquired by Twitter that same year for a reported $30 million. In 2013, Vine became the most-downloaded free app within the iOS App Store; the following year, Vine launched a web version of the service to explore videos. An Xbox version was released for Xbox Live members to watch the looping videos. In 2015, Vine launched “Vine Kids” for Apple devices.

Peter Tortorici vs The Glossary of Anachronisms

A respected leader in the business, Peter Tortorici has served as President of 2 broadcast networks that flourished under his tenure (CBS, Telemundo), developed and produced top-rated shows (Grace Under Fire, October Road, Significant Others, The Pinkertons, Cracked), ran Mindshare Entertainment, which created branded content for clients, and now operates at the cutting edge of the industry, defining new relationships between brands, content and media.

Tortorici founded GroupM Entertainment as a worldwide content producer and served as CEO of GroupM Entertainment Global, as well as independently producing his own projects. In addition, he represented parent company, advertising and PR giant WPP’s investment as a board member of VICE Media. Currently, Tortorici is working with WPP and GroupM on strategic initiatives in digital publishing with a focus on OTT. He is also on the board of Indigenous Media, the digital content group headed by filmmakers Jon Avnet and Rodrigo Garcia.

Neil Landau: If I wrote a book about the current trends in TV, this book would rapidly become obsolete. I’d love for you to do some prognosticating—I’m aware you don’t have a crystal ball, but I’d like to hear your reactions to my “Glossary of Anachronisms,” based on your expertise and vast experience in television. This interview will follow my own highly subjective views on each word or term—and I welcome dissension and alternate points of view.

Peter Tortorici: Sure. I’m game. Go for it.

NL: Timeslots? Do you believe they will be completely gone in the near, or not so near, future?

PT: I think a timeslot is all about linear programming. It identifies a specific time and place to see a program … and if it’s live and you want to see it when it happens, you’d better pay attention. I don’t think linear television is going away in 5 days or 5 months, or maybe even 5 years. To the degree that linear television maintains a presence, which I believe it will, timeslots are still going to mean something. For example, if ABC is going to premiere a new comedy, they’re going to do it around comedies that are compatible and make sense to be viewed with it. So, it’s an evolving landscape for sure, but to conclude that timeslots are going to be completely irrelevant in the immediate future, I think is incorrect.

NL: I agree when it comes to live events, Super Bowl …

PT: I don’t disagree. But that’s different.

NL: Lead-in series? It’s a term related to timeslots, as a means to promote a new show.

PT: Yes, again, I think what it really comes down to is: we’re talking about 2 different ways to view. To view in terms of a linear model that we’re all used to, and to view in a nonlinear fashion. They’re going to co-exist for a period of time, because we’re talking about a very, very massive scale of audience. I think it’s segmented by age, because I think younger people are more along the on-demand lines; I think older viewers, having grown up and been accustomed to linear television, are still watching by and large in a linear fashion. Even that’s changing, and you can see it by virtue of the fact that you’re now seeing ratings evolve from a C+3 to a C+7. Again, even people who are watching ‘television,’ are time-shifting, and watching in a more on-demand way. To me, all of the things like timeslots and lead-ins, all go to the question of, what is the survivability of linear television? And I think linear television will survive, because it’s a different way to watch.

NL: Overnight ratings?

PT: I think overnight ratings are irrelevant as a currency, and I think they’re only relevant as an early indicator.

NL: Commercial breaks? The broadcast and basic cable networks are still wholly advertiser supported and AVOD, as are digital networks Hulu and Sony Crackle, whereas Netflix and Amazon are SVOD. Do you think commercials will survive with traditional act breaks in scripted content, and mini-cliffhangers on “unscripted” reality shows?

PT: Commercials? Absolutely here to stay. Although I’m not sure that they’re going to survive in traditional act breaks, I think advertiser-supported content is going to continue to be part of what we now call the “television landscape,” and what we will call the “long-form video landscape.”

NL: For the last several years, episodic story structure has evolved, depending on the show. 1-hour dramas used to all be a teaser plus 4 acts. Now some have 5 or 6 acts. Some have teasers, some don’t. My point is that I’m not so sure that scripts are going to be structured that way, with those 15-minute cliffhangers, for very much longer.

PT: Right. I think the structure is going to evolve. But, the questions of whether the structure evolves, or whether or not commercials still exist are completely different. And audiences know that the cost of watching “free” TV is a word from our sponsors: advertising.

NL: Procedural dramas with closed-ended resolutions (à la CSI and Law & Order)? D o you think that as the audience ages out, and younger viewers start to grow up, that the new generation is going to prefer content that’s less formulaic?

PT: My instincts are that people like variety. And the more that you give them of one kind of storytelling, the more that they crave something different. So, the balance between how much of either is going to be available in the marketplace is going to depend upon demand. Again, I think there’s going to be multiple genres and multiple forms pretty much forever. People don’t watch only one type of narrative structure. They don’t just watch one type of creative execution. And, it all comes down to a question of quality; how imaginatively can you do that? So it’s not an “either/or” proposition. You can still do things such as, for example, stories on The Good Wife, where you’ve got a resolved A story, but you still have strands that take multiple episodes, and have arcs, that bring the viewer across episodes into a broader relationship. But, it doesn’t detract from your ability to enjoy the show that you’ve seen, any more or less.

NL: The 22-episode season? Do you think you’re still going to see such large orders, given that digital series and limited series on FX and AMC are doing shorter orders where showrunners have more time to tinker and perfect their material? Doesn’t it feel like the shorter the order, the better the quality of the series?5

PT: Considered better by whom? I think the profit participants of the shows that reach 100 episodes would say that those shows are better. Because they can make a lot of royalties on the basis of that. I think the question of episodic orders goes to both how the stories are best told. You can’t force a story to be more than what it is. But, the ambition to try to create something that can sustain itself for a really long period of time isn’t going to go away, as long as there’s an economic reward for doing so. I think long-running franchises are valuable properties, because once people genuinely fall in love with a world and with the characters that inhabit it, they want more. And, what has happened is that those inventories of programs become very valuable; they have the ability to sustain an engagement, and they’re proven to have been successful over a period of time on whoever the initial carrier was. So, I don’t think, as an economic model, that’s suddenly going to go away. And, I don’t think that creative people are going to say, “Well, I don’t want to do that! I’d rather just do 6,” if they could also have the opportunity of having those 6 turning into a 100, and share in the reward.

NL: On the other hand, one of the main advantages of an anthology or limited series is casting. A-list movie stars tend not to commit to a 22-episode schedule. But 8, 10, 13 episodes are less restrictive and therefore more palatable.

PT: Totally. The biggest thing, I think, that goes to almost every one of these questions right now, is: we’re not moving into an “either/or” world. We’re moving beyond that. So, it’s not a question of, “Will there be timeslots, or won’t there be timeslots?” There will be timeslots, and there will also be viewing that doesn’t have timeslots as a relative ingredient. It’s not a question of, “Will there be commercials, or won’t there be commercials?” There will be commercials, but in a way that supports the viewer experience—that basically supports both the commercial model and the way people want to watch.

NL: Pilot Season and Pitching Season? It seems as if networks are hearing pitches all year round, a lot of shows are being picked up out of cycle. Do you think it’s going to become pretty much, across the board, a year-round development season for the networks?

PT: For certain players, it’s a year-round development season. For certain others, the bulk of their development, and their development calendar, will still fall into a traditional pattern. I was at CBS in 1988, when we declared that the pilot season process was over. OK—we were wrong! [Laughs] It was 1988, we’re now in the year 2015, and the pilot process is pretty much the way it was then. So, there’s a lot of logical reasons why people think it’s inefficient, and would rather see alternatives. But, again, you’ve got a commercial model in broadcast network television, that, although certainly different than it was back in 1988, it’s still in terms of an advertiser-supported medium, still at the top of the chart, in terms of revenues, by a significant margin. The reason why the production cycle and the development cycle exist is because of the circulation patterns of viewing, and also the way advertising is bought and sold. There’s going to be year-round development, and there’s still going to be a structured to-pilot season as we’ve known it, for as long as the broadcast networks remain relevant, and I suspect they will, for some time to come.

NL: Ted Sarandos [Chief of Content at Netflix, see Chapter 1] would ardently disagree, as would many of my friends in senior positions at the broadcast networks. One of them declared 2 years ago, “We’re on the deck of the Titanic, and we’re going down.” But, it sounds that for you, the traditional broadcast model of the Upfronts and pilot season is going to stick around, for quite a while.

PT: Well—you never know! It’s like water dripping on a rock, you never know when that one drip suddenly turns it into pebbles because its accumulation of drips, over a long period of time. If I was still sitting in a broadcast network right now, and sitting in kind of the positions that I was in years past, I’d probably feel the way they do. The traditional way of doing business is changing and, in a sense, it’s going to get smaller every year. They’re being paid to try to maintain the power they have for as long as they possibly can. And that’s a really, really tough job. So, their point of view is a point of view of somebody who is playing defense.

Looking at it from the outside, there’s probably going to be people hired and fired, that are doing a better or worse job of trying to maintain position. That doesn’t mean the entire franchise is going to go away. That means there’s going to be a lot of turmoil and instability, while the franchise gradually continues this pattern of erosion.

NL: Having the ability to binge view an entire season from the start? Is this going to be the new normal for all networks, or is it more of a novelty?

PT: You’re going back to, “either/or” again.

NL: [Laughs] Hey, I’m covering a revolution! You can’t blame a guy for trying.

PT: I know it’s a better dramatic narrative, but it’s just not true. It’s not all or nothing.

However, I do think that, say, CBS has got to do what it’s got to do, as HBO has to do what it has to do. It knows that its current business model is under attack. And it’s under attack because there are other ways people are accessing programming, the likes of which have been their lifeblood. So, what are they going to do about it? Are they going to make believe that these other alternatives don’t exist? No, they’re going to diversify. They’re going to use their assets so they can diversify their portfolio and not have all their eggs in one basket. And, at a point in time, with inflection points, will the major emphasis on where their bread and butter is change? Yes. But that doesn’t mean that it’s going to be an “all or nothing” proposition there, either.

Think about it for a second under the terms of, “How do you enjoy watching what you watch?” When you’re in an on-demand universe, you have to choose what to watch. When you’re in a linear universe, you just can passively watch what’s on.

NL: That’s true.

PT: And it depends on what kind of mood you’re in, as to what you really want to do. And there is no rational explanation for why you want one, or the other. You just do, or you don’t, depending upon what your mood is. It’s a lot like the cable bundle; does OTT mean the end of the cable bundle? Maybe. But not anytime soon.

NL: I respectfully disagree.

PT: There are some people who enjoy having a menu of programmed networks they don’t have to pick and choose from, and that are value-priced for them in a way that isn’t really offensive to how much money they choose to spend. It’s just easier, more convenient. And, for some people, that’s not true. They don’t want a bundle of networks that they don’t watch; they would feel better about the experience if they’re just picking and choosing what they want to watch. So, in the cable universe before OTT, it was “either/or”—either you buy the bundle, or you don’t have cable television.

Now, you can choose to either have cable television with the bundle, or choose a streaming service where you don’t. And again, I think we’re going to see, over time, just where the balance shifts.

NL: I think you’re right that it will be segmented by age. Next question is the future of … Reruns? Especially during the summer. Do you think the broadcast networks are going to be able to still show reruns in the same kind of patterns they used to?

PT: The reason there is so much more original content on today is because the investment in original programming is worthwhile. What you can’t get away with is reruns of shows that people didn’t really want to watch that much in the first place.

Reruns are a label we give to watching stuff that’s already been on one other broadcast network. But we don’t call syndication “reruns.” We call that valuable programming.

The Big Bang Theory is really, really valuable to TBS, because people love watching that show. And the fact that they might have seen it before doesn’t mean that they won’t watch it again. And so, the durability of product depends on the quality of execution.

NL: But it also depends on genre, right?

PT: Right. Serial drama, in general, just doesn’t repeat well because the reason why people watch it in the first place is because they’re hooked on finding out what happens next. And, once they do, they’ve seen it.

If you want to talk about program services that are dependent upon reruns, Netflix and Amazon are more dependent upon reruns than the broadcast networks are. Look at the ratio of original programming to library that exists on those services, versus the ratio of original programming to reruns that are on network television.

NL: And most of the library of pretty much any studio is more valuable than any of the current content, so that’s a great point. And, especially, internationally, they can license it to other countries …

PT: Yes, exactly.

NL: Primetime?

PT: If I still have a linear program service, then the value of my linear program service is going to be dependent upon whether I’ve got something that people really want to watch—and really want to watch first, when it first happens, and then there’s social currency involved with seeing it—whether it’s in primetime or Sunday afternoon.

So, if I’ve got a really great show, and I know that of the universe of people that still watch in a linear fashion, that Sunday night is a great time, and 9 o’clock is the best time, and I know that I can maintain dominance of whatever that franchise is worth by putting that show there, and only allowing it to be seen on a once-a-week basis because it creates scarcity and demand, then I’m anxious to do that!

NL: Network Standards and Practices? Do you believe these so-called standards are going to become more liberal, given premium cable and digital content, with its coarser language and nudity?

PT: Standards and practices are meant to protect the advertisers.

NL: And, don’t advertisers want to be associated with the most buzz-worthy shows? I would anticipate that censorship will diminish, and that edgier content will be available on AVOD but with parental advisories.

PT: Now, standards and practices are also about trying to draw a line that the industry can accept. And that sits on the very precarious shoulders of popular culture, and the evolving social mores of a culture. If you look at what’s on TV now, and you look at what’s on a broadcast network, and you look at their programming 20 years ago versus 40 years ago, it’s very different. But, there’s still a line being drawn. So, is the line going to continue to move? Of course it is. Just like it’s been continuously moving over the past decade. But, as long as advertisers are involved in the equation and they have concerns about what kind of content they choose to associate with, then carriers will have standards and practices, so that their relationship to those advertisers is protected. Because without standards and practices, then nobody knows where the line is, and how do you create without having some level of understanding of whether or not it’s acceptable?

NL: It creates a baseline for what’s maximally acceptable. The TV industry has adopted a voluntary ratings system, that’s similar to the MPAA [Motion Picture Association of America]. Instead of rated “R,” we get rated “TV-MA” (for mature audiences). But in the Internet age, everything is on the honor system anyway; how can any non-Amish parent truly prevent their kids from watching porn? That’s rhetorical, and, I’m not expecting you to have all the answers. And—if that one’s an “either/or” proposition, I’d rather have my kids watching Law & Order.

Aggregating Viewers and the New Cultural Influencers

In today’s social media world it is the cultural informers—the bloggers, the YouTube stars and good old-fashioned word-of-mouth via not so old-fashioned avenues like Facebook, Twitter, Instagram, Snapchat, and the rest—that turns the attention of a desired audience towards what’s new and worth their time in the digital arena. And once gained, the best way to keep their attention and keep them coming back is to make them feel like they belong there—like they are co-owners of the brand. Just look at The Guild or Video Game High School. The audiences for these shows definitely felt like they owned a piece of the brand because many of them, well—did. Season 1 of Felicia Day’s The Guild was solely supported by fans through PayPal, (Kickstarter wasn’t started yet). Video Game High School developed a cult following buoyed by its enormously successful Kickstarter campaign. (Its creators set a goal of $75,000 which they reached on day one, and which continued to climb to over $270,000 from over 5600 backers.) Both these shows, and many others like them, succeed by turning their audience into a community. Loyalty was rewarded. VGHS gave its backers free downloads and DVDs. And if crowdfunding creates a monetary tie to a brand, then interactive message boards create the emotional link. It invites them into the content, giving the audience a feeling of belonging.

It’s a bit of reverse engineering. It used to be that a hit show built an audience. In today’s world, the online community—aka the audience—builds a hit show. In return, the brand pumps up the audience via special events, merchandizing, and bonus content. It’s a 2-way street, a ying and yang of interconnectedness in which authenticity is the tie that binds. It’s a fact—online communities value their stars’ “unvarnished individualism.”6

In a survey commissioned by Variety in July 2014 and reported by Susanne Ault (Variety 8/5/2014) it turns out that teenagers are more enamored with YouTube stars than they are with the biggest celebrities in film, TV and music for being “more engaging, extraordinary, and relatable than mainstream stars.” In fact, the top 5 and 6 of the top 10 most influential figures were YouTube stars. The survey found that teens enjoyed a “more intimate and authentic experience with YouTube celebrities, who aren’t subject to image strategies carefully orchestrated by PR pros.”

Here are the Top 10 Influencers in descending order:

  1. Smosh—an online comedy team of Ian Andrew Hecox and Anthony Padilla, both 26 years old.
  2. Fine Bros.—another online comedy team, Benny and Rafi.
  3. PewDiePie—Swedish videogamer Felix Arvid Ulf Kjellberg who has garnered the most subscribers on all of YouTube.
  4. KSI—British videogame commentator, comedian and rapper. His YouTube channel has over 10 million subscribers.
  5. Ryan Higa—YouTube personality and comedy video producer with over 15 million subscribers.
  6. Paul Walker—Actor—Fast and Furious fame, he was the highest-ranking non-YouTuber on the list. Paul tragically died in a car accident in late 2013.
  7. Jennifer Lawrence—Actress—The Hunger Games; The Silver Linings Playbook; American Hustle.
  8. Shane Dawson—Comedian, singer songwriter, director. His YouTube channel, ShaneDawsonTV, is the 79th most subscribed channel, having more than 6.8 million subscribers.
  9. Katy Perry—Emmy Award winning singer, songwriter, actress. “I Kissed a Girl”; “Firework”; “Roar.”
  10. Steve Carell—American actor, producer, director, writer. Crazy, Stupid, Love; The 40-Year-Old Virgin; The Office.

Finding Talent with a Built-in Fan Base

Before SMOSH: The Movie (starring YouTube phenoms Anthony Padilla and Ian Hecox), there was Expelled on AwesomenessTV, written and directed by newcomer Alex Goyette. Expelled was revolutionary for taking a young YouTube star, Cameron Dallas, with virtually no acting experience, and placing him front and center in a feature film based solely on Dallas’ enormous fan base. Dallas currently has more than 8 million followers on Vine, over 5 million followers on Twitter, and approximately 7.5 million followers on Instagram. Dallas began his career in September 2013, posting Vines of himself playing jokes and pranks on his friends and family. In August 2014, Dallas won the category Choice Viner at the Teen Choice Awards. In 2016, a movie entitled The Outfielder, produced by Fullscreen7 will be released. The film features Dallas and another YouTube sensation, Nash Grier.

See my interview with wunderkind Alex Goyette about his movie Expelled on AwesomenessTV at www.routledge.com/cw/landau

Varied Perspectives on New Business Models

Caryn Mandabach on the New Bi-Continental Co-Production Model

As we forge ahead in the Digital Television Revolution, we’re already seeing the side effects and collateral damage that are inevitable with every new political, sociological and technological shift. The once dominant 4 broadcast networks are struggling, rapidly adapting to remain relevant, offering on-demand, advertiser-supported content; steering clear of rigid timeslots; eschewing the once sacrosanct overnight Nielsen ratings system as the primary metric of a series’ success.

All are in direct response to the exponential expansion and impact of streaming networks Netflix, Amazon, and Hulu. The advent and ubiquity of the Internet should have been harbingers, but whether it was arrogance, denial or both, the big networks have to admit they ignored the gigantic digital iceberg in the distance, as the changes they’re now facing are of Titanic proportions.

It may seem like a lifetime ago, but in the late 1980s and early 1990s, the TV business went through another radical change with the eventual abolishment of the Financial Interest Syndication Rules, known as “Fin-Syn.” Enacted by the FCC in the 1970s, Fin-Syn was designed to prevent the big 3 broadcast networks—ABC, CBS, NBC—from monopolizing the airwaves by owning the programming they aired in primetime. The stringent rules also prohibited the networks from airing syndicated shows (reruns) in which they held a financial stake. As a result, the independent television production company business was robust, with some of the best TV series being produced by Mary Tyler Moore and then husband Grant Tinker’s MTM Enterprises (The Mary Tyler Moore Show, Hill Street Blues, St. Elsewhere); Norman Lear’s Tandem Productions (All in the Family, The Jeffersons, Good Times); and the Carsey-Werner Company—founded by former senior executives at ABC, Tom Werner and Marcy Carsey—which expanded into Carsey-Werner-Mandabach Productions. Caryn Mandabach joined as VP of Development in 1984, and was subsequently promoted to partner in 2001.

From 1988–2006, Carsey-Werner-Mandabach dominated the situation-comedy landscape, with such hits as The Cosby Show, A Different World, Roseanne, 3rd Rock from the Sun, That ‘70s Show and many others, plus naturally a few misses. Carsey-Werner-Mandabach deficit-financed their homegrown productions in exchange for a licensing fee from one of the big networks. In what was, at the time, a virtuous circle, the indie production companies would lose buckets of money during the first several seasons of a series. However, once a series reached the 100th episode benchmark: jackpot! The indie TV production companies would have then banked enough content for a rich syndication deal. And not only could they recoup their years of losses, they’d also make a bundle in net profits, by auctioning off the syndication rights to the highest bidder—in some cases, the buyer was the original broadcaster; in other cases, the rights were purchased by a competing network. The indie TV production companies were the benefactors, capable of investing their significant revenue stream into producing more shows. It sounds like a win–win proposition for the hit makers Carsey-Werner-Mandabach, but in hindsight they were more like gamblers on a staggering lucky streak, in a world in which the odds are always in favor of the house. Cynical, but true; welcome to America.

Consequently, during the 1980s, the broadcast networks aggressively lobbied in DC to chip away at Fin-Syn. The rise of the fourth network—Fox Broadcasting—and the blossoming of basic cable networks all but put the last nail in the Fin-Syn coffin. The FCC abolished Fin-Syn in 1993, enabling networks to own their own programs. If that sentence sounds redundant, it’s because it is. The broadcast networks quickly segued into the production business, owning and operating studios and production companies—which would develop content, sell it to their parent companies (the networks) in sweetheart deals, that under Fin-Syn would have been deemed an incestuous conflict of interest, monopolistic and illegal. Not anymore. It’s no wonder that the series Brothers & Sisters, which aired on ABC from 2006–2011, was produced by Touchstone Television, a (sibling) subsidiary of Disney—which owns ABC. It seems the “virtue” of the virtuous circle is in the eye of the beholder.

At the time, the end of Fin-Syn was as unfathomable as Netflix negating Blockbuster Video, and Amazon.com ostensibly putting bookstores out of business. Before long, every major TV network tied the knot in a mutually beneficial marriage to a studio and affiliated syndication company: ABC and Disney; CBS and CBS Productions/Television Distribution; Fox and 20th Television; NBC and NBCUniversal; The CW and Warner Bros/CBS Television Distribution. The seeds of today’s firmly entrenched, behemoth media conglomerates were planted. With more mergers among giants happening seemingly every week (involving Comcast, Charter Communications, and Time-Warner), Amazon’s ubiquity, and Netflix’s plans to operate its own studio and production company, it’s not difficult to foresee new FCC regulations on the horizon, to level the playing field in 2016 and beyond.

Back in 1993, even though independently developed, top quality shows, from big name showrunner/creators with mega-star attachments, could help defy the odds stacked against them, it was a matter of time before the indie TV companies started to fold. In an interview in the Chicago Tribune in July 2005, Tom Werner—who today owns the Boston Red Sox—commented about the ever-changing business: “Someone is going to come up with another comedy hit. But the way we were [developing shows] was very challenging … Marcy would say we’re like a Mazda Miata, and everybody else had these big rigs.” As Tribune reporter Scott Collins summed it up: “It’s a quiet end to a one-time TV powerhouse that brought in an estimated $3 billion in revenue over the last decade. But Carsey-Werner basically became the equivalent of a mom-and-pop grocer in a Walmart world.” The proliferation of relatively inexpensive reality series and the resurgence of game shows certainly didn’t help matters for Carsey-Werner-Mandabach, as ratings for many of their sitcoms began to wane. Caryn Mandabach saw the writing on the wall and departed Carsey-Werner in 2004 to pursue her own production deal.

With her impeccable taste, stalwart reputation, and decades of producing experience, Mandabach has been able to pivot into the premium cable (Nurse Jackie on Showtime) and global marketplaces (Peaky Blinders for the BBC and Netflix) and she continues to thrive. She’s the CEO of Caryn Mandabach Productions with offices in London and Los Angeles.

Neil Landau: Some Netflix shows are branded “Netflix Originals,” but were developed and produced for entities like the BBC. How and where did the brilliant and innovative Peaky Blinders originate?

Caryn Mandabach: I heard a pitch from [Academy Award nominated, A-list screenwriter, see Chapter 4] Steve Knight who asked if I could sell it to the BBC. It was such a fully realized world, rooted in and based upon his childhood. I got excited. We went in and pitched it and BBC bought it in the room. While I’m one of the Executive Producers, my company actually owns the show. Although I’m the “studio”; I wasn’t prepared to deficit-finance the entire production; it’s an ambitious period piece. I had to go out and raise the money. It wasn’t easy. All I heard was, “Jeez, we can’t understand those Birmingham accents.” Endemol stepped up with financing in the UK, then tried to shop it in the US and couldn’t sell it. Eventually, they sold the US rights to the Weinstein Company who had a deal with Netflix.

NL: It’s a one-of-a-kind show: a period piece with a stylized, larger than life tone, like an edgy, gritty fable. We’ve never seen characters like these before, with those bizarre haircuts, weaponized hats and dapper suits. There’s also a steam punk vibe to the production design, and that awesomely addictive soundtrack that adds a modern spin and swagger. As the head of your own studio, and with mainly situation comedies in your portfolio, how did you know that such an anomalous series would be viable for today’s audiences?

CM: When you choose to look like that and add Nick Cave and Jack White to the soundtrack, the intention wasn’t to be about 1919 Britain, but the experience of a family struggling financially, trying to escape their class, and adapting after coming back from a horrendous war. I knew the show would be deemed parochial by the more traditional TV establishment, but I also knew our characters would be accessible to worldwide audiences. To me, this was a series that could escape parochialism and travel, and indeed it’s become the #1 show on subscription cable in France and Spain. Of course, I was just going with my instincts.

NL: For you and Endemol to recoup your deficit financing, the show has to become a “hit”—which used to translate to banking at least 50–100 episodes. But you have a much smaller number of episodes. Is there a new alternative formula for revenue streams in this post-syndication “second window” digital world?

CM: The short answer is yes. But it would require a whole other book to discuss all the changes in ownership and production. There are too many variables. I have good ownership because I live in the UK. There is no ownership in the US. It’s 100% corporatized in America. Even if you’re Spielberg or J.J. Abrams, you’re still working for the Man [aka Corporate America]. In the UK you can have the Carsey-Werner model and it’s still possible, which is why I moved. Netflix has a good business model, but it precludes studio/creator/producer ownership. Although you might be able to keep a few territories. Basically, instead of deficit financing, Netflix gives you a little bit more on top of your producer’s fee. We are not going to have ownership anymore in the US television business. That ship has sailed.

In the UK, there are no agency packages and the BBC take 15% of the net, so it’s a great deal.

NL: So you may not be working for “The Man,” but you’re accountable to the British government?

CM: That’s right. It’s the public’s money. The British television industry is entirely publicly supported.

NL: Do they give script and production notes like a network?

CM: I would not characterize them as meddlesome. They’ll interfere in the beginning, but there’s no nitpicking. They’ll allow you to keep 8% of the spend. Peaky Blinders costs what it costs and you keep 8% as a production company, and a small producer’s fee. Above the line is 1/3, below the line is 2/3—which is the opposite in America. But in the UK, that’s how you get paid. Unfortunately, they used to pay all budget. Now they pay 2/3, so you have to bankrupt yourself for a while until money comes in from territories. It’s a different model from America.

NL: So many of my favorite shows on Netflix are from the BBC, Channel 4 and ITV. The Fall is fantastic. Broadchurch is gut wrenching but remarkably engrossing. Orphan Black— which I know is BBC America—is fascinating. I’m assuming that the phenomenal success of a high-end show like Peaky Blinders adds tremendous cache to your company in both US and abroad—true?

CM: 3 things have happened since I started spending time in England. Firstly, the industry changed because small indie films stopped being produced, so all of those wonderful writers drifted into television. Secondly, the world has become truly global as the result of the streaming services. Third, the domestic syndication market dropped out and the US Networks are more aware of “rest of world” sales. As a bi-continental operation, all of those things are good for me.

NL: So what makes a good TV series?

CM: It can come from anywhere. It’s always going to be surprising and unique. I recommend that content creators try not to be subversive, but sui generis. You want to be first. Broadcasters say, bring me something I can’t find anywhere else. It’s a challenge. My background was to break through the clutter and have a hit. Think about the money later, it will come. Spend a lot of time on the A side of the equation and how to touch a nerve. Sell this, sell this, sell this, is an American model.

NL: Millennials don’t have TVs. They’re watching on devices—smartphones, iPads, laptops. I have teenaged sons and I learn about new shows, such as BoJack Horseman, from them. When they tell me to watch a new show and I ask what network it’s on, they never know. They don’t care if it’s Netflix or Amazon. I understand why those places want to own their content. They don’t have brands anymore. CBS might be the only one that has a brand—positive heroes, procedurals. ABC has Shonda Rhimes. If I’m prognosticating, commercial interruptions are going to be history soon. I can see embedded advertising, wraparound ads, and product placement. But I don’t understand how that’s going to sustain the current model.

CM: I’m wondering the same thing.

NL: I’ve talked to Peter Tortorici [former President of CBS, currently with Group M Entertainment] about this. His answer was, it’s not going to be “either/or”; it’s going to be “and/but.” You have to look at our country—the flyover states. On the coasts may be more sophisticated audiences, but naturally people still want to watch free TV. They want to come home, watch whatever, and are probably too lazy to change channels.

CM: I’m going to suggest that it’s not that they’re too lazy, it’s that they don’t have the money to afford cable, or Netflix. It’s a 2-tier system based solely on people who have money and people who don’t. The “New Diversity” boom on broadcast television isn’t stemming from the networks’ sense of social responsibility; it’s because they realized that the people who will be home the most, watching broadcast TV, are the people who can’t afford other stuff. They can’t afford Netflix. It’s completely financially driven. Who are they broadcasting for? Broadcast television has to play it both ways until it naturally dissolves into something else, and everyone has a computer, and you don’t have to pay. The bigger question, the truth is, the advertising model itself is in trouble, and they’ll never admit it.

NL: I talked to Andy Kaplan [President of Sony Worldwide Digital Networks, see Chapter 1] and he said he doesn’t think commercials are going anywhere.

CM: Well, maybe not yet internationally. But in the US, when 52% of people watch TV through their DVRs, and not ever once see a commercial—how is that sustainable? You don’t watch the NFL for the ads; you want to watch the game.

NL: Right. Most people still have cable for sports and live events. Now HBO and Showtime and everyone else have SVOD options. The TV viewing experience is any time, anywhere.

CM: And the demand is higher than ever for original narrative content; this is why my move to the international space is helpful.

NL: I feel international audiences are open to watching our shows. Do you think the pendulum will shift in America to the extent that we’ll embrace shows from other countries in their original language (with subtitles)?

CM: For dramas, but comedy is trickier. For example, the Portuguese don’t watch what the French watch, who don’t watch what the English watch, so comedy doesn’t travel. It has to stay in its own culture. Sadly, comedy is harder to make money from, because if the 80/20 rule applies, you can’t sell it. It’s too specific.8

On the drama side, every single show we import is about murder, serial killers—it’s 100%—but it’s very rare that a format from another country translates and gets embraced by US audiences. There’s like 2 murders in all of England, ever. To do Broadchurch and The Fall in the same year is silly. If I said, “I like steak tartare,” and you said, “Me too,” and I offered it to you every day of your life for breakfast, lunch and dinner, you’d say “No thanks.” But in the aggregate that would just translate, irrespective of language, as the language of paranoia, fear, and murder.

Another example is the language of preexisting marketable names—The Tudors, The Borgias. Sherlock travel, Dr. Who doesn’t travel. The next challenge will be the thing that travels, and yes it’s dubbed, but it doesn’t have the murder trope. It’s just human beings. Keep it English language, character based. If it took place in India and I was sitting in Birmingham, Alabama I would watch it as long as it’s good and in English.

NL: Let’s talk about the traditional pilot process here in the US versus abroad. Do you find it valuable to fully produce the pilot and test it?

CM: It’s a moot point. Spending money on an expensive pilot as proof of concept is a luxury that the BBC and British broadcasters can’t afford.

NL: But which model would you prefer, hypothetically, if you did have the choice?

CM: If you have the luxury to get your R&D [research and development] on and a lot of information given to you, then that can be valuable. What I don’t like is that it’s used as an excuse to gum up the works. In the US, if it’s up to me, I’m all right shooting a pilot first, or not. Because broadcasters here feel insecure and need up-to-date information about their careers, things change. A perfectly good pilot could be brilliant at the time, but after being put through a mill and undue pressure, that beautiful thing you created can die unnecessarily. That upsets me. A lot of good things die by waiting and some form of bureaucratic, plausible deniability.

NL: Where do you see the TV business going? And, where would you like to see it going?

CM: I’m hoping that it’ll find an egalitarian and happily remunerative place. But if working in entertainment—in TV—is your passion, then the work will be its own reward—to a point. It’s like being a lefty. In my case I had to produce. Even if there’s no money at the end of it. But as a parent and as someone who cares about students and my profession, I worry younger artists are going to continue to be exploited by the big corporations. The reality is the new generation of content creators is going to earn far less than their traditional broadcast network predecessors.

I’m very grateful that character-based stories like Peaky Blinders are easily accessible and popular with international audiences. The business models will catch up, but the king, as it always has been, is content.

Blumhouse Productions’ Jessica Rhoades on the New Micro-Budget TV Series (It’s Not What You’re Thinking)

Blumhouse Productions, the micro-budget genre company founded by Jason Blum, got its start with the Paranormal Activity 9 franchise, which has collectively grossed almost a billion dollars worldwide.

Since Paranormal Activity, Blumhouse has created a business model producing a lucrative, cost-effective slate of horror films, including Insidious, The Purge and Sinister franchises. From his first producing credit on Kicking and Screaming (Academy Award nominated10 writer/director Noah Baumbach’s debut feature film), Jason Blum has distinguished himself with great taste and smart commercial instincts in both film and television, including the Academy Award winning Whiplash, written and directed by Damien Chazelle (the 2014 Best Supporting Actor Oscar went to J.K. Simmons for his indelible performance as “Fletcher”; the movie also won awards for best film editing and best sound mixing).

Blum served as Executive Producer on the multiple Emmy Award winning feature, The Normal Heart 11 for HBO; on the 2015 docu-drama The Jinx: The Life and Deaths of Robert Durst for HBO; and on the MTV drama series Eye Candy starring Victoria Justice, Ascension on Syfy, and prepping South of Hell for WEtv.

Expanding its TV portfolio, Blumhouse brought in Jessica Rhoades as Head of Television in January 2014. Blumhouse has been building a TV business since entering the space with the ABC horror drama series The River. Rhoades was previously a partner with Ashley Tisdale at Blondie Girl Prods. in their deal with Relativity Television. She executive produces ABC Family’s newly picked up comedy series Young & Hungry starring Emily Osment. Her credits also include Inner Circle, Cloud 9, Under Construction and Miss Advised. She has both a scripted and unscripted background as well as multi-platform experience.

Blumhouse has a first look deal with Universal Television, and UCP (Universal Cable Productions).

Neil Landau: Your role is overseeing the slate of TV series. Do you have any specific mandates?

Jessica Rhoades: Serialized, recurring, limited, mini, we’ll do all of them. But, I do think that where the model kind of sustains, from the feature side to the TV side, is that we want to be creative driven. For us it’s really important to offer our writers and directors creative autonomy. To partner with people we think are extremely talented, and then find a way to help them build their vision.

NL: Can you talk about applying the micro-budget model to TV projects?

JR: Jason had been trying to do a micro-budget model for a while. He really wanted to emulate the feature model on the TV side. It was hard. It’s hard to wrap your head around the equivalent of a box office bonus. You know? It’s really clear whether a movie performs or not. It’s less clear when a series becomes financially successful.

And so it really was Jason talking to Jeff Wachtel [Co-President of USA Network and Head of Content for Universal Cable Productions], and Jason asked, “What is that price at which a network can … not give notes? Can take a chance? Can say, ‘Let’s see if they’ve got it, let’s see if they can do it.’ ” And if they do, wow, that’s the next Louie; we’ve found something really inventive and exciting here. Because we all love creatives, so, what is that number? And Jeff really isolated, and pinpointed … I should say that it’s: the price of a pilot. Everyone in this town knows how to say, “Whoops, that pilot didn’t work,” and people don’t tend to lose their jobs over a failed pilot. And so, we really honed in on that, as the number. And we said, “Well, what if we could do an entire season for the cost of a pilot?”

NL: The $5 million range?

JR: Or less. To fit our micro-budget model, the project would have to fit this perfect little triangle: passion project; contained setting; something we think will find a core audience.

NL: So is your micro-budget model for emerging talent, to give them a chance to prove themselves?

JR: Just the opposite. Our micro-budget model necessitates really experienced showrunners. Jason has always worked with experienced directors, who now are at a point in their career where they have something really specific, whether it’s to prove, or a vision that they’ve always wanted to carry out, that they needed freedom to do. It’s not really first timers that make up our micro-budget feature model. It’s the same on the TV side.

Delivering television, let alone delivering television for a price, is a very specific skill-set; even though it’s micro, it’s still a substantial financial investment on behalf of the network and the studio, and we don’t take that lightly. So, we partner with people who are extremely experienced, on the micro side.

I think on the other side [broadcast and cable] is where you have a little bit of room, to add a failsafe. For example, we’re doing a series for WEtv called South of Hell; it’s this beautiful script written on spec by a young writer who just nailed it. So we partnered him with a showrunner to move the project forward.

NL: I’m still processing this: 10 episodes for the price of 1 pilot—how?

JR: We got a bunch of really smart people in a room together; I’ve got to give a lot of credit to the lawyers and agents who sat in a room, UCP and CAA and Blumhouse, and said, “How would this look?” And, really try it. And it’s really exciting. And it could be something really different. But, it’s a unique model. And we said, “If we can find a showrunner, with a project they’re passionate about, that they want to spend all their time and energy on, for scale, and we can look at Season 2 as the marker of success … that’s something special.”

NL: But you’re not limiting yourselves to strictly micro-budget “bottle shows”12?

JR: We’re going to run the full spectrum. We’re still pursuing our full budget shows, both on broadcast and cable, along with premium cable content which usually causes the “above the line”13 to grow. We certainly are pursuing low and micro as well, which for us are 2 different models. So we’re doing the more low budget—which is talking to our partners at NBC about a show that we have and saying, “Can we put it through the Blumhouse lens? What does it look like? Does it still have all the high quality we’re known for putting on the screen, but come in at half the price of the other broadcast shows?” For us, that’s a phenomenal opportunity to do low budget.

For me, the most exciting thing is when someone doesn’t come to me and say, “They’re trapped in a room for 10 episodes, and here’s what it is!” Because that to me feels like a bottle episode, and in fact when someone pitches me something great that’s contained, part of me wants to be like, “That should be the regular budget show. Let’s find some way to make that incredible and awe inspiring, with characters you cannot peel away from. And let’s go; let’s get top talent. Can you believe they have so-and-so and so-and-so in a room together, and for 10 hours, we’re just going to watch them?!” That, to me, is almost more exciting to do big.

NL: Digital TV networks are currently working under WGA and DGA “new media” contracts (which is ironic because “new media” is already becoming an old, outdated term). Anyway, digital networks, Netflix, Amazon, Hulu Originals, Sony Crackle, are all paying content creators a very low rate—way below scale.14 And yet, these digital content purveyors are spending millions on production values, big name actors, and in some cases directors. Bottom line: they’re spending a lot of money on both above and below the line production costs, but spending the smallest amount of money upfront to acquire the spec pilot and series bible. The writer is not going to make huge money, like in traditional broadcast television. Not even for the second season.

JR: Yes, for the most part, that’s true.

NL: On the positive side, there has never been a higher demand for scripted content; emerging talent can get their shows made, gain experience, and build up their writing credits. And if the series breaks out, then you have—

JR: A launching pad.

NL: Exactly. The same hard work for less money seems to be where the digital revolution is leading us, even for a major corporation like Sony. It’s the way of the future. And yet, for some digital networks (Crackle, Hulu), we’re still seeing the AVOD model—which, compared to Netflix, feels regressive, old school. What’s your perspective? Are you finding that binge viewing and serialized shows are what most networks are looking for now, more than ever? Or is it still, “We want a closed-ended, procedural element, and we need those requisite (commercial) act breaks”?

JR: I think what many TV execs realize is that most audiences want more from their characters. And they want to see characters grow and change. And so, what “procedural” has come to mean is, “Characters never change.” But they don’t need to be mutually exclusive anymore. So even though the temperature out there is cold, we would still love to do a really, really great procedural.

NL: If there’s a twist, or a new spin?

JR: Yes. Absolutely. Look at the CSI franchise. That could have been a formula, and they came in, and everyone will still make fun of, you know, Caruso’s glasses in CSI: Miami, but at the end of the day, they said, “Here’s how we’re going to shoot evidence. Here’s how we’re going to shoot ballistics, and re-creations. And we’re going to bring this visual slant, that pulls the viewer deeply into the cinematic retelling of the crime and the events.” And it really re-broke what we expected from a procedural.

NL: Right, instead of the usual “Whodunnit,” CSI was “How-dunnit”?

JR: I do think that there’s crazy backlash right now against the word “procedural,” but I think it’s reactionary. Because, I do think that there’s a large portion of the audience who wants a little bit of familiarity in their television. Not every person wants shows to always be cutting edge, doesn’t always want to be doing some deep, dark character dive. I think there is a little of “familiarity brings comfort” and that every week, I’m going to see characters I like going through a challenge and there will be a resolution. And I think it’s really important in TV, from an entertainment standpoint, to give that to people. I also think that really good serialized TV can have a bit of a procedural element, but it might not resolve each week, each episode because television doesn’t fit into a weekly timeslot viewing experience anymore.

NL: Right, the viewer is in control.

JR: Each episode gives you another bite at the apple. Another bit of information in a larger mystery. And I think that to give your audience some foothold, some sense of what the ground is, it’s nice to be able to dole that out in contained bites, i.e.: “Here’s a bit of the mystery, that’s part of a bigger one.” So instead of pitching a show as a “procedural,” I’d call it a closed-ended investigation.” It’s a bit of a nuance.

NL: In digital, niche is the new mainstream, but niche used to be verboten on television. What gives?

JR: Well, I would say 2 things. One, I would give some credit to unscripted television for showing how much audiences are interested in the deep dive into a subculture, or a world they didn’t know, or an interesting situation that brings characters together. I do think we have to give some real credit to unscripted, for opening up audiences … wide. Secondly, in scripted, audiences find different access points to different shows through characters. It’s not plot-driven; it’s character-driven. Character, character, character.

NL: In the heyday of broadcast television, producers, creators, agents and managers would do their recon to find out what people were looking for, and then gear a lot of stuff they were bringing to the buyers based on those mandates. But given the digital television revolution, do you guys have your own internal mandates?

JR: Yeah. I mean, I think you always need a champion. So, I love talking to our partners, at our studios, or at a network you might have lunch with, and find out what would be their favorite thing to develop, that they have a little fire in their belly for. If you come across that, if you find a way to find a project with a writer you’re extraordinarily excited about that happens to satisfy a specific executive’s craving, that’s always helpful.

NL: As a producer, when you’re hearing pitches, are you inclined to pass on anything that sounds too much like something else? For example, if someone pitches a serial killer show, would you automatically say, that’s too much like Dexter— and pass?

JR: No. For us, that’s damaging. For me, what’s most important is, “Do I want to follow these characters? Do I want this meeting to never stop? Do I want to keep talking to this person about these characters, longer?” After that, we can figure out if we need to guide a particular project away from competition in the marketplace, or if we find similarities that we think will make it feel redundant, or too derivative. But, for us, my only thing that I’m thinking is, “Are we [currently] developing this [at Blumhouse]?” Networks are looking to break out. They need to find their way through the clutter to stay relevant. As a production company, we just believe a really good project, with great characters and great writing, executed correctly, can cut through all the noise, on its own.

The WGAW’s Charles B. Slocum on the New Syndication

As Assistant Executive Director of the Writers Guild of America, West since 2002, Charles B. Slocum’s day-to-day focus is financial and strategic analysis of the entertainment industry. As an active contributor to the WGA’s Written By magazine, his incisive essays have provided an invaluable perspective for screenwriters in all media. Given the daily changes in the television business, I reached out to him for a reality check. Is the digital television revolution a boon or curse to TV content creators? Does streaming on-demand content portend the end of linear broadcast and basic cable television? Are commercial interruptions here to stay, or will “TV Everywhere” preclude “a word from our sponsors”? Sure, there are more shows than ever for audiences, but does glut mean a loss of revenue for TV studios and networks, or does more mean more profits? Is TV going to become irrelevant and superseded by Internet web series? And how will rampant piracy impact the monetization of digital content?

I asked Slocum to consult his crystal ball and prognosticate on the future of television. We chatted in his office at the WGAW headquarters, located across the street from CBS Television City (adjacent to Hollywood). On most discussion points, Slocum’s comments were eye opening for me, while others served to corroborate my research. And on the topic of long-view linear television, we engaged in spirited debate.

Before joining the WGAW, Slocum was a Senior Financial Analyst at Paramount Pictures; a game show judge for NBC; and Supervisor of Audience Research for ABC’s primetime programming division. He has an MBA from the Wharton School of Business, University of Pennsylvania, and a degree in Public Communications from the Newhouse School, Syracuse University.

In 2012, the Federal Communications Commission (FCC) chose the WGAW to join its first Open Internet Advisory Committee (OIAC). The OIAC’s mission is to help the FCC track and evaluate the effects of its Open Internet rules. The WGAW has acted in Washington, DC on several Internet-related issues, among them PROTECT-IP and SOPA (Stop Online Piracy Act). Charles B. Slocum is one of the OIAC’s 19 distinguished members.

Neil Landau: Historically, TV studios deficit-financed their series and secured broadcast network licensing fees to cover some of their costs. They were always operating at a loss, until a show hit the magic number [80+ episodes], at which point they hit the jackpot of a big syndication deal. Do you see those kinds of syndication deals continuing in the future and how do they apply to digital networks?

Charles Slocum: I do see them continuing. I’m always hesitant to speak with too broad a comment because there are a lot of different business models that co-exist. I don’t want to say that the old business model will disappear, but the economics of TV have changed dramatically. If we used to talk about the syndicatable number of episodes, it’s now 8—because Netflix will buy 8.

Television now is instantly profitable, so the whole concept of deficit financing is gone. If you used to try to cover your budget with the domestic number license fee and foreign, then syndication was the profit. Now the domestic license fee and the foreign already put you in profit. Warner Bros has said publicly that they have a 23% profit already in the current production slate (year/season). There are 2 main factors: the SVOD providers (Netflix, Amazon) and foreign basic cable. Foreign is now overrun by channels owned by US conglomerates. They are their own customers. With all of that value and for the right shows, with a current season sale to Netflix or Amazon, they’re in profit the day principal photography starts.

The other thing that’s happened, because of binge viewing on the SVOD outlets in particular, shorter numbers of episodes are fine. In fact, it’s better. Trying to binge watch shows that have multiple seasons with 22 episodes—it’s too much! You actually want fewer episodes. Years ago, if you had 3 seasons of 10 episodes each, those 30 episodes would have been a $15 million failure. That is now a profitable business, not a loss, that you’re gritting your teeth through. The syndicatable number has gone down from 80 to 8. What we used to call “busted series” is now a “breakeven series.”

NL: Yet, I’m hearing ad revenues are flat—and even down this year.

CS: Well first, what is down? The Upfronts? All that means is that they expect to sell the ads for more, later, if the volume is down. There are 2 things: the volume of sales, and the price they sold it for. We’re hearing about CPM price increases,15 so prices aren’t down. But if they’re holding the volume back, then the value of the upfront sales just means they’re going to sell it for more later in the year. That’s a strategic decision. I haven’t heard the price per thousand is down. On top of that, if it were down, transmission fees are up. They have a second revenue stream that pays for content. As producer, they have those domestic and foreign markets we discussed. Comments on ad revenues, about 1 narrow little piece of the economic pie, have nothing to do with the overall economics of the business.

That original ad-supported sponsorship model where Proctor and Gamble paid for the production cost—it’s a radically different market now. If you’re losing money when making series TV, you aren’t doing it right.

NL: With the emergence of SVOD and non-linear TV, I feel like commercial interruptions aren’t going to sustain, given the alternatives—and won’t that impact the economics?

CS: My short answer is: I don’t know and I don’t care! Either they will persist, or they’ll accept some ads and pay some money, or the consumer will simply subscribe and watch TV on Netflix and Amazon. Either way, there’s money funding the program. It’s increasingly a mixed economic model.

I just cut the cord. You have to have Hulu, Netlflix, Amazon, and iTunes. Better Call Saul you can’t get anywhere except on iTunes for $20. The only reason for cable is sports. If you’re a sports lover, buy the bundle. If you aren’t, cut the cord. You can almost meet your news needs now and usually find full episodes of the various nightly news online. The only ones you can’t replace are paid, premium, cable networks. Of course, you have HBONow, Showtime Anytime and Starz will be available soon. Virtually everything is available online now except live sports events. Anything on CBS should be available. Everything else is authenticated TV Everywhere and you’d have to have the bundle. CBS, which doesn’t care about breaking up the bundle, went with an All Access app, but they can do that. Disney won’t, because they have ESPN, and NBC is part of Comcast. CBS and Showtime stands on its own. They don’t care about the bundle. And they priced it high enough so that they can say to the cable companies, “This is so high priced ($5.99 per channel) for 1 channel available for free over the air, it’s only going to be cord cutters that take it up.” The price point is high for 1 channel.

NL: Either cord cutters or people who never had the cord. Younger people.

CS: If you read my [written by] article on cord cutting they’re called “Cord Nots.”

NL: WGA and the other entertainment trade unions operate under so-called “new media” contracts. Netflix doesn’t give ownership to anybody; their Chief of Content, Ted Sarandos, says they make their front-end deal taking into consideration what would be a back end. It’s more lucrative up front, which tells me, in terms of syndication deals, that even though it’s instantly profitable for these companies, it isn’t on the same large scale of a payout that a syndication deal would produce for a Jerry Seinfeld.

CS: That depends on your agent and your lawyer. It’s less uncertain, so it’s all done in one deal. First, this is not a sweeping change. We are only talking about the shows Netflix is buying. Amazon is doing in-house producing, which isn’t different from the HBO model. They buy all the rights and produce in-house. HBO probably used all the rights less often worldwide. Netflix has ambition to be everywhere. HBO is less aggressive—though they are in a lot of markets. The point is, yes, when you’re going to sell a show to one buyer, you have to get all of your money from that one buyer so make yourself a good deal. There’s no reason why Beau Willimon [House of Cards’ showrunner] can’t get as rich off that show as someone who creates a broadcast hit with international and syndication success. It’s all in the individual deal and the argument that in success you have to pay the creatives. It’s all in the negotiation. We do need to account for the fact that there’s no arm’s length market setting that value.

NL: It’s still early in this process so there isn’t a lot of precedent. It used to be that the syndication deals were so rich because you’d sell the library of the show somewhere else. Now, they’re retransmitting it.

CS: This has been happening ever since Fin-Syn (Financial Interest Syndication Rules) died, because the buyer of your show has been the network that was using it, and increasingly using it on their cable networks. So you’ve already had to deal with that, to find ways you’re being compensated fairly. It’s all in the individual deal. Yes, the third party arm’s length sale of the show around the world is less on your side, in terms of valuing the rights. But it’s all in valuing it. You need to get your deal to accommodate the fact that your main buyer is using the rights not reselling them. That’s a different aspect of deal making, and it’s not fundamentally negative.

NL: And, new media companies have lower minimums and lower thresholds to keep costs down because technically they’re start-ups.

CS: Ever since the 2014 deals, SVOD television, and the budget levels that Netflix and Amazon are doing, they make the terms essentially equal to HBO and Showtime. The minimums aren’t lower for SVOD. At lower budget levels there are lower minimums. At the lowest end it is still what it was since ‘07, ‘08, which is freely negotiable. At the high end, where the contracts will have specific budget breaks, they’re paying HBO and Showtime rates. It’s not discounted; they’re on the same footing. Netflix and Amazon now (in 2015) are making as many shows as HBO, Showtime, and Starz. We’ve duplicated that rich, pay-TV tier in the Internet space in 5 years. That’s a wonderful development, and a great emergence. The great volume change in TV, which is at an all-time high in terms of the produced number of episodes per year, has come in basic cable. Good old-fashioned media is the workhorse, the engine of TV employment for writers and crew, too. In about 8 or 9 years, we’ve gone from 25 series [drama and comedy] made for basic cable to 125. Cable’s come up and doubled the volume of TV being produced. The dozen shows being made for the Internet are significant because they are the highest budget levels, but they aren’t a volume play. The volume is in basic cable. When Netflix looked around for a strategy online and couldn’t duplicate their DVD business, they found HBO’s strategy and adopted it. It was great for Hollywood, because it meant high quality content.

NL: Though it wasn’t in terms of basic cable residual formulas and minimums. Those are lower, right?

CS: Yes, they got improved in 2014 from the Writers and Directors Guilds. They’re better than they were. The model for new media was pay TV not basic cable, so, HBO and Showtime levels. Basic cable was not used as the model for Netflix and Amazon.

NL: For Netflix, for example, you’d get residuals based on what formula?

CS: For Netflix and Amazon and even Yahoo and AOL, the formula is similar to the HBO model—annual license fees, annual residual payments. You get some thousands of dollars for every year that the show is available on the online service. It’s not a buyout, it’s an annual royalty or residual payment. It’s not as high as it should be. It’s much lower than broadcast and they’re using network minimums for the script fees. In the case of writers, they’re getting the same weekly staff salary. As in broadcast and HBO and Showtime, a lot of the writer’s compensation is above scale. In terms of the WGA structure, they are getting the same annual payments.

The context is that the Hollywood Guilds do not set the price of talent above scale rates. We bring the bottom up, and say what everyone must be paid at least. We obviously think it should be more. To be negotiated.

NL: Sony Crackle started an initiative in 2014 with the UCLA MFA Screenwriting Program, whereby they support the “Writing the 1-Hour Drama” pilot workshop that I teach. In the initial workshop, 10 students developed original pilots, and Crackle bought 3 of them—which is fantastic for our students. However, the pay is well below WGA minimum compensation [aka “scale”]. Did Sony TV get a waiver from the Guild?

CS: Crackle is a non-Guild signatory company. Sony Pictures has plenty of Guild signatories that could and should hire these writers for Guild minimums.

NL: Crackle’s series have basic cable size budgets and high quality production values. They’re doing their first 1-hour drama [The Art of More] with Dennis Quaid and Cary Elwes.

CS: Then they should be paying more for the scripts!

NL: Now I understand why. It’s non-union rates for some of their writers. As digital becomes more dominant, and as linear networks become more like digital networks, my hunch is the current residuals’ formula is inevitably going to change—and soon.

CS: But be careful not to overstate the change. There are common network residuals, and some of them are taken by the timeslots that limited series, such as Zoo or Under the Dome, will occupy. There’s stickiness to the existing business model, both because of the networks desire to milk it and WGAW’s desire to keep the residuals the same way. I hold the view that the traditional models will persist more than you are saying. Right now we’ve seen the emergence of the short order series. Almost all of that is additive. As far as I can tell, the amount of 22 episode orders is pretty much the same. It’s not less.

Currently [in 2015], we are in the third age of television. That means in the first 70 years of TV there have only been 2—the pre-cable and cable era. The 3-channel era and the 500-channel era. Now we are in the on-demand era. These 30-year changes happen very slowly. What you’re saying—check in with me in 30 years!

NL: My counter would be, time moves much faster now.

CS: I’m not convinced that’s true. Netflix has added to the ecosystem. Things change, and it’s a cute thing to say things change less in the short term and more in the long term than people think. It’s sort of true. I don’t buy into the “Oh, you’re so lucky that you still have your 22 episode order.” There are plenty of shows that don’t get network reruns because the content became serialized and they don’t repeat well. We have a “haves” and “have-nots” world over the last 10 years, where the procedural episodics repeat a third time, and the most serialized shows don’t repeat. The overall network repeats stayed the same. That idea of network repeats was part of the economics of people working in that area. You had to know that if you got on a serialized show you wouldn’t get the repeat, that’s always been true. Will the short run series take away some of the repeats, yes. Not a whole bunch—15, 20% at most. The networks still want to amortize the costs over 2 runs. They will still find a way to do it if they can find a Netflix or Hulu or Amazon to pay for it. A couple of shows will do that, it’s incremental and it’s only revolutionary 25 years later.

NL: I interviewed Peter Tortorici, former President of CBS, and he agrees with you. I think 5–10 years it’ll be a dramatic shift. He thinks it’ll take longer. It’s all shifting so fast. He says it won’t be “either or,” it’ll be a “yes, and” model.

CS: I’m in the same boat as him. Here’s the perspective I have on that question. None of this is out of the control of the industry. The temptation with things that are technology-based is to somehow give them their own agency or autonomy. And with the minor emphasis on the element of piracy, none of it is inevitable. All of these changes are in the control of the people who are running these companies. Under the Dome could have network repeats or it could have an Amazon deal at Les Moonves’ option. No one makes him license it to Amazon, no one makes him not repeat it. He makes a decision whether he’ll repeat it or not. It’s only happening if it’s economically better.

NL: Yes, if their repeats are nose-diving then they’ll stop showing them.

CS: There’s a limited amount of competitive force there. The main reason they go to the other platforms is because of the shows there. Netflix can buy a certain number of those, but they are also rerunning other people’s shows. They don’t get those shows licensed to them, because they don’t pay enough. The growth doesn’t happen. I shy away from looking at these phenomena as self-fulfilling or autonomous. They are mostly in control of the executives in the business. They happen at the pace at which they are most profitable for the companies. And the bottom lines of these companies prove that they are still making record profits. The profit of the big 5 or 6 companies has doubled in 10 years in actual dollars.

There is nothing negative happening here in digital television. To the extent that it changes, it’s positive. And everyone who’s involved should be compensated for it; it shouldn’t all fall to the bottom line of the corporation; it should go to talent. Most of it they can stop or delay or mute if it’s negative. But it’s positive, because the executives allow it.

Notes

1For decades it had been a common practice for all networks to develop and distribute content, but to lay off physical production at a production entity or studio, e.g., Netflixs House of Cards was produced by MRC (Media Rights Capital), and Orange Is the New Black by Lionsgate Television, respectively.

2The Seinfeld/Hulu deal was said to be valued at $875,000 per episode, which translates to nearly $160 million. Prior to this pact, a limited number of Seinfeld reruns could be viewed online via Sony Crackle. The Hulu deal marked the first time the series would be available on-demand for those inclined to binge view all 180 episodes.

3Netflixed (2013) by Gina Keating, p.187.

4Owned by AMC Networks, they own the cable channels AMC, IFC, WEtv and Sundance.

5The Ranch, the new multi-cam comedy for Netflix from Two and a Half Men co-showrunners, Don Reo and Jim Patterson, will debut another new model: a 20-episode order, which premieres twice a year in 10-episode batches. It’s an evolution from both Netflix’s usual 13-episode seasons, and the standard 22-episode orders for network sitcoms.

6Variety, Susanne Ault, 8/5/2014.

7Fullscreen, Inc. is a global network of content creators and brands on YouTube, owned by a joint venture of AT&T and The Chernin Group. It is the largest independent YouTube network based on unique viewers according to comScore Video Metrix.

8The 80/20 rule refers to studio contracts for the profits from home video, and is a legacy from the early home video era. The studios retained 80 to cover the production and distribution of VHS tapes, which was expensive, and then pays profit participantssuch as indie TV production companieson just the remaining 20 of royalties. Now, DVDs are easier to manufacture, lighter to ship and distribute, so retaining 80 is no longer justified. And in our digital era, distribution is both significantly cheaper and may not even fall into the category of home video. Netflix, for example, does not reveal the statistics for each show or movie streamed. Such subscription streaming services also outpaces electronic sell through (EST) of digital downloads, which are classified as home video. Plus, Netflix pays for licenses, rather than figures based on the viewer numbers for a particular title, so having an 80/20 arrangement is hardly relevant. 80/20 remains a major question, that has to adapt to the reality of todays industry and market.

9Paranormal Activity, 2007, writer/director Oren Peli.

10Baumbach was nominated for Best Original Screenplay for The Squid and the Whale in 2006.

11Ryan Murphy-directed adaptation of Larry Kramer’s play.

12“Bottle shows” are set in one primary setting, such as an airplane on Flight Plan.

13“Above the line” are primarily the producers, writers, directors, and actors.

14“Union scale” means that Companies that are signatory to the guilds (WGA, DGA, SAG/AFTRA) must not pay union members below the pay scale requirements specified in the “Minimum Basic Agreement” (union contract).

15Cost per 1,000 impressions.

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