New Media Financing, Part 3: Controlling the Costs

More than a decade ago, I was working on a project that involved producing original 30-minute in-studio television programs. The cost of the shows had to be low enough to allow them to be bartered (given to stations free), or even aired through paying the stations for the time. I approached a number of producers in Los Angeles and said, "Here's an outline for the show, our budget is $300,000 per half hour, can you do it?" Not a single one would touch it for anywhere close to that budget, even though the series wasn't going to be technically difficult to produce and wouldn't require "name" talent.

It costs a lot of money to produce a network television show--according to The Hollywood Reporter, between $2.5 and $4 million per episode for an hour-long drama, while half-hour comedies are significantly less expensive at around $1 to $1.25 million per episode. For those costs, you get professional union talent both in front of and behind the camera, the best equipment, first-class music and sound, excellent post-production, and so on.

At the other end of the spectrum are user-generated videos like "Keyboard Cat" and the "Numa Numa" guy, shot and edited by a single person with a camcorder or webcam. The cost is virtually nothing, and sometimes, very rarely, a huge number of people watch them. But could you get a million or two people to watch the "Numa Numa" guy for 30 minutes a week, for 13 weeks?

Network television shows are very expensive to produce, but if they catch on, people will watch them over and over for years. They generate advertising revenues from day one. They can be sold to other countries and syndicated to local television stations, even while the original run of the series is still on the network. They can be packaged into DVD collections and resold. They can run on Internet sites like Hulu and generate more advertising revenue. The entire network series production system is based on creating these kinds of shows. The series that don't make it, that last a season or less, are a sunk cost, never to be heard from again. It's a little bit like the venture capital business, except that even a failed venture might have valuable intellectual property that can be licensed or sold, while a failed television series has virtually no residual value.

But what if the production model reflected reality? What if costs were based on the expectation that a show will fail? What if producers put real money into a show only once it was proven to be a hit? You'd see a very different model for funding series production, the model that I think needs to be applied to the Internet.

In the "Look out, she's about to blow!" model, everyone gets paid Union scale, not X times scale, until the show is a proven hit. DSLRs replace 35mm film; multicamera shooting techniques replace single-camera, decreasing the number of setups and saving both time and money. Teams are light and shoot fast. Sets go virtual; why make huge investments in practical sets when you can create them digitally and then build them once you know you've got a hit? Also, you don't have to tear down virtual sets. Editing and post-production are done on the desktop.

I can already hear a chorus of network executives and producers saying "That will never work! The production quality of our shows will be diminished, and we'll never get them to the point where they'll be hits. It'll be more expensive to upgrade production standards midstream than it would be to set high standards from day one."

But just because network executives and studios would find this an unacceptable way to approach production doesn't mean that it's unacceptable. For the Internet to take off as a platform that can generate its own hits, it has to be able to deliver compelling programming that will bring viewers back again and again. That requires more than a camcorder and an idiot jumping off a roof. It means operating as "close to the bone" as possible in order to keep costs in line with potential revenues, and to only ramp up costs once revenues can support them.