Regardless of which part of the world you belong to and your age, we all have grown up watching TV. TV channels and shows have been an integral part of our lives whether for serving entertainment, information, or gracing our living rooms. TV channels were launched as the best entertainment option for news, sports, and entertainment completely free of cost.
They conventionally generated money through commercial ads. This scenario lasted for around 60 years, and now, it has changed. The Internet has changed and challenged conventional systems in various ways. OTT platforms are replacing TV channels and cable services primarily. Whether you have cable, satellite, or moved to OTT, internet service is a commodity no business and household can overlook. We would suggest you must check CenturyLink internet plans – for affordable highest speed internet, you won’t regret this choice.
Here, in this article, we are going to shed some light on how TV channels generate income. So, let’s see what are the conventional and working business models to keep the flow of income going!
CBS, Fox, NBC, and other local stations are changing their business models as the Cable TV, and online platforms offered free TV to their customers while charging for commercials to earn money. This advertising principle for broadcasters is becoming less available, making them focus on other methods to generate money and pay for programming.
Now, how would you define revenue? Revenue is the advertising sales of commercial units by liner (or nonlinear) viewing, valued by the number of audiences per thousand.
Here Is the Difference Between Revenue and Expenses
Revenue: It is the subscription fee that the service providers charge from their customers. The formula for calculating revenue is the number of households passed times a market rate per subscriber.
Expenses: It is the cost of consumption to offer quality programming services to the customers. It includes the prices for marketing, news production, and so on!
Subtract expenses from the revenue to calculate the net revenue.
Net Revenue = Revenue – Expenses
We will CNN as an example to help you understand how business models in the TV industry look like.
With an operating income of around $500 million, CNN generates revenue through its subscription fee. This fee adds up to 50% of the total revenue it generates. The other 50% comes through advertising and additional revenue streams.
Multiple websites are generating revenue through Primetime. When considering CNN Primetime, it accounts for about 10% of the overall revenue. Using Primetime is easy and it provides feasibility to its customers in this digital world. CNN has supported this statement in favor of Primetime.
The free-for-carriage or negotiation-for-value is what the broadcaster pays to Distribution Platform Operators (DPOs) for displaying their channels. You’ll see people also calling it value-for-signal or TV tax.
CNN also enjoys 10% of its revenue through Digital Advertising. Phil Kent, the former CEO of CNN, said that managing the costs, investing in journalism, free-for-carriage, and extension in multi-platform reach are the four stands to grow the news division and make more money.
Well, that was just an example but simply put, this is how the business model for news TV stations usually work:
Ads – the ads we see during breaks, matches, and all the time are the major source of news and other channels too. This is how they keep the flow of income going.
Second, new channels are paid for by cable companies. They get paid for each home that watches that channel or is subscribed to.
Paid subscription – some channels largely as their prime source, while some have the second-largest source of income through paid subscriptions. In this model, customers pay a monthly fee for having a certain channel.
Today, all the channels have their digital presence too, and that brings in a good flow of money too. That is through millions of views online, that gets their channels monetized, affiliates, associates, ads, collaborations with brands online, and hosting live events. This is the reason, most of them are focusing on digital platforms more.
Miscellaneous sources might involve getting paid for showing certain content, this involves promotional content again but not in the form of ads.