On Halloween 2010, AMC, the cable auteur behind Mad Men and The Killing, debuted a new series about zombies called The Walking Dead. With more than 5 million viewers tuning in, the channel's ratings suddenly tripled. But like a character from Mad Men, AMC is finding that financial success wields a double-edged sword.
Michael Idov's wonderful New York magazine piece on AMC's complicated ascendancy is worth a full read, but it's a nugget of TV economics toward the end that caught my eye. There are three ways to make money as a TV network, Idov writes: selling ads, owning your own content, and charging subscription fees within cable packages sold by providers like Comcast.
Broadcast networks like NBC have tens of millions of viewers, so they rely on ads. Premium cable channels like AMC do not have tens of millions of viewers, so they rely mainly on subscription fees set by cable providers.
So, this is the economics of television in a nutshell. If you are a broadcast network, your goal is to make as many popular shows as possible and sell ads with them. But if you are an unestablished premium cable channel, your goal is to make one or two hit shows that put you "on the map" and qualify you to demand fees from cable providers.