How Much Can You Make, and How Do TV Production Companies Make Money
When new writers set out to pitch a TV show, they often ask us “How much do TV writers make?”, or “How much can I make from selling a TV show idea as a new producer or writer?”, the answer is not one-size-fits-all. Also of importance is understanding how TV production companies make money. There are a myriad of factors that determine how much one project delivers versus another, as well as what one writer or production company makes compared to another. Budgets determine fees, deals determine participation, and the success of a show influences everything. This article gives the new TV writer or creator an overview of basic deal points, along with some insight on what to expect when you sell a TV show.
When a company commits to bringing your TV series pitch to market, they’ll propose an option agreement for negotiation that gives them the exclusive right to sell your TV series treatment or pilot script to a network for a limited period of time. More people from outside the TV industry break into the business from selling a concept for a show rather than an actual longform property (script, book, etc.), so it’s important for us to share what one may expect when selling a concept in order to strategize and prioritize your negotiations.
Option deals for scripted projects are structurally the same as for reality-based concepts, but fees and purchase prices are considerably higher in scripted. Budget and Network outlet play a large role in determining related fees. Financial participation as well as participation in the development and production is negotiable to a point, depending on your experience within the industry and what you bring to the table in terms of the marketing of your show.
As in any industry, there are a variety of forces and factors that give shape to the legal structure and content of any deal made. A television Writer or Producer who has an established track record is likely to receive a more lucrative deal than someone with little or no experience, and most often will be given more involvement in the actual production of the show. However, there are industry standards regardless of who you are.
First, it’s important to understand how TV production companies make money:
By traditional standards, production companies carry high risk with the overhead of a development team, in-house producers, administrative staff, and costs involved in securing and packaging projects. They must have a very specific path to deliver viable TV series to their Network executives, and the talent to develop and deliver compelling content that will connect with a buyer and convince them to commit to a budget and order for series. It’s important for new writers and producers to understand that a production company typically doesn’t make their first dollar until production actually begins. Production companies who get the green light are given that privilege because the Network or Studio knows they can deliver, and knows that their vision is the right approach for the story or format at hand. To try to explain how TV production companies make money can be as complicated as defining “Net Profits”. So lets stick to the basics for the sake of understanding the basics.
When a production company is ordered to produce and deliver a TV series, or pilot for series, they’re given a budget from the Network or Studio. The fee for physically producing the show may be 10% of budget. So immediately you’ll understand that the bigger the show, the bigger the network, the bigger the fee for producing. Add to that, negotiated fees tied to specific talent producing the series per episode, and licensing fees as profit participation in the distribution of the series and any ancillary income from such, you can start seeing how a successful run of a TV series can pull in some serious revenue. Of course nobody is getting rich unless a series is a hit, and in that case a producing entity may have a right to renegotiate certain financial considerations depending on the deal they’ve secured. Some production companies are also tied into development deals with studios who cover development costs and other front-end expenditures in exchange for having first right of refusal to anything that production company develops.
The following is a conservative outline of what should be in an industry standard deal from a production company making a new writer/creator an offer for a TV concept:
[Disclaimer: This is in no way provided as legal advice or guarantee of what may or may not be offered to you by any company or person you engage in negotiations with. We strongly advise that you have an entertainment attorney negotiate any offer made to you, as there are many variables and strategies for securing the best possible deal.]
Option Money or Free Option
This is an upfront payment made to you by the company who wants to produce your show. It’s token money, and varies from $500 up to appx. $10,000 depending on the project. The company pays it to you simply to retain the exclusive right to further develop and sell your show to a Network or Studio. If the project is a property with market value already tied in it will pull a larger option fee. Option fees for bestselling novel sub-rights can run into six figures. Some writers will agree to a free option simply to benefit from the opportunity of a top production company shopping their show to networks, and to launch their career as a writer/creator of shows. Most production companies will have no problem offering a nominal amount of money upfront, but keep in mind they’re the one investing time, resources, connections, and finances to prepare it for network before getting paid a dime. At the end of the option period, the company will sometimes have an option to extend the deal if they have a bona-fide offer in play with a qualified third party, which requires additional payment for the extra time they are requesting to retain your project.
If the production company doesn’t sell your show to a network then the show returns to you, the creator and owner. That’s called “Reversion”. You can continue to shop your show to other companies. Many writers have had shows never make it to production, but have made significant financial gain off of repetitive options. If the company does sell your show to a network, then you will be paid a “Purchase Price” or “Set Up Bonus” that will have been pre-negotiated.
This is not always included in a deal, but may be negotiated. It is a fee paid to you, the creator of the show at the time of the production company “exercising your option”. In other words; you are paid this money as a bonus when the show is sold to a network. The amount varies greatly depending upon your negotiations with a buyer. At this point, the show no longer belongs to you and is the property of the production company who sold the show, and eventually the network or distributor who puts it into production.
This is the main source of revenue derived from a series. Typically a production company will offer the creator/producer a percentage of the locked per episode budget. Whatever the Networks sets as the budget per episode, you would receive a set percentage of that. Anywhere between 2 and 5% is standard, and up for negotiation. Budgets vary greatly depending on the content of the series and the network producing the show. Major Networks and Prime Time shows pay more. However, when you’re looking at long-term financial gain, you hope for a successful series that runs multiple episodes for multiple seasons on any network or cable network at any budget.
Participation In Profits:
As the creator of a show it is customary to retain an interest in profits derived from the production and distribution of that show. This is paid to you by the production company through your attorney and is usually a nominal percentage of the fees paid to the production company by the network or distributor as the show is produced and televised. Again, the amount of financial participation in this area varies and can often be negotiated as leverage against any purchase price you agree to. Additionally, it is standard practice for your attorney to retain the right to “audit” the accounting of the company paying you to ensure that the percentage of profits you agreed to is the true percentage you are paid.
For reality-based projects, companies and networks will acknowledge the creator of a show produced, usually with a “Created by” and “Associate Producer” or “Consulting Producer” credit. For scripted projects it is more often a “Written by” or “Story by” credit in addition to a negotiated producer credit. As such, you should be able to negotiate a standard fee associated with your credit, paid per episode or week of production. These are all negotiable.
Now that you understand how much you can make selling a TV show idea, here’s a quick overview of the process when landing a TV series deal at the TV Writers Vault:
– The Writer/Creator wrote and develops an original concept, format, or story.
– They connect with a Production Company after their pitch was scouted in our marketplace.
– They engage in conversations to determine its potential and ideal direction for development.
– The Writer/Creator received an “Option Agreement” proposal that would allow the company exclusive rights to develop and shop the project to networks.
– Negotiations for all terms are settled.
– The company develops and readies the project to pitch to Networks. A sizzle reel is often produced as a proof-of-concept.
– The production company sells the pitch to a Network and the Option is exercised.
– The series is produced, and the Writer/Creator is engaged and compensated as per the terms of the agreement.
Check out our articles “How To Pitch Scripted TV Show Ideas and Pilot Scripts” and “How To Pitch A TV Show Idea” to increase the odds of landing a deal by creating and pitching a TV series treatment or script that is more appealing to buyers.