[Throwaway23412]

>The networks are gambling big in a risky industry where only the most prominent shows survive. While top-rated hits can garner millions of viewers, FX research found that the bottom 20 percent of shows averaged around 380,000 viewers, a daunting prospect for networks that depend on big audiences for ad revenue.

Only the prominent shows survive in the ads business model that currently governs these networks. If an Amazon or Netflix show gets 380,000 viewers and this show convinces the majority of those viewers to keep their subscription, then the respective streaming giant has already accomplished their goal. That's another $3.8M (or whatever the average subscription amount is) in monthly subscription revenue. They're not beholden to advertisers. A typical "Black Mirror" viewer might not overlap with a typical "Marco Polo" viewer or a typical "Unbreakable Kimmy Schmidt" viewer, but, as long as each viewer has a reason to stay subscribed, Netflix doesn't care if said shows were to have a low average number of viewers.

[thenomad]

It's probably not quite as rosy as you state here, I'm afraid.

Let's look at a 380,000 viewer show. It's very unlikely that ever single one of those viewers paid for Netflix for a solid year just to get access to that show (which will have all its episodes released at once).

So let's assume it has significant cult appeal, meaning a full 25% of its viewers are primarily subscribed for that show and things like it. (I'd say that's likely to be very high, based on my experience in the narrative video world, but let's be optimistic.) And let's say, based on subscribing for that show and forgetting to cancel for a couple of months (or subsequently being retained by another 380k viewer show), that Netflix gets 3 months' worth of revenue from them.

So that's 380k/4 = 95,000 * $7.99 * 3 = $2.28m revenue attributable to that show.

Of the shows you mention:

Marco Polo cost $90m to produce for the entire season.

Black Mirror doesn't have figures online, but it'll be around $3m per episode if it's similar to other BBC shows. So that's $18m.

Unbreakable Kimmy Schmidt doesn't have figures available, but based on Tina Fey's fees for other shows and general knowledge of how much TV costs, I'll guess at about $3m an episode. (Might be cheaper if they're being clever about it, so could be as low as $2m) So that's $39m.

So, assuming that Netflix are just getting revenue from retained subscribers, and they get the figures above, we're looking at losses of:

$88m for Marco Polo.

$16m for Black Mirror.

$37m for Unbreakable Kimmy Schmidt.

Obviously the situation is far more complex than that - they'll be financing with coproduction deals, they're looking for growth rather than revenue, they also acquire a lot of content cheaply (very, very cheaply in some cases) through licensing - but it's certainly not rosy enough that they'll be happy with 380k viewers for shows they're making.

[matwood]

It would be interesting to know how many people subscribe and unsubscribe to Netflix for a single show. I tend to think it is a small minority, but without numbers it is hard to know.

Also, the up front production costs do not need to be recaptured on first watching. The 90M to produce Marco Polo creates and asset that can be sold, traded, etc... Eventually Netflix will have so much good, custom content that a new person joining will take years to go through it all if possible. What we are watching now is them bootstrap that process, but it will not always be that way.

[thenomad]

Yes, usually you'd have to consider syndication rights, DVD sales, merch, etc when looking at a show's overall profitability.

OTOH, it would appear in many cases those rights aren't going to Netflix directly. See

https://www.wired.com/2014/03/comcast-bites-netflix-snagging...

, for example.

(Of course, this is how Netflix is getting so many shows made - they're trading those rights to the production company in exchange for not footing the entire production cost.)

It's worth noting, though, that those will scale strongly with the initial success of the show. Breaking Bad DVD sales were huge. The sales of DVDs of, say, "Alphas" on Sci-Fi will not be nearly as impressive.

As for subscribe numbers - I don't have hard figures, but based on years of persuading people to watch video-based narrative content I'd guess 5% of total viewers for a weak show, 10% for a strong show or one that's capturing a new audience, 18% for one that's both very strong and targeted at a radically new audience. Occasional outliers like Breaking Bad and Game Of Thrones will probably provide higher capture for the subscription services showing them, but they're 1-3 times a decade phenomena.

[dazc]

"It would be interesting to know how many people subscribe and unsubscribe to Netflix for a single show."

I haven't subscribed ever for just a single show but I tend to subscribe for one month to watch a few shows and then unsubscribe for maybe 3-4 months before returning.

I have a UK account but live most of the time in Spain. The offering is similar in size. I have bothered a couple of times to go via vpn to get the US version but not found it so much better that it's worth the extra effort.

I have an amazon prime account too that I have never cancelled. Partly because I sometimes use the free delivery option when I'm in the UK but also with amazon I find new stuff worth watching tends to come along a bit more frequently.

[Ntrails]

my "to do list" on netflix probably has 500 hours of television on it. That's ignoring the random stuff I'll see as new and just watch (eg gone girl) or the re-watching of a classic (hello breaking bad).

Netflix still has shitty recommendations, and annoying pushing of content I'm not interested in. But by the time I get through all the things I actually want to watch as of today I'd be amazed if there wasn't almost as much new content. In other words I don't think I'll ever run out.

[maxsilver]

> it would be interesting to know how many people subscribe and unsubscribe to Netflix for a single show.

I don't know about Netflix, but anecdotally, I subscribed to HBO just for Westworld alone.

[Shivetya]

Well a better example of one show subscribers would have to be Game of Thrones for HBO. I would love to see their subscriber numbers throughout a year

[Retric]

Netflix is designing original programming to fill holes so 25% is probably low. The three month assumption is also very low as the subscription is cheap and people don't think lets cancel right after a show they liked. Further they now own these shows so they gain long term benefit from having them.

So, a failure is probably worth ~10m and a success can be worth 20+x that. Remember eventually they end up with a back catalog that's large enough to be self sustaining.

[maxerickson]

I don't think you should extrapolate from the 380k like that.

For example, a show no one ever even heard of "Tyrant", was canceled for averaging 700,000 viewers.

[heartbreak]

I wouldn't discount the value of product placement deals, either.

[thenomad]

They're generally (according to producers I know who have done such deals) not as much of the production budget as you'd expect. Up to 10% or so at most.

[abandonliberty]

Also we're talking accounts, 1 to 1+ viewers.

[cylentwolf]

Marco Polo = 9 mil per season and 90 mil for the 10 seasons. So while they have losses they aren't as high as you think they are. I think they are thinking that they can take the loss if they can get enough people to watch it over time. Counting on people to either rewatch it (ala reruns in normal TV) or tell friends who then have something to use their subscription for.

[thenomad]

Marco Polo is $9m per episode.

http://uk.businessinsider.com/netflix-marco-polo-tv-show-bud...

[izacus]

And not being forced to appeal to everyone means that they can create better and more immersive content for the smaller target audience the shows are meant for - making them so much better for the subset of people.

[aeharding]

On the other hand, I go to a grocery store not because it has potatoes and onions but because it has a couple niche items that are much less popular (but that are essential to me). This allows me to make one visit to one store.

I go to a grocery store that has my niche items, but I also buy popular items that are expected at every grocer.

(My grocery store has to have good tasting cheap milk, full fat large container fage yogurt, fresh & authentic croissants, lemongrass, red lentils, etc.)

If one store has a monopoly on full fat fage yogurt but doesn't have lemongrass, I'll make a compromise of going to the store with lemongrass and buying some other brand of yogurt from them. Making one store visit is important to me.

[jp555]

Not sure about that analogy. Ingredients tend to get mixed together in many ways to make many different kinds of meals.

You can only watch one show at a time, and the marginal effort of "travelling between stores" - flipping from Netflix to Youtube/Amazon/HBOGo/Etc, is essentially zero.

[wlesieutre]

Only if you assume a subscription to each of those services, instead of just one. It'd be like $100/month if you wanted access to every single streaming service.

[aeharding]

It might be a low barrier for some, but for me I don't want to manage multiple services which could contain duplicated content (less value per $). In this case, I'll choose the most valuable service to me as a compromise.

[rubber_duck]

I wonder how much money you get for the embedded brands. Like I went to see dr. strange this weekend and I immediately noticed Microsoft Surface and Adidas prominently focused in two scenes. Not classical advertising but it surely pays, and considering it's a Marvel it must have cost quite a bit, but I'm sure you could find some brands interested in 300k viewers depending on the content.

[FussyZeus]

I giggled a bit when he chucked the Surface on the floor. As a proud owner of a Pro 3, that's highly relatable... :D

I've never minded the on-screen product placement in movies. It just makes things more immersive, IMHO. Certainly better than the hamfisted style of advertising seen elsewhere. I'm not sure how effective it is at moving product, though.

[rubber_duck]

>I've never minded the on-screen product placement in movies.

Actually the Adidas logo was quite out of place in that movie for me - the color was really out of place in the scene (probably to draw attention), they usually try to balance the colors in the scene and this really broke my immersion. The Surface part on the other had was nice, it didn't sacrifice anything and it added an interesting detail.

[FussyZeus]

To be honest I didn't even notice the Adidas logo. shrug Apparently that product isn't "for" me. Ha.

[thebspatrol]

Which scene are you referring to? It looked like Strange was wearing Yeezys in the opening operating room scene, but I don't remember seeing anything else.

[rubber_duck]

The one where he talks to the guy at the basketball court asking him how he's walking again - when the guy turns there's a huge (teal or blue or some such color) Adidas logo on his back that looks very out of place in that scene at least for me.

[brak1]

Product placement is a big money source for film & tv.

e.g. http://www.cbc.ca/radio/undertheinfluence/show-me-the-money-...

[bduerst]

I've always wondered how Netflix does attribution for their netflix originals.

For example, do they take the percentage of a person's viewing habits that the show takes up, multiply it by their monthly subscription revenue, and attribute it to the show for all viewers?

[jerf]

They have enough data to do statistics that are probably pretty accurate. I wouldn't be able to just whip off a description of exactly how you'd do that in an HN comment, I'd have to think about it for a while since I don't do this every day, but I'm fairly confident the people who do can get a very precise answer to that question with the data they have. Certainly an answer precise enough to give to the executives deciding which series to keep and what to invest in.

[bduerst]

And yet, their recommended movie list is still not that strong :(

[webmaven]

It used to be a lot better, but the increasing cost of licensing Hollywood films has been cutting into the size and quality of their catalog.

[verbify]

I recall reading that's how Spotify's model works.

[michael_h]

Spotify's model is slightly different - for premium subscriptions, they pool the total subscription revenue, take their cut, and then pay out to the artists, based on their total share of listens. Not awful, not ideal.

[narag]

It's not only the ads that have a rigid model. The contents of the shows are also mostly formulaic and repetitive. I've seen only a few series that broke that mold, like Lost (although it spoiled after three seasons), The Wire and Breaking Bad. The rest, even if good, seems like made by the same book.

Maybe products could differentiate if producers tried to do something... different. If you do the same thing (with small variations) as everybody else is doing, it's very difficult to captivate the audience, that only see "yet another police show with a twist".

[zephod]

$3.8B? The average subscription amount is slightly less than $10,000/month...

[Throwaway23412]

Apologies for my crappy math. Already edited it.

[chx]

Yeah but that means you only a very small budget for that show. Perhaps $100k per episode perhaps even less.

[Throwaway23412]

Individual budgets for individual shows sounds like a big TV network convention. Netflix isn't selling ads against each show; their subscription revenue is shared between all their content.

I just read elsewhere that experts estimated that "Fuller House" attracted over 10M viewers. Even if every single one of those viewers cancelled their subscription after binge-watching the show, Netflix might have made nearly $100M in one month from that show. "Fuller House" probably funded several shows that you or I love.

[mattmanser]

But does it really work that way? Do you think that Netflix thinks it works that way?

I subscribe because it has X number of good shows, not because it has 1 good show. If Netflix only had "Super duper invaders from Mars" and that was the only show I was interested in, I wouldn't subscribe to them, I'd just pirate it.

[matwood]

It's two things, good content and ease of use. Netflix is also banking that with their investment in their own content that there are more shows you would enjoy. It does not happen overnight, but they are getting there.

[Cthulhu_]

Good TV shows don't need big budgets. A show like House of Cards does without special effects or CGI, whilst still being a highly popular show.

Another factor is that Netflix is a multinational; if a (cheap?) show doesn't work in one country, it might work very well in another one. (see the Warcraft movie as a movie example; did okayish in the west, was a huge hit in China).

[noibl]

Heh, probably not the best example of cheap TV. $3.8m wouldn't even pay for a single House of Cards episode.[1]

But it still works as a good example of the economics: "With Netflix spending a reported $100 million to produce two 13-episode seasons of House of Cards, they need 520,834 people to sign up for a $7.99 subscription for two years to break even. ... That sounds daunting, but at the moment, Netflix has 33.3 million subscribers, so this is an increase of less than 10 percent on their current customer base."[2]

[1] http://variety.com/2013/digital/news/caa-agent-discloses-net... [2] http://www.theatlantic.com/technology/archive/2013/02/econom...

[matwood]

Those numbers recoup their original investment, but also remember that they now have created an asset (HoC) which itself has value.

[mseebach]

> they need 520,834 people to sign up [..] Netflix has 33.3 million subscribers, so this is an increase of less than 10 percent on their current customer base.

Yes, it's less than 10% -- but it's also less than 2% (33.3m * 2% = 666k)? Or what am I not seeing?

[deadbunny]

Or just stop 10% of people from leaving.

[dredmorbius]

Whilst I can't speak to HoC, my understanding is that CGI is frequently used because it is cheaper than constructing large sets or shooting outdoor scenes, or is used to add small elements to a scene.

The BBC drama Poldark makes use of CGI to nail some of its historical elements, for example: https://www.latitude50.co.uk/journal/on-the-set-of-bbcs-pold...

Both Battlestart Galactica (the remake) and Firefly were fairly low-budget productions which made extensive use of CGI.

[ascagnel_]

Indeed, this is a poor example specifically because House of Cards makes heavy use of digital backlot.

> Steve: We have a visual effects supervisor on the show who’s been working with Fincher for around 20 years. Let’s say we’re shooting on stage, and out the window we want to see the Washington monument, we’ll shoot green screen out of the set window. Then we’ll coordinate with the VFX department, telling them that we need to add a certain image out the window, and then we will go back-and-forth on how much expense it will require and how best to accomplish it.

> We actually do a fair amount of digital work in post on the show. All the driving in the show, anything inside the vehicle is done on stage, in a room that is a big three-sided green screen space. The car does not move, the actors are in the car, and the cameras are set up around them. We have very long strips of LED monitors hung above the car. We had a camera crew go to Washington, D.C. to drive around and shoot plates for what you see outside when you’re driving. And that is fed into the LED screens above the car. So as the scene is progressing, the LED screens are synched up to emit interactive light to match the light conditions you see in the scenery you’re driving past (that will be added in post). All the reflections on the car windows, the window frames and door jambs is being shot while we’re shooting the actors in the car. Then in post the green screens are replaced with the synced up driving plates, and it works really well. It gives you the sense of light passing over the actors’ faces, matching the lighting that is in the image of the plate.

> And as you mentioned, one of the bigger computer-generated things that we did in the first season was the VFX extension of the exterior of The Francis J. Underwood Library. That was a one-story building on location, which was not very modern. We added some elements to it when we shot it, then in post the top of the building was extended per the design that we did in the Art Department to create the modernist look of that building. There were a few other spots where we did visual effects work to enhance things on the show.

From http://www.pushing-pixels.org/2013/12/29/production-design-o...

[woobar]

Here is an interesting video from 2010(!). Green screen was already routinely used for regular outdoor shoots.

https://www.youtube.com/watch?v=mCXE9cNzcgI

[dredmorbius]

I've seen similar, including a few scenes shown tthere. Good CGI is invisible CGI.

[sprafa]

Working in the film industry and this is both true and untrue, depending on the situation. It's very hard to estimate. But yes CGI can make certain productions a lot cheaper, while a lot of films also have a ton of CGI work for superfluous reasons. Retouching the actor's faces for instace is more common than you would imagine, in the industry it's called "beauty work" and it's widespread.

[dredmorbius]

Reemphasising: CGI can be used to reduce costs. Hence, relying on "uses CGI" as a sign of either a high-budget or low-budget production isn't valid.

If you want to assess the budget, look at the budget.