Question:

     Hollywood studios, or their corporate parents, now own all the television broadcast networks in America.  How does their control over television affect their movie business?

Answer:

      The six television networks– CBS, NBC, ABC, FOX, UPN, and WB– are the cash cows for the movie studios today. They pay the studios a licensing fee for the right to show studio-produced movies, cartoons, and television programs over a limited time period. Last year, these network fees totaled $5.1 billion, which was $1.2 billion more than the studios received from the entire American box office. What makes this a real windfall for the studios is that they do not have to pay any advertising  or marketing costs out of the proceeds, as they do in their movie business. So the licensing fees flow directly into the studios’ coffers as almost pure profit.
          In addition, networks help establish television series and movies for syndication to local and foreign television stations. So after the networks’ licenses expire, the studios can sell the same programs over and over again. And a hit series can be extremely lucrative: the 125 episodes of The Cosby Show has earned a half-billion dollars for Viacom to date, according to its chairman Sumner Redstone. In 2003, this local aftermarket provided studios with another $5.5 billion. Aside from the small percentage that gets paid out in residuals to actors, directors, and writers, the take from these sales goes directly to the studios’ bottom line.

     
      This bonanza explains why studio executives are not unhappy that the percentage of Americans who go to the movies every week nowadays is only a fraction of what it was 50 years ago. The audience that is staying home in droves is now their main source of profits.