Fascinating business tidbit

Traditionally, kids entertainment groups have made just 10% of their income from broadcast commissions, with the balance generated by DVD and merchandise sales. Many companies have been squeezed by the global decline in DVD sales, while increasingly broadcasters expect to pay nothing for children\’s television shows commissioned from outside rights holders.

While Entertainment One has turned in a sparkling performance in recent years, it too has had to make concessions to broadcasters. In order to secure Peppa Pig its slot on the Nick Jr channel in the US, it is thought to have paid all production costs and agreed to share income from merchandising.

\”If you can\’t broadcast these things on television then you can\’t sell any merchandise, so you do have to get the product aired,\” says analyst Ian Berry at Cenkos, broker to Entertainment One. \”But the potential royalty income from merchandise is almost 100% margin.\”

OK, so we all know that the TV shows lead to pester power for the Peppa Pig lunch box, the Peppa Pig waterproof nappy (no child would be seen dead at the beach without it) and the Peppa Pig doll, poster, DVD.

But it\’s a fascinating little detail of capitalism the way the money moves around, isn\’t it? The TV stations aren\’t paying the people who make the programs any more. In fact, the people who own the rights to sell the lunch boxes are in fact paying the TV stations (that\’s the \”sharing of merchandising revenues\”) to show the programs.

The scarce resource here isn\’t in fact the character or the TV program. The scarce resource is the audience and thus the money flows to whoever it is who has access to that audience, that is, the TV station.

2 thoughts on “Fascinating business tidbit”

  1. What they’re saying is that the produces are paying the TV company to show a program in the hope that viewers will buy the associated product. Is that not simply a description of a TV commercial?

Leave a Reply

Your email address will not be published. Required fields are marked *