TV as a loss leader

Includes: DIS, FOX, TWX
by: David Strahlberg

An article in yesterday's Wall Street Journal highlighted a growing trend among TV studios:  keeping an unprofitable show alive if it helps sell DVDs.

The article discussed shows such as Fox's (NASDAQ:FOX) Arrested Development and the WB's (NYSE:TWX) Jack & Bobby, which are facing possible cancellation after this season, but may be saved if fan support and DVD sales are compelling enough.  In another instance, Fox's Family Guy was canceled after three seasons but is being revived on May 1, 2005 following the sale of 3 million Family Guy DVD box sets (at $50 each).

Quick comment: This article does a good job in demonstrating how the business model for TV and movies has changed over the years, as studios seek to monetize their content through avenues other that advertising, as viewership has declined.  For example, the article mentions how ABC's (NYSE:DIS) blockbuster hit Desperate Housewives would have been canceled in 1960's with only 20 million viewers; in contrast, The Beverly Hillbillies attracted 60 million viewer each week.  Now, shows can make money through DVD sales, and through licensing deals with movie studios and video game developers.