Acquired
02:15:31 · David Rosenthal, Ben Gilbert
[02:15:31] S1: Yeah. The Seinfeld star is burning brighter and brighter and brighter and consuming everybody within it in the fusion reactor at its core. Yes. Which is a good time to flip back over to the business side of Seinfeld. Because also, right at this time, after the move to Thursday night, after the huge success, after the Internet starts to come online, Seinfeld hits syndication. [02:16:05] S0: So Jerry's quote to the LA Times here is, we'll be in syndication next year, and that will probably help us further the same way it helped Cheers. Most people are still just now discovering our show. Most of the audience watching the show on Thursdays have not seen us before. They're new to us. There's 60 some odd episodes they haven't seen. [02:16:24] S1: Yep. Oh, boy. And were those 60 episodes gonna be worth a lot of money Yep. To the, ownership group that we discussed earlier in the episode. Because Seinfeld is basically the most perfect syndication show ever created. Because of the no hugging, no learning element, no character development, no relationship development, you can tune in anytime to any episode in any order. Doesn't matter. You're gonna get a full entertaining experience. [02:17:00] S0: And because these characters are just kind of vessels that you don't really need to invest in their storyline, they're just like mirrors of the worst part of ourselves. The situations provide the comedy. And so it's a very internationally relatable show too in a way that not all comedy has.
02:17:00 · Ben Gilbert, David Rosenthal
[02:17:00] S0: And because these characters are just kind of vessels that you don't really need to invest in their storyline, they're just like mirrors of the worst part of ourselves. The situations provide the comedy. And so it's a very internationally relatable show too in a way that not all comedy has. [02:17:19] S1: Yep. Yep. Totally. So why now? And what exactly is this business of of syndication? There's sort of a magic unofficial number for TV shows back in this time of a 100 episodes. That was when you entered into syndication. [02:17:34] S0: And the 100 episode thing kinda stems from you have a large enough number of episodes to demonstrate that people liked the show, and there was familiarity with it or you wouldn't have continued, and that there's a big body you can license Yep. To someone to show it. Because they don't wanna buy your 10 episodes. That's not interesting. They wanna buy a big block of them. And so syndication, for those not familiar, is basically anytime a show gets licensed to another distribution option besides the primary first run TV network. And essentially, those options are international, off network Yep. Which this is the biggest one for the longest time. I did not understand how this worked. When NBC buys a show, they're buying it directly from Castle Rock. But once that enters syndication and the reruns are going constantly, that has nothing to do with NBC. Yes. That is just the local affiliates. And the local affiliates, you know, it starts with a k or a w. It's a four letter station that's broadcast over the air in your city.
02:17:34 · Ben Gilbert, David Rosenthal
[02:17:34] S0: And the 100 episode thing kinda stems from you have a large enough number of episodes to demonstrate that people liked the show, and there was familiarity with it or you wouldn't have continued, and that there's a big body you can license Yep. To someone to show it. Because they don't wanna buy your 10 episodes. That's not interesting. They wanna buy a big block of them. And so syndication, for those not familiar, is basically anytime a show gets licensed to another distribution option besides the primary first run TV network. And essentially, those options are international, off network Yep. Which this is the biggest one for the longest time. I did not understand how this worked. When NBC buys a show, they're buying it directly from Castle Rock. But once that enters syndication and the reruns are going constantly, that has nothing to do with NBC. Yes. That is just the local affiliates. And the local affiliates, you know, it starts with a k or a w. It's a four letter station that's broadcast over the air in your city. [02:18:36] S1: Yep. And it might be a NBC or an ABC or a CBS or a Fox station. Right. But they only take the network's programming during prime time or sporting events, etcetera, etcetera. [02:18:46] S0: The rest of the time, they have to go find their own programming. So either they need to make it, or they need to go buy it directly. Mhmm. And there's, like, a thousand of them. And so this is where Sony actually does something. This is where the distributor matters. [02:19:01] S1: They earn their keep now.
02:19:01 · David Rosenthal, Ben Gilbert
[02:19:01] S1: They earn their keep now. [02:19:03] S0: For off network syndication, what you're really trying to figure out is how many of these individually owned local TV stations are willing to buy my 100 episodes and at what rate. And so that is how off network works. Then there's off network cable, same thing, but to cable stations. Fortunately, there's many fewer cable stations than there are local TV affiliates. And then in the far future, but it didn't happen yet, is a subscription video on demand or streaming, which would become a very, very valuable part of syndication. But the interesting thing about the TV business is just how large off network syndication and streaming syndication could be relative to the original first run business. Because if you think about what what does it actually cost to make a Seinfeld episode in season one? Probably less than $500,000. Yeah. Probably less than $400,000. You're not paying the stars that much yet. Production costs aren't actually that high. And so then what's NBC gonna pay for it? $300,000? [02:20:05] S1: You know? 80% ish of whatever that number is.
02:20:05 · David Rosenthal, Ben Gilbert
[02:20:05] S1: You know? 80% ish of whatever that number is. [02:20:08] S0: Not a lot of money. So let's look at season two, for example, 12 episodes. That probably costs somewhere in the 5 to $6,000,000 to produce, which means that somewhere in the million dollars for NBC to buy. It's actually, like, kind of a small thing. But those 12 episodes, when they're sold later in syndication, can fetch huge sums of money, especially if it runs for a long time because the rights can be sold over and over and over again. And the most important thing is that group, David, that you were pointing out, that sort of cap table of who owns the show, it's a totally different split from who makes the money the first time around. The first time around, there's all these people you're paying on salary, especially the actors. The second time around, the people who are participating in all the syndication, it's that whole waterfall of who actually owns the show. [02:21:02] S1: Yep. And this is back to why Larry and Jerry got the most valuable deal in television history because they got huge amounts for creators in that back end waterfall. Yep. And then that back end waterfall would be billions and billions of dollars. And this is where it all starts. [02:21:21] S0: At least reportedly. Again, this is like a funny thing about doing this versus covering public companies is, like, we're relying on some reporting done by a few news outlets over the years, but I think we have to take that at face value.
02:21:21 · Ben Gilbert, David Rosenthal
[02:21:21] S0: At least reportedly. Again, this is like a funny thing about doing this versus covering public companies is, like, we're relying on some reporting done by a few news outlets over the years, but I think we have to take that at face value. [02:21:31] S1: Yes. But assuredly, billions of dollars have gone through this waterfall. So, yeah, we we sort of joked about Sony slash Columbia earning their keep in this first syndication cycle, which is just for local broadcast affiliates. They can't take it to cable yet. Sony sells the show to a record 224 local TV stations across America. [02:21:58] S0: Out of the thousand TV stations total. So, basically, one station in every market of the country taking the exclusive local rights. And that generated an aggregate sum of $500,000,000 in revenue.