Acquired
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.
02:21:58 · Ben Gilbert, David Rosenthal
[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. [02:22:12] S1: Actually, over $500,000,000 in revenue in a single event here in 1995, and that was just for the first five year syndication window and only on local TV affiliates, not even on cable yet. Yeah. And it turned out that those local affiliate stations that were paying all that money for Seinfeld actually were getting a pretty good deal. Because all of a sudden, reports start popping up as Seinfeld enters into syndication where stations that would run Seinfeld reruns would end up winning the time slot in their local market. They would beat live programming on other stations at the same time. So, like, let's say you're, you know, local affiliate TV station in Buffalo, New York. You decide that you're gonna run Seinfeld reruns during a particular time slot when the other stations in town are running local news. Seinfeld beats the local news. [02:23:15] S0: It's the audience of people who never got to watch it on network, cause it only ever aired twice. Like, you missed a big episode. Let's say you missed the contest. You were working the first night, and then you weren't around because you were doing summer travel or whatever. The only chance to catch it is in syndication, and that's a thing that everyone talked about. That could be a marketing event if you were a local TV station Right. Trying to drive a bunch of attention. We're gonna air that episode.
02:23:15 · Ben Gilbert, David Rosenthal
[02:23:15] S0: It's the audience of people who never got to watch it on network, cause it only ever aired twice. Like, you missed a big episode. Let's say you missed the contest. You were working the first night, and then you weren't around because you were doing summer travel or whatever. The only chance to catch it is in syndication, and that's a thing that everyone talked about. That could be a marketing event if you were a local TV station Right. Trying to drive a bunch of attention. We're gonna air that episode. [02:23:41] S1: Right. You could market that you are gonna be running the contest on Yes. Tuesday night at eleven or something like that. I mean, that sounds way more compelling than local news to me. [02:23:51] S0: Or whatever other local programming. I mean, I think, Wheel of Fortune... There were a lot of, like, game shows Yep. That would be... I think the phrase is first run syndication that would skip the network altogether and be produced directly to sell to the local affiliates. Actually, Oprah was this. [02:24:06] S1: Yes. We talked about this on our Oprah episode. Yep. And just to make it even more fitting, that same year in 1995 when Seinfeld hits syndication is when Fin Sin gets repealed. Yeah. So the door is now slammed that no other shows are gonna have these dynamics because the networks now are gonna own their own shows. And this is gonna play out over broadcast television a little bit, and it's gonna play out big time in the streaming era.