Business Theories: Thoughts on [adult swim] and Fox

15:10 05 June in Musings, Rants and Raves

On June 23rd [adult swim] will begin airing episodes of the new Fox sensation Bob’s Burgers. This is now the 6th Fox TV show that TBS (the parent of William Street and Cartoon Network) has picked up for syndication (Family Guy, King of the Hill, Futurama, American Dad!, and The Cleveland Show). As a die hard fan of both Bob’s and [as] I cannot wait until I can spend (what I hope to be) multiple nights a week catching up on one of my new favorite shows. But more importantly, this new announcement has my wheels spinning again and curious about some of Fox’s business decisions in collaborating with TBS.

Two weeks after Fox premieres a new episode of their hit show Family Guy, [adult swim] premieres the same episode. To put this into deeper perspective, Family Guy on Fox averages 6 million viewers per episode. [adult swim] averages about 1.5 million viewers per episode. In addition, Hulu, the best option for watching Family Guy online and a platform which Fox currently owns 36% of, airs these new episodes 8 days after the Fox premiere (only SIX days prior to syndication on [as]) and allows only for 5 episodes to be streamed for free and all seasons to be streamed by Hulu Plus subscribers. The final stat worth mentioning is the estimated $2 million per episode syndication fee that TBS pays Fox.

The obvious analysis to do here would be to explore why [as] would pay $2M an episode to Fox and how they come to this number. But, the more interesting analysis lies in why Fox would allow for the 3rd platform for an episode of their hit show be a competitive station. To add even more lunacy to this idea is the fact that this rival station is owned by Time Warner which Fox has some dirty history with. The obvious answer is the minimum of $420 million ($2M x 210 episodes) that Fox will receive. But given potential deals with ANY other, less combative partner that Fox could seek out – Netflix, Amazon, YouTube, Google Play, DVD, VOD, or maybe just someone that hasn’t threatened a potential multi-class lawsuit – why would Fox do this?

But first, let me bring up something about Bob’s Burgers and the general idea of syndication. Bob’s generates close to 4.5 million viewers per episode, most of the time ranking last behind the Simpsons and MacFarlane Animation Domination Sunday cartoon block. [as] is reportedly syndicating the show for $500,000 an episode (equal to that of The Cleveland Show). But the most important number Bob’s has to offer is 45 (REALLY wish this was 42 for all you Hitchhikers out there…). Bob’s Burgers only has 45 episodes created and it is being syndicated by [adult swim]. The rule of thumb is that a show will begin talks for syndication after it’s 100th episode. Bob’s hasn’t even hit the 50% mark yet.

Tying Bob’s and Family Guy together now: why would Fox syndicate a show to a competitor before it hits 100 episodes, before all the seasons are available across multiple platforms, all for a measly $22.5 million? Wouldn’t it be smarter for Fox to put more weight behind it’s own airing or reruns or it’s sister company Hulu?

Allow me to propose my hypothesis with one last story. In 2011 the Australian horror film The Tunnel was simultaneously released in theaters, on Showtime Australia, on DVD through Paramount Pictures Australia, and on BitTorrent. You read correctly, the film was released FOR FREE at the same time as all the pay windows. The results of this strategy will blow your mind. Not only did the free release of the film not harm the release of the film across pay platforms but it actually was the direct cause of HIGHER DVD sales than projected. The most direct competitor to every single pay platform (free downloads) ended up being the number one cause of higher revenue on one of said platforms.

My long lost theory is this: Fox syndicates their shows to [adult swim] because [as] has an audience that Fox can’t reach otherwise. In a sense, the [as] syndication is a form of marketing for additional revenue streams. Maybe the liberal, young, stoned audience of [as] doesn’t watch Fox because of their Republican support. Maybe people watch Family Guy only on [adult swim] because they show scenes and episodes that Fox cuts for being to risque. The important thing is that Fox is getting an additional 1.5 million viewers an episode from [adult swim]. Forget the $420M they’re getting from TBS, that’s an additional 21 million people A WEEK (1.5M x 7 days x 2 episodes/day) watching their programming on a single platform.

There’s a moral to share here: solutions hide under every rock. If Fox were close minded then they’d be missing out on ONE BILLION viewers a year that their competitor would generate for them. And let’s not forget that [adult swim] is one of the main causes for the un-cancellation of Family Guy. The wild irony in this rambling of mine is that 20th Century Fox and it’s other film divisions are in constant battles to avoid changing current windows in film. Meanwhile, Fox TV divisions are syndicating shows that aren’t even signed through 100 episodes to their competitors. Let’s hope that this tale will one day resonate with someone from the film community that could help our films reach wider audiences in non-traditional ways.

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James Belfer - Founder & CEO

James founded Dogfish in 2009 to produce and invest in independent film (in which he made 6 films). He was named by Deadline Hollywood as one of 2012′s 10 Producers to Keep Watching. In 2013 he launched the Dogfish Accelerator program after an inspiring experience working for TechStars in Boulder, Colorado. He’s a Northwestern University graduate and received his MBA from NYU Stern in 2013. He currently is an Adjunct Professor at NYU Tisch School of the Arts where he teaches Strategies For Independent Producing. James aspires to be one of the world’s most renowned hermits. He tends to spend most of his free time in South Williamsburg watching cartoons and googling “best Texas BBQ in NYC.” He also runs a monthly meetup called A Presentation of the Deplorable, Bizarre, and Terrible in which he binge watches 10 films in a row that most of the world has never seen (most of the time for glaringly obvious reasons). As of July 2014 only 3 people have attended.