Television Production in Post-Network Era: Changing Strategies of CBS, HBO, and Netflix an Analysis on the Big Bang Theory, Game of Thrones, and Sense 8

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Television Production in Post-Network Era: Changing Strategies of CBS, HBO, and Netflix An Analysis on the Big Bang Theory, Game of Thrones, and Sense 8

MA Thesis Television and Cross-Media Culture Miribanguli Abudureheman Student Number: 11783095 Supervisor: Dr. Mark Stewart Second Reader: Dr. Jan Teurlings Date: 2018-06-29

Table of Contents

Chapter 1: Introduction 3 Chapter 2: Stories So Far: The Growing Competition 5 2.1 The Network Era 6 2.2 Multi-Channel Transition 6 2.3 Post- Network Era 9 Chapter 3: Same Game, Different Rules 12 3.1 Columbia Broadcasting System (CBS) 12 3.1.1 The Advertising Business Model 13 3.1.2 The Challenges for CBS 16 3.2 Home Box Office (HBO) 17 3.2.1 The Subscription Business Model 18 3.2.2 HBO’s Original Programming and the Branding Strategy 19 3.2.3 The Challenges for HBO 21 3.3 Netflix 23 3.3.1 Netflix’s Technological Features 24 3.3.2 The Subscription Business Model and Netflix’s Branding Strategy 25 3.3.3 The Challenges for Netflix 26 3.4 Findings and Discussion 26 Chapter 4: The Changing Production Practices 29 4.1 The Big Bang Theory 29 4.1.1 The Financing of TBBT: Deficit Financing 30 4.1.2 The Creation of TBBT: High Production Costs and a Spin-off 31 4.1.3 The Distribution of TBBT: Scheduling and CBS All Access 33 4.2 Game of Thrones 35 4.2.1 The Financing of GOT: Self-Financing 35 4.2.2 The Creation of GOT: High Production Costs 36 3.2.3 The Domestic Distribution of GOT: Scheduling, HBO Go and HBO Now 38

4.2.4 The International Distribution of GOT: Licensing, Simulcasting and HBO Go 41 4.3 Sense 8 43 4.3.1 The Financing of S8: Cost-Plus to Self-Financing 43 4.3.2 The Creation of S8: High Production Costs and Global cast 45 4.3.3 The Distribution of S8: Exclusivity, Simultanous Whole Season Release, and Infrastructural Features 48 4.4 Findings and Discussion 49

Chapter 5: Conclusion 52

Bibliography 54

Chapter 1: Introduction

The U.S. television industry has witnessed profound changes, and the contemporary television landscape is more competitive than ever. Observing the changing conditions in the industry, many overtly claim that traditional television – broadcast networks and cable channels – are dying (Cardinal; Yarow). Titles such as “TV’s Death by a Thousand Streaming Apps” (Lachapelle), “Why Traditional TV Is in Trouble” (Maheshwari and Koblin) perpetuate online, labeling label traditional television as “old-fashioned, irrelevant, and dying industry” (Enli and Syvertsen 143), while describes newly- emergent television portals as “world-dominating” (Katz) and “unstoppable” (Morgan). These claims rises many questions: Are traditional broadcast networks and cable networks total victim of this competition? Are they not taking any action to respond to these challenges? Are television portals really not facing any challenges? The changes and the competition in the industry also have attracted many scholars’ attention. Some authors focus on the transformative changes in the production and consumption of television (Turner and Tay). Some recent works have focused specifically on the increasing competition and corresponding changes on industrial structure, practices, and businesses (Curtin et al.; Landau; Steemers). Wildman argues that traditional television and content suppliers should adjust their financing and distribution strategies in order to overcome challenges and maximize revenue (Wildman 91); On top of that, observing the changes in current U.S. television industry, Amanda Lotz argues that the transformation and current challenges has necessitate the reconsideration of production processes – “the practices involved in the creation and circulation of television – including how producers make television programs, how studios finance them, and how audiences access them” (Lotz, The Television 4), in other word, the financing, creation, and distribution of content. This thesis aims to explore how U.S. traditional television – broadcast networks and cable channels – as well as relatively-new television portals are adjusting their television production practices in order to respond to challenges in current competitive television industry. To do so, Based on academic journals, industry and trade documents,

4 audio-visual materials and interviews (accessed from articles and online podcasts, etc.), this thesis conducts case studies on the broadcast network CBS, the premium cable network HBO, and television portals Netflix, and analyzes the production practices of one of their signature television series, namely The Big Bang Theory, Game of Thrones, and Sense 8. The analysis in this thesis consists of three parts, each with an accompanying research question. The following chapter explores why U.S. television industry is said to be competitive than ever. By briefly overviewing the history of U.S. television industry, and comparing contemporary television industry with earlier periods, I argue that today’s U.S. television landscape is competitive because comparing to television’s earlier days, there are numerous platforms, abundant content, and alternative ways of watching television, which fragmented once national mass audience across different platforms, and changed their behavior and expectations. Chapter three analyzes the general and specific challenges that CBS, HBO, and Netflix are facing in current television industry. Here, the main differences between them - the business models, technological features, and business strategies - are identified, and then the challenges that are threatening them are examined. I argue that they are all threatened by audience fragmentation, and the specific challenges vary due to the differences between them. Chapter four analyzes the financing, creation, and distribution of The Big Bang Theory, Game of Thrones, and Sense 8 to explore how CBS, HBO, and Netflix are adjusting their production practices in response to the challenges identified in chapter two. I argue that all three networks are actively adjusting their production practices in order to overcome the challenges, and traditional television networks, in particular, are aggressively launching their studio portals to overcome challenges and expand their markets. Finally, this thesis ends with a concluding discussion on the main findings.

Chapter 2: Stories So Far: The Growing Competition

The purpose of this chapter is twofold. Firstly, this chapter briefly overviews the 5 development of the U.S. television in order to illustrate how the industry has gradually become more competitive, and how different television distributors adapted to the changing environment; Then, it demonstrates the dynamic changes in the current television landscape, and their impact to different distributors. Amanda Lotz, in her book The Television Will Be Revolutionized, categorizes the major developments of U.S. television into three periods, namely the network era, multi-channel transition, and post-network era (7-8), and demonstrates key changes within the three periods. Roberta Pearson took a similar approach, and summarizes the development of U.S. television as: “In the United States, TVI, dating from the mid-1950s to the early 1980s, is the era of channel scarcity, the mass audience, and three-network hegemony. TVII, dating from roughly the early 1980s to the late 1990s, is the era of channel/network expansion, quality television, and network branding strategies. TVIII, dating from the 1990s to the present, is the era of proliferating digital distribution platforms, further audience fragmentation, and, as Rogers, Epstein, and Reeves suggest, a shift from second-order to first-order commodity relations.” (107). I began with this quote because it illustrates the main characteristics of the U.S. television industry in different periods. While both authors admit that the linear periodization of television history into three distinct eras is likely to obscure the complex operations and considerable overlaps between them (Lotz, The Paradigmatic Evolution 127; Pearson 107), these frameworks are useful in illuminating the main industrial shifts of each era and providing comparisons between them. Therefore, in the text follows, these frameworks will be considered as broad guideposts to understand the development of U.S. television, and used to demonstrate the competition in each era, and corresponding changes in production practices.

2.1 The Network Era The network era dates from the mid-1950s to the early 1980s, and is characterized by “channel scarcity, the mass audience, and three-network hegemony” (Pearson 107).

For audiences in the network era, the television meant the Big Three networks, namely ABC, CBS, and NBC. Although there were some local independent television stations for choice, their programming could not compete with the three big networks due to the financial limitation (Lotz, The Television 23-24). The television set was the only device to watch TV (22), and the remote control was not available until the early 1980s (24). Watching television in this era meant “a limited range of genres, certain types of programming scheduled at particular times of day, the television ‘season’, and reruns” (24), which offered the viewers with little control over program schedules, and limited options of content. The networks’ shows, on the other side, were distributed to the massive national audience, and the three networks generate revenue by selling the thirty-second advertisements to advertisers (22). In network era, the television industry was dominated by the Big Three, and the competition was mainly limited within the trio. The networks had greater bargaining power over the production studios, (given the fact that the studios only had three potential buyers to sell content), and forced the studios to bear the financial risk while offering a minimal reward (Lotz, The Television 24). Audiences all around the U.S. were divided by the three networks, therefore, in order to get the most viewers possible, the main concern of the networks was preventing their audience from shifting to other two networks (Klein, 329). Considering that the whole family would watch television together, the networks tended to create shows that “doesn’t have to be ‘good’… [But] only has to be less objectionable” than the other two networks (ibid). The prime-time programs were also scheduled in a similar time in order to garner the largest audience (ibid).

2.2 Multi-Channel Transition During the roughly thirty years of the network era, the industry practices remained fairly static until a series of new developments flooded in, and brought about substantial changes to the industry, signaling the start of the multi-channel transition. In this era, the development of new technologies provided more options and control for the viewers,

7 and disrupted the common television experience established in the network era (Lotz, The Television 25-26): the invention of alternative distribution systems such as cable and satellite, and the rise of new broadcast networks such as Fox (1986-present) significantly expanded audiences’ choice. In addition, the remote control devices (RCDs) enabled people to skip the commercial breaks, and easily shift from one channel to another (Curtin 11); the video-cassette recorders (VCRs) enabled viewers to record the television programs, to build their own personal libraries, and to watch them on their own scheduled time (Lotz, The Television 26). These changes altered the ways the viewers used the television, introduced more choice and content to the viewers, and consequently fragmented them to different channels. One of the most substantial changes/disruptions of this era, as Lotz points out, was that U.S. cable channels started to produce original scripted series in the late 1990s (Lotz, The Paradigmatic Evolution 127; Lotz, Industrial and Creative Changes 10). At the beginning of multi-channel transition, there were nearly thirty cable channels. These channels, which are usually called as basic cable channels, drive revenue from two different sources – selling advertising in and between their programs, and generating affiliate fees from multichannel video programming distributors (MVPDs) – and were able to survive by rerunning broadcast network programs and old films (ibid 11). However, as the cable service providers introduced the digital cable system, cable channels in the market quickly expanded from approximately thirty to three hundred (Lotz, The Paradigmatic Evolution 127). This situation increased the competition in the industry, making it difficult for cable channels to seize bigger audience size by solely depending on rerunning acquired programs, and required them to build distinct identities to stand out from the crowded marketplace (Wayne 3). As a result, starting from the late 1990s, cable channels began to produce original scripted series that target a specific audience group (niche audience), and build their brand identities over these shows. This strategy was initially utilized by subscription-based premium cable channels – HBO debuted Oz (1997-2003), and USA debuted La Femme Nikita (1997- 2001) in 1997 – and followed up by basic cable channels in the early 2000s (Lotz,

Industrial and Creative Changes 11).A number of channels developed their identity by creating original content which targets specific audience group. For example, ESPN established its brands as a place for sports programming, Lifetime targets female audience, while MTV produced original music television. By improving the value proposition, and building clear channel brands, these channels managed to generate considerable income from selling advertising which targeted their niche audience, and from cable service providers, and produce more original content in the years to come. The proliferation of new networks and channels intensified the competition in the industry, and led to gradual changes in production practices. With the attempt to target specific audience group, cable channels started to pursue “differentiated programs that might be ‘most satisfying’” to their target audience, instead of developing shows likely to be least objectionable to the mass audience (Lotz, The Television 27). In addition, to differentiate themselves from broadcast networks, cable channels also tended to develop content clearly differed from broadcast networks’ content, according to Lotz, “many early cable originals consequently featured far less conventional characters, uncommon settings, and more serialized storytelling than typical of broadcast networks” (ibid, 104). Some bigger cable channels started to produce and schedule programs “with themes and content unlikely to be found on broadcast networks” (ibid 27). These practices increased viewers’ content choice and brought corresponding changes in viewers’ experience of watching television (ibid 27). Rather than being locked in three broadcast networks in the network era, audiences started to actively tune in different channels to find content that is most enjoyable to them. The abundance of channels and the increase in content gradually fragmented the audience, and eroded the dominance of the Big Three Networks (Lotz, The Television 25). However, broadcast networks were still able to attract a significant amount of viewers comparing to cable channels, and it took decades for the audience fragmentation to impact broadcast networks’ revenue (ibid 57). Therefore, during most of multi-channel transition, the broadcast networks maintained their status, and the majority of their programming practices (ibid 57), and “fundamental logic of the

9 network system” (Curtin 11), such as program creation and distribution, remained the same.

2.3 Post-Network Era Beginning from the early 2000s, the industry has witnessed numerous significant changes, which signaled the arrival of post-network era. A number of cable channels gained enough revenue to produce higher-quality original content, which further expanded viewers’ program choice and considerably disrupted the industrial practices (Lotz, The Paradigmatic 128); New technologies, such as digital video recorder (DVR), DVD, and video-on-demand (VOD), personal computers, and mobile phones, offered viewers more options and convenience to watch television content (Lotz, The Television 54); digital video distribution platforms such as YouTube and Netflix offered abundant content free from fixed schedule, and further fragmented the audience (Enli and Syvertsen 145); screen technologies also enabled the viewers to consume content across multiple screens, and dispersed “television’s family audience” into multiple places and platforms (Turner and Tay 2); given different options to watch television, viewers started to “focus much more on programs than on networks” (Lotz, The Television 68; Curtin et al. 88), which forced the industry to reconsider their conventional production practices in accord with the new conditions. Observing these significant changes in the industry, Michael Curtin argues that “[Television] was no longer a broadcast medium … television had become a matrix medium, an increasingly flexible and dynamic mode of communication” (13), and contemporary television landscape “is characterized by interactive exchanges, multiple sites of productivity, and diverse modes of interpretation and use” (ibid). So many changes had happened that it is difficult to uncover their specific impacts into limited pages, however, just as Michael Curtin argues, today’s television industry is undeniably dynamic and complex. A number of scholars argue that one of the most transformational change occurred to current industry is the rise and proliferation of television portals, such as Netflix, Hulu, and Amazon Prime Video, which became a phenomenon in U.S. television

10 industry by 2010 (Lotz, The Paradigmatic Evolution 130; Lotz, Industrial and Creative Change 18; Enli and Syvertsen 145). The fundamental difference between television portals and the traditional television networks lies in their different distribution technologies. The distribution mechanism of broadcast networks and cable channels is founded on “broadcast architecture” (Sandvig 226), which is only able to transmit a single piece of content at a time to a large number of audience. Constrained by “24- hour broadcast schedule” (Cunningham and Silver 96), they only can organize a certain amount of television shows into a linear sequence. The audience, in turn, has to correspondingly arrange their time according to a channel’s schedule, having little control over when to watch their favorite shows. Television portals, in contrast, depends on a different distribution technology – distributing content over the internet. This particular distribution mechanism enables portals to “deliver personally-selected content from an industrially curated library”, which is also “independent from a schedule” (Lotz, Portals 2-4). Therefore, portals are able to bypass the time-specific schedule, and provide the viewers with a non-linear access to a vast content library, allowing them to have uncommon control over “where, when and how” to watch content. This different distribution technology enabled – also required – portals to utilize industrial and production practices vastly different from linear traditional television (Lotz, The Paradigmatic Evolution 135-36), which I will analyze with detail in next chapters. At the same time, this non-linear experience of watching television significantly distinguished portals from the linear broadcast networks and cable channels, and gradually changed the viewers’ behavior by providing them greater convenience (Lotz, The Television 74). The proliferation of television portals and the abundance of content offered by them have led to a greater degree of audience fragmentation. (Enli and Syvertsen 145; Doyle, Media Economics 17; Lotz, Industrial and Creative Change 20). Viewers now are not only able to watch traditional linear television, they also have multiple platforms, websites and portals to choose from. In addition, bigger television portals are also investing heavily on content development to produce appealing, distinctive, and highly

11 desired content (Doyle, Digitization 635-638; Ryan and Littleton; Lotz, Portals 15). According to FX Networks Research, 182 original scripted series were produced in 2002; however, this figure increased to 487, among which 117 were produced by television portals (Otterson). Comparing to former two eras, viewers nowadays have a great variety of content to consume, and abundance of platforms to tune in. Consequently, audiences are more fragmented than ever before, which intensified the competition between different content distributors, and encouraged traditional television and portals alike to find out new ways to capture audience attention (Doyle, Media Economics 17). In addition, another feature of this competition is audience changing behavior and expectation towards non-linear viewing (Lotz, The Television 17). Television portals, as well as devices such as DVR and DVD, provided the viewers with more convenience and flexibility in deciding what, where and how to watch content (ibid 68; Curtin et al. 2). It is important to note that the popular discourse of “anytime, anywhere” access is exaggerated, for the reasons that television portals can only provide a limited amount of television, and they tend to be constrained by geographical boundaries (Stewart 702), however, television portals indeed provided viewers with more control over selecting their own viewing conditions and time. Non-linear viewing has been favored by some viewers, especially by the younger generation (Doyle, Channels 693), and gradually cultivated viewers expectations toward nonlinear convenience (Lotz, The Paradigmatic Evolution 136-17; Curtin et al. 2). As a result, the conventional distribution strategies such as linear scheduling became decreasingly effective as viewers tend to consume content on their self-scheduled manner (Lotz, Portals 15; Lotz, The Paradigmatic Evolution 136-37). It is becoming increasingly difficult to force the viewers to watch the show when it is airing live (ibid), which decreases the audience engagement with the channels and networks, and also influence their advertising revenue (Lotz, Portals 16). Comparing contemporary U.S. television industry with former two periods, it can be argued that contemporary television marketplace is competitive than ever, and this

12 competition influenced every sector in the industry. Severe audience fragmentation influenced broadcast networks greatly, and the proliferation of content distributors also significantly eroded their dominance. At the end of the network era, the big three networks altogether were able to draw approximately 90 percent of all U.S. television households, however, this figure declined to 64 in multi-channel transition (Lotz, The Television 25-26). This percentage only continued to decline as viewers have more option to access various content in the post-network era. Although broadcast networks were able to raise their advertising price, and retained their revenue, it is reported that the advertising revenue has fallen substantially for two consecutive years (Oster). A similar precarious situation has also happened to cable networks as more and more people cutting the cords – i.e. cancelling their cable subscription and shift to the alternative offerings of television portals (Doyle, Channels 695). Many conventional practices and even business models of some traditional television networks proved to be less effective in this era, and forced them to reconsider their conventional practices. (Lotz, The Television 11; Curtin et al. 1). However, at the same time, disruptive and quickly-expanding television portals also need to compete for audience attention and time, which is becoming increasingly difficult to capture (Doyle, Digitization 634). That is to say, broadcast networks, cable channels, and television portals are all faced with various challenges in current competitive environment, and should accordingly adjust their strategies to maintain their business and status. In order to have a clear understanding of what challenges different television distributors are facing with, in next chapter, I will analyze the business models, business strategies, and unique features of CBS, HBO, and Netflix, and highlight the general and specific challenges.

Chapter 3: Same Game, Different Rules

3.1 Columbia Broadcasting System (CBS) The establishment of CBS dates back to 1927 when it was initially incorporated as United Independent Broadcasters (and soon changed its name to Columbia

Broadcasting System in 1928), a national radio broadcasting company. With the emergence of television during the 1940s, and popularization of this new medium in American households, CBS had gradually transited its focus on television, and by providing numerous national hit programs, such as I Love Lucy (1951- 1957) and The Beverly Hillbillies (1962-1971), etc., CBS established its status as one of the Big Three networks. Although the dominant position of the Big Three slowly withered away during the transformations (Edgerton 2), CBS still has kept its reputation as a prestigious television provider with its different kind of programming, ranging from drama to live sports events, providing over 80 hours of free-to-air television shows to American households, and garnering millions of audience nationwide.

3.1.1The Advertising Business Model In 2006, Howard J. Blumenthal and Oliver R. Goodenough define a major broadcast television network as: “In the United States, a broadcast network is a branded collection of 100 to 200 local television (or radio) stations that promote and exhibit the same program schedule to build national audiences for programs and performers. The primary revenue stream for these programs is the sale of audience access in the form of commercial time”. (2, qtd. in Cunningham and Silver 64) Starting from its radio origin, the U.S. broadcast networks have been working on this mechanism. That is to say, CBS delivers its programs to the viewers all around the U.S. with a fixed schedule, and sells the advertising time in and between these programs to the advertisers to generate revenue (Cunningham and Silverman 64). This adverting model makes it crucial for CBS, and for all other free-to-air television network to draw a large amount of audience to the network when airing a show. The larger audience that a show is able to attract, the more advertising money the network could generate from the advertisers (Napoli 164). This business model, in turn, has fundamental impacts on how CBS create (or select) a show to air on its network, and how CBS invests in a specific show. Firstly, it

14 needs to consider audiences’ and advertiser’s needs when creating content. Due to the advertising model, CBS, as well as other broadcast networks, focus on creating appealing content that audiences like and enjoy, but they are even more concerned with creating content that are likely to be acceptable to the broadest range of audience so that they can maintain a large audience base (Havens and Lotz 32; Lotz, The Television 24). If a show is unacceptable to the viewers in any way, or it offends or shocks them, they might easily refuse to watch the show, and turn to other free-to-air network instead. This situation, in turn, directly influences the network’s viewership, and its advertising money. Furthermore, when viewers find the content of broadcast television inappropriate or offensive, they are able to make complaints to Federal Communications Commission (FCC), the federal regulatory organization that grants broadcast licenses and governs many media industries in the U.S., which can impose regulation and penalties on broadcast stations (Havens and Lotz 70-71; Nelson 26). In addition, the advertising model also requires CBS to consider advertisers’ requirements and preferences when creating and selecting programs (Havens and Lotz 78 & 117). The advertisers are concerned about the content of the show that they are sponsoring, because it, to some extent, is correlated to their product and their brand reputation (ibid 117). Advertisers usually prefer shows that are light and unchallenging, and match the character of their product/brand (Kelso 48). Therefore, in order to retain larger audience, attract more advertisers, as well as avoid unnecessary conflicts with FCC, the broadcast networks tend to be conservative about their content creation and selection, and try to avoid controversial or challenging content. Moreover, in order to strategically arrange the fixed amount of advertisements in and between its shows, and assure possibly-largest amount of audience to watch the advertisements, programs created for broadcast networks follows strict structural standards. For example, each episode of a half-hour show usually lasts around 22 minutes (or forty-two-minute if it is an one-hour show) (Lotz, The Television 236), and an episode is strictly designed to contain four or more commercial breaks (A.Smith), so that the network can organize a certain amount of advertisements into every

15 commercial interruption. This also influences the narrative structure of the show, because the scriptwriters are asked to incorporate a cliffhanger just before every commercial breaks in order to keep the audience stick to the channel and watch the advertisements (ibid 41; Lotz, The Television 194&326). Therefore, the constraints and limitations on content, structure and narrative have great impact on broadcast content development, and provide the creators with limited innovation spaces when creating new shows. This does not mean broadcast networks never offer enjoyable or popular show, however, their content tends to be “tried, trite and predictable” (Lotz, The Television 234), conservative and conventional. Despite from its influence on the content creation process, the advertising model also is a determining factor in how CBS invests in television programs. As Ian Griffiths in ITV comments, “Our [investment] model is very simple – we get X number of viewers. We know that around X million viewers, we will sell this much advertising. Therefore we can afford to pay a certain amount of money [for content]” (Griffths, Ian. Interview, April 2015, qtd. in Doyle, Digitization 638), the broadcast networks, in general, allocate their investment according to the size of the audience a show is able to draw. As Maureen Ryan and Cynthia Littleton observes, big investment in content production becomes one feature of today’s U.S. television industry, as the subscription- supported television providers, such as HBO and Netflix, are investing heavily in their content (Doyle, Digitization 638). However, because of the advertising model, it is less feasible for CBS, and other broadcast networks, to pay such huge amount of money in a single show, because if the show fails to draw corresponding amount of audience when it is airing, the network will face the risk of losing money. This financial mandate makes CBS even more cautious about investing big money in new shows, because new shows need to gradually form its audience. Therefore, rather than making innovations in their content, broadcast networks tend to rely on their “past success” (Napoli 167), such as market-proven old shows, established genres and formulas to minimize risks, and ensure revenue.

3.1.2 The Challenges for CBS First and foremost, severe audience fragmentation caused by proliferation of content providers and abundant program choice becomes a significant challenge to CBS, and also to other advertising-based networks. CBS’ business model requires it to attract as much audience as possible when it is airing the show live. However, the audience fragmentation and their changing behavior towards non-linear content consumption make it increasingly difficult for CBS to force audiences to watch its live shows. Gary Woolf, an executive in Zodiak International, acknowledges this situation, “If you look at the TV landscape in general over the last 5-10 years it has just become more fragmented. The number of pay-TV and free-to-air channels you have and having additional SVOD services just complicates that further. And it is harder to launch a new [program] brand now than perhaps it was 5 or 10 years ago … It is not that programs aren’t as popular but actually getting viewers into one group is getting more and more like herding cats.” (Woolf, Gary. Interview, March 2015; qtd. in Doyle, Digitization 634). As audience dispersed to different platforms to watch content, it will cause a decline in CBS’s audience rate, and directly influence its advertising revenue. This situation demands CBS to seek out alternative revenue stream to maintain profit, or to make distribution innovations to cater to audiences’ needs. In addition, CBS, and other broadcast networks, face more difficulties in launching successful new shows. Firstly, as different television providers produce increasingly more content, and some even invest heavily on developing compelling “high-end content” to attract viewers (Doyle, Digitization), it becomes more challenging for television shows to stand out of the crowd. Additionally, as argued above, CBS tends to be conservative about its content creation, and produce “predictable” shows. These shows are unlikely to appeal audience’s attention in current “content bubble” (Landau 346). More importantly, CBS makes investment decisions according to how much audience a show is able to attract. New shows have to cultivate their audience base

17 gradually, however, as audience continue to fragment, it becomes more risky for CBS to invest more money in new shows. Therefore, broadcast networks face a “new show crisis” in contemporary television market. By comparison, their market-proven old shows are arguably more valuable for them, because they already have an established audience base.

3.2 Home Box Office (HBO) To provide context and better illustrate HBO’s practices, a brief historical overview is given here. Initially conceived as The Green Channel in 1971 and soon renamed into Home Box Office, HBO was, in the very beginning, established as “a subscription television (STV) service that would primarily offer first-run movies and sporting events to its paying customers” (Edgerton 1). Indeed, by being the intermediary between the movie studios and at-home viewers, HBO had grown rapidly into a well- known domestic premium cable by the time that the videocassette recorder (VCR) was introduced to the American households, which enabled people to “bypass HBO by renting movies (and choosing from a much greater selection)” (Kelso 58). Realizing that being solely a wholesaler of movies and sports events was a dead-end, HBO’s executive team started to reposition HBO’s focus on original content production to provide “an outstanding one-of-a-kind programming service”(Edgerton and Jones 7). Until 2017, HBO has been the biggest Primetime Emmy Awards winner for sixteen consecutive years, which, to some extent, confirms the high-quality of its shows. Now, HBO is no longer only a domestic premium cable channel; it has grown into a cable network whose content is available in more than 50 countries (HBO, FAQs), a high-profile global brand which is “synonymous with quality in the contemporary television landscape” (McCabe and Akass 84; Edgerton and Jones 322), and also a major revenue source for its parent company – Time Warner, Inc.

3.2.1 The Subscription Business Model

A fundamental difference between HBO and CBS is that CBS’ business model is advertisement-based, whereas HBO depends on a subscription model. Unlike CBS, whose main concern is how many people are actually watching its show at a specific time, HBO cares mainly about how many people (is willing to) subscribe to its service. In order to encourage television consumers to subscribe to its service, HBO needs to provide enough value to convince viewers to pay for and maintain the monthly subscription (Lotz, Linking 12). This requires HBO to deliver more attractive shows that differentiate it from free-to-air broadcast networks (Mullen 53; Lotz, Portals 31&40). As Chris Albrecht, the former chief of HBO, states, “As the marketplace became more competitive, we had to go from being an occasional-use medium to something people use on a regular basis in order for people to justify paying for us … original programming became a tool for doing that” (Grego, A4, qtd. in McCabe and Akass 84). HBO, as well as other subscription-based television, must provide television programs which are original to the cable channel and also which differ from those on advertiser- supported networks, so that it can sustain its business (Lotz, The Television 235). Its business model necessitates higher-quality and exclusivity of television content (Santo 20), so that the viewers “want to watch it so badly” (Bradberry 8), and could not find it anywhere else, so they will subscribe to HBO. In addition, the subscription model exempted HBO from the regulation of FCC (Nelson 26; Leverette 124), and the restriction from the advertisers, which provided HBO with a greater degree of freedom to innovate on its content production (Lotz, The Television 234-9; Jaramillo 168; A. Smith 46; Santo 19). As mentioned in the former section, when creating a show for broadcast networks, the creators are usually conservative about the content, and follow a strict narrative structure. The subscription model eliminates these limitations, and offers more flexibility to creators. Without institutional constraints from FCC, and content-related requirements from advertisers, the creators working from HBO are able to take more challenging steps in storytelling, and innovate in narrative and visual style to pursue high quality and artistic integrity,

19 and even use profanity, nudity, and violence when it is necessary (C. Johnson 29; Kelso 49). In addition, the relatively flexible schedule in HBO – it no longer needs to put advertisements in and between its programs, so HBO has more flexible schedule to arrange its shows – provided more artistic innovation space to the creators by allowing them to arrange the episode length according to the story rather than commercial breaks, and use alternative narrative structure to enrich character complexity and storylines (Lotz, The Television 236; A. Smith 39&46). These conditions provided a broader freedom to HBO to produce unconventional shows, which, in turn, used by HBO to promote itself as a place where “gifted storytellers are allowed pursue their own vision in their own way” and “the first and best place to find the world’s most innovative programming” (HBO, About HBO). However, it is a bit more exaggeration to call it “first” or “best”, for it is nearly impossible to determine which television provider is the best. But, what cannot be denied is that the subscription model indeed enables – and also requires – HBO to produce unconventional shows to differentiate itself from broadcast television, as well as other television providers.

3.2.3 HBO’s Original Programming and the Branding Strategy Original programming is bread and butter of HBO’s business. On one hand, original content increases HBO’s value proposition. Since the cable channel deliver content that is unavailable elsewhere, it can provide better value for its viewers, and have more asset to require higher affiliate fees from MVPDs (Lotz, Industrial and Creative Changes 12). On the other hand, original programming helps HBO to build a recognizable brand identity, thus it can distinguish itself from other rivalries, and “construct a roadmap” that attracts viewers to itself (Havens 330). Scholars term this practice as “branding”, and states that branding became a crucial strategy for channels to reach target audience, differentiate itself, and stand out amidst the competition (C. Johnson 34; Wayne 3-4; Jaramillo 169; Edgerton 7). As the number of options offered to viewers continue to increase, branding became

20 even more necessary for television providers to “generate distinct identities” to survive in the competition (Selznick 181; Edgerton 7; Bottomley 483). As argued above, due to the subscription business model, HBO must differentiate itself from other television providers. Given the fact that the viewers have limited leisure time to watch television content, and have limited money to subscribe to a certain amount of television providers (Lotz, The Television 277), it is crucial for HBO (and other subscription-based television providers) to build a strong, “distinguishable”, and “recognizable” brand identity to stand out among its competitors, and attract new subscribers to remain viable. Starting from HBO’s attempt to produce original content, HBO has been utilizing various ways to establish its brand. Catherine Johnson, in her book Branding Television, summarized HBO’s branding strategy by stating, “[…] over the second half of the 1990s HBO developed a brand identity as the home of quality television in the USA that drew on a wide range of its programming, but was centered on the shift towards producing adult, edgy, authored and high-budget original drama series. While the brand identity was initially constructed through the promotional efforts of HBO itself, and then increasingly depended on these signature shows to stand in for the network, it also increasingly depended upon critical acclaim within the media more broadly to support its claim to be the home for creative talent”. (32) This quote is particularly useful in understanding the way HBO reinforces its brand identity to the television consumers. First, by using “It’s not TV. It’s HBO” (1996-2007), HBO presented itself as a superior form of entertainment (Tryon 107), and distanced itself from “[regular] television and its historically low cultural reputation” (Newman and Levine 30). Then, as HBO gradually shifted its focus more on the original programming in the late 1990s, HBO further identified its “not TV” status “through a reputation for innovative and artistically challenging original programming” (Bottomley 485; Edgerton and Jones, 318-19; Carter C2; Nelson). From then on, its original programming has become increasingly central to HBO’s brand. Starting with the

21 prison-drama Oz in 1997, HBO consistently produced hour-long original series such as Sex and The City (1998-2004), The Sopranos (1999-2007), Six Feet Under (2001-2005), Curb Your Enthusiasm (2000-present), True Detective (2014-present), and most lately Game of Thrones (2011-present) and Westworld (2016-present) etc. These original programs have embodied HBO’s slogan “It’s not TV. It’s HBO” themselves, and highlighted HBO’s brand by creating “prestige, cultural influence and public awareness” (Carter C1; McCabe and Akass 84; C. Johnson 31). Also, HBO’s brand identity is further promoted by the press coverage that its original shows received. The high recognition these shows received from media professionals and academic critics, such as “[a show with] unusually intelligent storytelling, powerful visuals and exceptionally nuanced performances” (as for Westworld) (Wiegand), “discussed around countless water-coolers across America” (as for Sex and The City) (McCabe and Akass2), and “the greatest pop-culture masterpiece of its day” (as for The Sopranos) (Biskind), is used to reinforce HBO’s brand as the home to “television’s most creative minds” (HBO, About HBO) and high-quality content. It can be seen from HBO’s branding practice that its original programming is very valuable to HBO’s business, as Chris Albrecht confirms, it is “pragmatic business decision” (McCabe and Akass 84). On one hand, HBO’s original programming is integral to establishing and maintaining a strong brand identity (Doyle, Digitization 635), so it can differentiate itself in the marketplace, and attract subscribers. On the other hand, as already mentioned above, the original programming is also the key to providing a reason to the subscribers to keep paying for the service (K. McDonald 209). Thus, content, especially compelling original content is at the primary importance of HBO’s business.

3.2.3 The Challenges for HBO Firstly, HBO is also challenged by the proliferation of content providers and new programs. Although nowadays HBO is still the place that the audience switch to find

22 high-quality television content, there are many newly-emergent television portals which provide original programming. Given abundant choice, a subscriber or a potential customer might subscribe to other television distributors if he/she finds their content more attractive than HBO’s. This situation, as the network’s Chairman Richard Plepler suggests, reinforced the growing importance of establishing brand identity and reputation in the current market: I think there is an interesting paradox about what is happening out there in this very rich content-driven culture now. … It means you cannot keep track of everything. And brands matter more than ever. Because a brand is essentially a promise. Our promise is the curation of quality. … As long as we continue to curate excellence, and we do it across a lot of categories, we’re gonna continue to grow.… We are going to put together in a rare quality can become addictive to even a broader part of the consumers. That’s what we are doing for a living. (Richard Plepler, HBO Chairman/CEO, Podcast) Therefore, in current competitive environment, maintaining a brand identity becomes more crucial for television providers, and edgy original content, which is integral to establishing the brand identity and maintaining subscribers, becomes increasingly important. Another challenge comes from audience changing behavior and expectation towards non-linear viewing. Television portals provides a more flexible and convenient way of watching television by allowing viewers to consume television content according to their own choices and schedules with various digital devices (Lotz, The Paradigmatic Evolution 131). If HBO cannot be able to provide services that its rivals are providing, HBO will be less attractive to both its potential customers and its subscribers, and suffer from cord-cutting. This signifies the importance of making distribution innovation. By offering a better way of watching its content, HBO can increase the value of its service and the brand, so that it can compete with other disruptive rivals, and retain subscription. HBO’s adjustment in distribution will be addressed in next chapter with detailed a case study.

3.3 Netflix Founded on in 1997 by two software engineers Reed Hastings and Marc Randolph, at the very beginning, the company welcomed its customers as an online subscription- based DVD rental and delivery site. But soon, the emerge of digital content delivery technologies made consumers less reliant on renting DVD disks (Lotz, The Television 141), making the company’s executives come to believe that “DVD is not a hundred- year format” and they need to find a new market in digital arena (Helft; Hardy). Therefore, in 2007, Netflix debuted its online streaming service, delivering licensed television shows and movies directly to subscribers’ personal computers. By licensing popular content from major content providers such as Starz and The Walt Disney Co., etc. (Dempsey; Chmielewski and Fritz), and by enabling its subscribers to access its service through multiple digital devices, Netflix quickly garnered over 20 million subscribers (Hastings and Wells), and established itself as a multi-national “aggregator” of licensed television and movie content (Vonderau 721; Goldsmith). However, the year of 2010 had witnessed the steep rise of television portals, such as HBO Go, Showtime Anytime, Hulu, and Amazon Prime, etc, which not only fragmented the potential subscribers, but also influenced Netflix’s content licensing deals- there were, and now still are, many buyers for limited content, and the studios started to raise the licensing prices (Pepitone). This competition suggested that solely depending on licensing others’ content was a fragile and unreliable business, and encouraged Netflix to provide customers with “original content that people love and that they can’t watch anyplace else” (Sarandos, Ted. Interview. qtd in Landau 16), so that they could (continue to) subscribe to Netflix. Therefore, Netflix tapped into original content development, and since 2011, it has produced a number of exclusive original programs, such as House of Cards (2013- present), Orange is the New Black (2013- present), and Stranger Things (2016- present), etc. Now, Netflix has become a global television powerhouse which has 125 million subscribers (as at 2018-05-27) in over 190 countries (Netflix, World), and also a

24 recognized original content provider who has won considerable amount of awards including 43 Prime Time Emmy Awards, and 5 Golden Globe Awards.

3.3.1 Netflix’s Technological Features Netflix’s internet distribution technology both enables and demands Netflix to utilize industrial practices and provide viewing experience different from traditional television. Firstly, as argued in chapter 2, the internet distribution technology exempted the traditional television schedule, and allows Netflix’s subscribers to watch content on their scheduled time with multiple electronic devices. Secondly, the different affordances of internet distribution technology enabled Netflix to build a rich content library rather than program schedules (Lotz, Industrial and Creative Change 18-19). Due to traditional television distributors’ “24-hour broadcast schedule” (Cunningham and Silver 96; Lotz, Portals 28), they can only arrange limited amount of programs into their schedule; Netflix, in contrast, is able to provide a library contains a greater amount of content, because it’s the internet distribution technology “eliminates time specificity and greatly reduces capacity constraints” (ibid 29). Its library contains a variety of licensed programs, and Netflix’s original content, ranging from popular shows to those only favored by a niche audience. Another asset of Netflix enabled by internet distribution technology is that, Netflix is able to reach television consumers on a global scale in a way traditional television networks cannot. Television had long been circumscribed to a national territory (Chalaby 460). Due to the cultural, technological and regulatory factors, the globalization of television industry had been, and now still is, a complex practice (Havens and Lotz 232-33), thus traditional networks fail to address international viewers directly and immediately through their own channels, and are forced to separately manage the domestic and international distribution of content to reach global viewers. As in the case of HBO, although HBO is available in over 50 countries outside the U.S., its content distribution is still separated domestically and internationally, which involves complicated practices and vary in different countries. For example,

HBO distributes all of its original content in Hungary through its country-based affiliate HBO Hungary, however licenses a part of its original content to the third-party television providers Foxtel in Australia. Comparatively, with the technological capacity of its internet distribution, by which “content can be published, distributed and accessed around the clock, whether locally, regionally, nationally or transnationally” (Finneman 65), Netflix can be directly accessed by consumers all around the world (except from few countries which blocked Netflix’s service due to government restrictions) via internet connection (Netflix, World) – though the content available in different territories may vary (Lobato 244). Therefore, the capability to concurrently address domestic and international audience provides Netflix with the golden opportunity to expand globally in such a short time span, but furthermore requires Netflix to adjust its business strategies to cater to not only domestic viewers, but also global viewers.

3.3.2 The Subscription Business Model and Netflix’s Branding Strategy Same as HBO, Netflix depends on subscription revenue to sustain its business. As already discussed above (in HBO’s case), this business model, on one hand, by eliminating the constraints of FCC and the advertisers, provides Netflix with more innovation space to create (or provide) unconventional content. On the other hand, it requires Netflix to provide viewers with enough value for the subscription fee, and to distinguish itself from other competitors to attract subscribers. Different from HBO, who offers value and established brand identity mostly depending on its original content, Netflix is able to differentiate itself by its original programming, its content library and also by its non-linear access, which is identified by Chuck Tryon as “prestige, plentitude, and participation” (105). Timothy Havens argues that Netflix utilizes a dual branding strategy to highlight its identity: it emphasized its video-on-demand service as “disruptive, youthful, individualistic, techy, and capable of satisfying immediate viewers desire” (327) in order to differentiate itself from linear broadcast and cable networks; it also highlights its original programming to represent itself as a professional television network (322), and seek to generate loyal

26 audience for its programming in domestic and international markets (330).

3.3.3 The Challenges for Netflix Firstly, the proliferation of content and content providers also challenges Netflix’s business. When Netflix started to distribute television content via internet, it was “definitely ahead-of-the-digital-curve” (Landau 8), and able to expand quickly in multiple countries. However, during recent few years, portals have emerged exponentially, and by the end of 2015, the amount reached nearly one hundred (Lotz, Portals 75). Furthermore, portals with more resources began to aggressively invest in original content in order to increase their subscription, competing directly with Netflix (Walsh). These portals also utilized Netflix’s innovative features such as simultaneous release, and to some extent demolished Netflix’s unique assets which once distinguish Netflix from others. The competition with numerous television portals requires Netflix to focus more on its content offerings. Another challenge that Netflix encountered is the growing competition in content licensing. When Netflix was new to the industry, it was able to secure licensing deals with many major studios (Pipetone). However, as production studios start to launch its own streaming service, they aim to distribute their content on their own platform rather than licensing to Netflix. Last year Disney announced that it will launch its own streaming platform, and will end the licensing deals with Netflix (Robehmed). This situation, on one hand, reduces Netflix’s value proposition by removing popular content from its library; on the other hand, it means Netflix will face growing competition in the future when the studios provides their content. As a result, it highlights the importance of Netflix’s original content, which “is the most truly distinctive product Netflix has to offer” (Havens 330).

3.4 Findings and Discussion This chapter set out to examine what challenges and threats CBS, HBO, and Netflix are facing in the current highly-competitive television industry. In order to answer this

27 question, the related aspects such as their development, business models, and branding strategies are investigated. To begin with, in spite of the different content they provide in their networks, the main industrial differences between CBS, HBO, and Netflix mainly stem from two aspects: One is their different business models, which is the fundamental factor that influences how they position themselves in the industry, and how they utilize certain production practices and strategies. CBS’ advertising model requires CBS to be concerned mainly with how many viewers tune into the channel when it is airing one specific show. The larger the audience that watches its shows, the more revenue CBS generates. It is crucial for CBS to provide popular shows and utilize different strategies to ensure that a large amount of audience watches the show when it is airing; HBO and Netflix follows the same subscription business model, which requires HBO and Netflix to establish a brand that promises a better service than free-to-air broadcast networks, and their rivals, so that viewers will be willing to subscribe to them. The more people subscribe to HBO/Netflix, the more revenue HBO/Netflix generates. It is crucial for HBO and Netflix to provide excellent content, which can distinguish their brands from other television providers, and attract people to subscribe to their network. HBO has been distinguishing itself as the leading provider of quality TV, and established its brand identity with its original high-quality content; However, Netflix highlights its “anytime, anywhere” on-demand service to differentiate itself from traditional linear television providers, and provides original high-quality content to distinguish itself as professional content provider, and to cultivate loyal audience. Another difference between CBS, HBO, and Netflix lies under their different distribution technologies, which is directly related to how they engage their audience. CBS and HBO follows linear transmission mechanism, which requires audience to watch the show on a weekly, time-fixed basis. This mechanism also restrains CBS and HBO to a “24-hour broadcast schedule” (Cunningham and Silver 96), so that they only can schedule a limited amount of shows into their schedule, which significantly constrains their capability of exploiting content. Netflix, however, follows internet

28 distribution mechanism, which enables its subscribers to access a rich content library “anywhere, everywhere” – a convenient experience of watching TV that linear television cannot provide. It also enables Netflix to reach global audience with single distribution platform, thus providing a significant opportunity to expand globally, and generate more revenue. Current fierce competition indeed poses challenges to every television providers, however, due to the differences mentioned above, the problems that CBS, HBO and Netflix vary. First of all, the steep rise of television content providers and the proliferation of content has posed challenges to all of them. For CBS, as well as for other broadcast networks, the audience fragmentation caused by this competition is significantly threatening their advertising revenue. For HBO and Netflix, as well as other subscription-based television providers, they face problems because the television consumers nowadays have too many choices, but due to limitation of time and money, they are only able to subscribe to certain amount of television services. Besides, Netflix also face challenges as other television portals emerged, which weakened the uniqueness of its technological feature, and disturbed its content licensing deals. Therefore, it is increasingly crucial for HBO and Netflix to provide “compelling” original content in their network, to highlight their brand identity and attract subscribers. That is to say, as Caryn Mandabach, the CEO of Caryn Mandabach Productions, puts it, “The business models will catch up, but the king, as it has always been, is content” (Landau 1). Whatever a television content provider’s business model is, providing content which is excellent and able to attract a large number of audience’s attention is a key driver to sustain their business. Secondly, audience behavior and expectations towards non-linear viewing makes it increasingly harder for CBS and HBO, as well as other linear television, to force audience to watch their content at a scheduled time (ibid 137). For advertising-based CBS and other broadcast networks, this tendency will influence their audience base, and harms their advertising revenue; for subscription-based HBO and other linear content providers, this tendency also diminishes subscribers’ engagement with the

29 network. The inconvenience caused by the linear viewing is very likely to upset the subscribers, and in the long run will cause a decrease in subscription. Therefore, it is relatively feasible for CBS and HBO, as well as other traditional linear television providers to innovate their distribution mechanism, so that they can address audience needs, and continue to expand their business. It is also found that although it is increasingly difficult to launch a new program brand in current television industry (Doyle, Digitization 641), it is even harder for CBS and other advertising-based broadcast networks to launch successful new shows. The advertising business model requires broadcast networks to be conventional about their content creation, and program investment, which makes their new programs unlikely to stand out in contemporary “content bubble”. Moreover, as audience becomes more fragmented, it becomes more risky for CBS to invest big money in new shows. Therefore, by comparison, their market-proven old shows which already have a certain audience base are becoming more important to retain their advertising revenue. But, the “new show crisis” must be taken into account, because in the long term, not being able to launch successful new shows will have significant negative effect for their revenue. It can be seen from the findings above that the challenges and threats the television providers are facing are caused by different factors. Therefore, they need to consider different aspects when financing, creating and distributing a content, so that they can successfully overcome the threats and maximize their revenue. In next chapter, I will examine the production practices of CBS’, HBO’s and Netflix’s one specific show to investigate how they are dealing with the current challenges, and what innovative strategies they are using to sustain their business.

Chapter 4: The Changing Production Practices

4.1 The Big Bang Theory The Big Bang Theory, which debuted in September 24th, 2007, is arguably one of CBS’ most popular and profitable shows. The sitcom that portrays the daily lives of four geeky and socially-awkward scientists has been continuously establishing its popularity,

30 and also proving its commercial value. With average 20 million viewers for six consecutive, TBBT has been ranking broadcast TV’s most watched scripted series for two consecutive years, and has been the broadcast TV’s top rated comedy in key demographics since season six (Moraes, 2015-16 TV Rankings; Moraes, 2016-17 TV Rankings). In March 2017, the broadcast network CBS has announced the two-season renewal of TBBT (Goldberg, Officially Renewed), promising the show will last at least twelve seasons.

4.1.1 The Financing of TBBT: Deficit Financing First of all, it is important to note how TBBT is financed, because the financing model eventually impacts how content will be exploited through distribution. The U.S. broadcast networks have long been relying on “deficit financing” (Lotz, Indutrial and Creative Change 13). In this model, instead of purchasing a show outright, the networks pay a certain amount of fee, which usually covers around 70 per cent of the production budget, to production studios, and the remaining costs are paid by the studios. In exchange, the network will have the right to become the first window to exclusively air the show for a period of time, usually a year. The studios, in return, will maintain the ownership of the show, being able to recoup the deficit by licensing it to secondary markets, such as other domestic broadcasters, DVD distributors, digital retailers like iTunes, and international distributors (Lotz, The Television 97; Lotz, Portals 68; Doyle, Television Production 83). This way of financing reduces the risk of developing a program for a network, but also enables the studios to generate profits in the long-term. (ibid) In TBBT’s case, CBS is the primary window to exhibit the show, its production studio – Warner Bros. Television (WBTV for short) is the copyright owner of this show, and takes charge of TBBT’s distribution deals. Therefore, in terms of commercial value, CBS and WBTV see TBBT differently, and exploit the content through vastly different ways. CBS mainly concerns about how much audience the show can bring to the network, and what can CBS do to maximize the advertising revenue of this show during

31 the licensing period. WBTV, however, seeks to leverage different licensing offers to draw long-term value. Due to the reason that the thesis focuses on the production practices of CBS, the production studios’ practices related to TBBT will be touched upon, but will not be discussed further.

4.1.2 The Creation of TBBT: High Production Costs and a Spin-off When looking into the narrative and production style of TBBT, it can be said that it is “old-fashioned multi-camera comedy” (Raymond). The narrative style of TBBT is based on “a story each episode” structure, and does not require complex stories or character relationship (although it cannot be denied that the script-writing does require significant efforts, since there are a lot of jokes and hilarious moments). In addition, it follows the traditional creation of multi-camera sitcom, which is shot in a studio with several fixed settings and few outdoor scenes (Butler 176-95). Moreover, its main interior settings have hardly changed throughout the eleven seasons. In other words, the cost required for storytelling and shooting is relatively cost-saving. The production cost of an episode of multi-camera sitcom usually runs from $1.5 million to $3 million (Ryan and Littleton), however, TBBT has been made with a hefty production budget – over $10 million per episode (Goldberg, ‘Big Bang Theory’). The main factor that accelerates TBBT’s production cost is the increasing salaries of the cast members. Starting from $60,000 per episode in first season, the leading actor’s salaries have risen to more than $1 million per episode plus an approximate 1% share of the show’s back-end profit, making the production costs nearly equal to the expense of an independent feature film. Considering that the broadcast networks are conventional with its investment, it is important to question CBS’ motivation to allocate such big budget on this show. One reason is apparently because of TBBT’s ability to generate considerable profit. TBBT is considered to be the broadcast television number one rated show, and the highest-rated sitcom since NBC’s Friends (Raymond). At its highest, TBBT has averaged 23.3 million total viewers (CBS Corporation, 2016-2017 Ratings), which nearly doubled the total

32 viewers’ of its broadcast rivals. With such noteworthy audience appeal, TBBT has becomes an important revenue source for CBS. According to Forbes Online, TBBT generated $1.74 billion ad dollars in 2015, and $1.83 billion in 2016 (Berg), which is a good deal comparing to its production costs. Another reason is that the “new show crisis” encourages CBS to retain its old shows that have already established a certain audience. As discussed in previous chapter, the broadcast networks, including CBS, suffered significantly from audience fragmentation, and this, in turn, causes difficulties in launching well-performing new shows. When comparing the performance of TBBT with newly-launched scripted shows on CBS, this situation can be noticed apparently. During CBS 2017-2018 Season, TBBT had averagely attracted 14 million viewers and scored 2.74 in key demographics, but the eight new shows averaged roughly 5 million viewers, and the appeal in key demographics were not satisfying (CBS Corporation, 2017-2018 Ratings), which resulted that half of them were canceled. The new shows’ unsatisfactory result highlights TBBT’s importance to the network. If CBS ceases to produce TBBT at this stage, it is unlikely to launch a successful show in a short time, which has such audience appeal and commercial value. Comparing TBBT’s huge profit (and relatively lower risk) with not-so-promising new shows, it is more feasible for CBS to keep investing in and keep airing the show. However, CBS can only retain the show for a foreseeable future, but in long-term, it must develop new shows to sustain its business. But interestingly, CBS managed to use TBBT’s influence to launch a new show with higher guarantee. In 2017, CBS produced TBBT’s spin-off Young Sheldon, and started to air the first season directly after each episode of TBBT. Widely used by network television since 1960s, spin-off programming is believed to have a bigger chance of success due to the audience base of their parent series and the audience’s familiarity of the characters and stories (Bellamy et al. 283). This strategy proves to be very successful in TBBT’s case. According to the latest ratings report published by CBS press, Young Sheldon ranked second scripted series in attracting audience, closely following its parent show TBBT,

33 with 12 million viewers (CBS Corporation, 2017-2018 Ratings). This spin-off becomes the best performing new show during the season, and has been effectively retaining TBBT’s viewers. Although launching a spin-off show is one of the most conventional strategies of the broadcast networks, CBS, to some extent, managed to reduce the potential risk and successfully extend the value of its established show to debut new programs.

4.1.3 The Distribution of TBBT: Scheduling, and CBS All Access In terms of distribution, allowed by deficit financing, CBS enjoys a period of exclusivity of TBBT. Usually CBS is able to hold the exclusive right of TBBT’s latest season for one year, and WBTV maintains the permanent copyright of the show. For example, during 2017-2018 season, the eleventh season of TBBT can be accessed only on CBS, which means during this period of time, WBTV cannot license it to other buyers. After this licensing period ends, WBTV will be able to license the show to domestic and international television providers, as well as DVD and digital retailers. One strategy CBS has used to maximize the revenue of TBBT is through scheduling. When comparing to new distribution practices available today, TV scheduling may seem old-fashioned and obsolete; however, scholars argue that it still has huge impact on linear-distributed television to retain and attract audience (Ihlebæk et al. 483). In TBBT’s first three seasons, the show was aired on CBS’s Monday prime- time, After TBBT proved its popularity and became a hit show, CBS rearranged TBBT’s schedule and move it to Thursday prime time. In advertisement-based networks, Thursday prime-time advertising has been particularly important for the advertisers, because advertising in this time slot is more efficient in marketing products to audiences, and also preparing them for weekend events (Lotz, The Television 242). Consequently, Thursday prime-time is most expensive in advertising price, and most profitable to the networks (C. Johnson 26), leading networks competing severely with each other to multiply the revenue in that timeslot. By airing TBBT on Thursday night, CBS can form a huge audience base by merging TBBT’s fans with Thursday night’s regular viewers,

34 thus boosting the advertising revenue; on the other hand, by doing so, CBS aimed to cultivate the audience viewing habits for regular Thursday night “watching-CBS” routine. Based on interviews with professionals who work in broadcast networks, Ihlebæk et al. argue that, as it becomes more difficult to keep viewers loyal to one channel in current media landscape, “being able to draw them back on particular days’ has become even more crucial” (477). By providing the network’s most popular show in Thursday night, CBS attempts to encourage new audience and TBBT’s fans to tune in the network in every Thursday, so that it can increase its advertising revenue. Another significant and noteworthy aspect of TBBT’s distribution is that CBS has launched its studio portals – CBS All Access, and provided TBBT on it. This service was launched on October 2014, and the audience can subscribe to the service by paying $9.99 per month. Multi-platform distribution, such as providing a show’s latest episode on networks’ official website, has been becoming more essential for networks to retain advertising sales (Curtin 14). By distributing TBBT through CBS All Access, CBS seeks to extract greater value from its content, and to expand the audience base (Doyle, Channels 695; Lotz, The Television146). To be more specific, TBBT, with a strong audience attraction, “offers built-in appeal to support demand for access” (D. Johnson 397), motivating the audience who missed several episodes or those who want to (re-)watch the latest season to pay for the service; on the other hand, it is also possible to direct the subscribers who newly encounter TBBT on CBS All Access to tune into the network to watch future episode when it is airing, which will increase CBS’ advertising money. The launch of CBS All Access is a significant move for CBS, which indicates that CBS is taking action to directly overcome challenges it encounters in current industry. Early in 2012, Les Moonves, the President and CEO of CBS, claimed that “If they [viewers] want us to bring the content directly to them, then we can” (Lotz, The Television 151). The changing viewing behaviors and the decreasing audience share made CBS realized that it must look for alternative chances to exploit its content. By launching CBS All Access, CBS is now able to generate revenue from two sources –

35 the advertising sales on its linear channel, and subscription fees on its non-linear VOD service. This service also enables CBS to further exploit the value of its self-owned content such as I Love Lucy (1951-1967) and The Good Wife (2009-2016) by offering them in its content library. The fact that CBS All Access depends on subscription business model also allows CBS to make strategic investment, and produce original shows. Although CBS faced “new show crisis” on its advertising-based network, however, it managed to produce several new original shows on CBS All Access, such as The Good Fight (2017-present) and Star Trek: Discovery (2017-present).

4.2 Game of Thrones Debuting on April 17th, 2011 on HBO, the television drama Game of Thrones, which is adapted from the mediaeval fantasy novel series A Song of Ice and Fire (1996 - present), has been continuously proving its popularity and artistic value. Recognized as “TV’s first global blockbuster” (Lotz, Game of Thrones), GOT has developed cultural zeitgeist around the globe, engaging millions of viewers and possessing an avid fan community worldwide (MacNeill 551). In addition, throughout seven years of its presence, this show has been nominated for various prestigious awards such as Golden Globe Awards and Peabody Awards for its casts, stories, visual effects, overall quality, and becomes the drama series that has won the most Emmy Awards in the television history (Hibberd). It is also acknowledged as “the world’s most popular show” (D’Addario), and “best show of the past 20 years” (Rotten Tomato). GOT has been so popular that, according to online piracy statistics website TorrentFreak, it has been the most pirated show for six consecutive years, although piracy is a big concern for television, this occurrence, to some extent, explains the worldwide popularity of this show.

4.2.1 The Financing of GOT: Self-Financing The financing of GOT is relatively straightforward: HBO finances GOT by itself, thus HBO is both the producer and the distributor of GOT (Time Warner 22; Lotz, The Television 150). The purpose of self-financing is to maintain the exclusive right of the

36 show. As I discussed in previous chapter, HBO is subscription-funded, therefore it must provide high-quality content exclusively on its channels to attract subscribers. Unlike TBBT’s case, in which CBS only control the exclusive rights of a season for a year, HBO eliminates the complicated rights negotiations between other studios, and can take charge of every decisive steps of GOT’s production, and control the domestic and international distribution practices. If other studios are involved in GOT’s funding, they may want to license it to other broadcast and cable channels, which will decrease HBO’s value propositions, draw away its subscribers, and damage its business. By financing GOT by itself, HBO aims to drive those who wants to watch GOT to subscribe to its service, and also benefit from the long-term revenue GOT will bring in the future such as revenue from DVD sales.

4.2.2 The Creation of GOT: High-Production Cost Although the original books were highly welcomed among the mainstream readers (Flood), the size and the explicit content of the novels made GOT a huge and challenging project for adaptation, deterring many studios from transforming the books into a film or a television series. Firstly, the size of the story makes it difficult to fit into a feature film. Being a fantasy series, the story includes a large ensemble of characters, and huge battle scenes. The full series currently consists of six novels, and the size of each novel, according to the author R.R. Martin, is as long as the Lord of Rings, which was adapted into three fantasy films (Armstrong). Secondly, the novels contain a great deal of explicit content and excessive violent scenes, which in many cases intertwined with storylines. Adapting the novels into a mainstream fantasy film or a broadcast network television series means removing these “inappropriate” content, even re- editing the story. With the aim of maintaining the originality of the story, the author had rejected many offers from major studios. This situation indicates that the adaptation of the series requires a TV provider that not only is willing to take risks, but also has the condition to enable the producers to stay truthful to the original novel, thus HBO’s decision to produce GOT highlighted HBO’s status.

Despite of bringing the complex and compelling story originally, HBO also emphasized on GOT’s production to maintain high-quality, even though it significantly increases the production budget of the show. According to HBO, one season of GOT includes 100 locations in 7 countries, 257 cast members, 703 crew members, and numerous designed costumes and props, and also the abundant and costly CGI and digital enhancement for the formation of dragons, castles, giants and battle scenes, etc. (HBO, Long Story Short). Also, in order to pursue artistic value, a lot of efforts are also paid to inviting top production staff from cinematography to music composition. The production cost of GOT, correspondingly, has been running between $6 million to $10 million per episode (Martin), and it is estimated to cost $15 million per episode in the last season (Ryan and Littleton). Although HBO was widely known among the industry for its generous budget in original drama series (Edgerton 8; Nelson 28), a project like GOT requires a price tag which “is certainly near the high end” for HBO (Lombardo, qtd. in Itzkoff). So, it is worth to question HBO’s motivation behind such a big budget. One reason, apparently, is that, ‘big-statement’ dramas like GOT works well to attract subscribers to their home network (Doyle, Digitization 635-638). As argued above in previous chapter, the rise of subscription-based television providers, and the proliferation of content has further reinforced the importance of establishing powerful brand to stand out of the competition. Moreover, according to Gillian Doyle, original content is integral to establishing distinctive brand and market position, therefore, television providers are keen to invest in high-quality programs. Original high-end drama is of highest-demand, because it “often has the appeal that extends across international markets and over time” (Digitization 641). Therefore, the market appeal of the edgy original content and its ability to reinforce brand identity makes the television providers willing to invest heavily on the content, as acknowledged by HBO’s CEO Richard Plepler, “We understand that the cost of content is going up. We understand that we have to pay it. But we are more than willing to do it, because the return of this

investment is as strong as it is. … We are going to invest more and more content, because that is the heart and soul of the brand. So we are perfectly comfortable making this kind of investments we need to make to have shows on our network that are going to be compelling.” (Richard Plepler, HBO Chairman/CEO, Podcast) To be more specific, “compelling” high-quality content like GOT is able to attract audience to HBO and the only way to watch the content is through subscribing to the HBO. By providing GOT, HBO can attract subscribers to its brand. The other reason is that GOT can promote HBO’s brand as a place for high-end quality show, thus increasing brand awareness and encouraging long-term subscription. The author repeatedly claimed that “GOT is only possible on HBO” (HBO, Long Story Short), presenting HBO is a distinctive producer of television content; The showrunners also highlighted HBO’s significant support in achieving high-quality of this show. The media press also mentions HBO when they talk about GOT, tying the show’s quality to its home brand. In consequence, HBO is presented as the place for artistic, and cinematic content.

4.2.3 The Domestic Distribution of GOT: Scheduling, HBO Go, and HBO Now As discussed above, HBO is the copyright holder of GOT, so HBO takes charge of GOT’s domestic and international distribution. Traditionally, HBO distributes its programs in the U.S. through four different ways: live transmitting, licensing, home entertainment (home entertainment works the same in domestic and international markets) and self-owned video-on-demand services (Time Warner Inc. 24). HBO licenses some of its finished shows for syndication in broadcast networks, basic cable networks, and local TV stations, and more recently in Amazon Prime SVOD service. For example, Sex and the City was licensed for syndication in the independent domestic TV station KORN after its finale, and the Sopranos can be accessed in Amazon Prime. The home entertainment sector is also an important source of revenue for HBO. HBO sells its original programming in both physical formats, such as DVD and Blue-ray, and in digital format, such as downloading through iTunes. The most traditional and usual

39 way of distributing its programs is through linear transmitting the shows on its traditional affiliates, such as HBO 2 and HBO Family. Its original shows are mostly scheduled on 9 p.m. (East Coast) on Sundays. However, the shifts in audience viewing behavior from live viewing to self- scheduling is making it increasingly difficult for HBO to “force” the audience to watch its shows at an appointed time (Lotz, The Paradigmatic Evolution 137), which will reduce audience engagement with the network, and in long term might result in cord- cutting. One way HBO uses to increase audience engagement with the network is through reinforcing subscribers’ linear viewing by distributing its high-end drama such as GOT in a fixed time. GOT airs on the Sunday night 9 p.m. time-slot on the cable channel. As GOT engaged increasingly more audience throughout its previous episodes, the viewers tend to tune into the channel the moment GOT is being aired to watch the latest episode. Moreover, GOT’s unusual story-telling capacity, which full of shocks and surprises, gradually turns watching the show into a “live concert event” where viewers discuss the show across social media platforms while it is being aired. So “the fear of missing out” – missing out the show (and being spoiled by online discussions), or missing out the discussions – further encourages people to watch it on live transmission. (Manjoo; Willett). This practice once again highlights the value of its high-quality original content, which empowers its home distributors with the ability to intensify audience linear viewing and “lock-down” the subscribers to its channel. Moreover, through this scheduling, HBO is also able to cultivate audience viewing habit (Ihlebæk et al. 477), and keep them subscribing to HBO. On the other hand, to serve viewers’ self-scheduling better, HBO provides non- linear services to the subscribers to watch GOT. When GOT debuted in 2011, its subscribers could watch GOT on television through HBO on Demand, or on other internet-connected devices via HBO Go. HBO on demand was launched on 2001, which allowed the subscribers to watch HBO programs on their own schedule on television. Then the introduction of HBO Go on 2010 further enabled its subscribers to watch shows “anywhere, anytime” with their different electronic devices. Although HBO on

Demand and HBO Go provide relatively more convenience on watching content, their unavailability without HBO subscription remained a major complaint among potential GOT viewers who do not have cable subscription. The piracy rate which was mentioned earlier also was partly caused by this unavailability. Additionally, on the other side, portals such as Netflix are providing abundant content library with a relatively low price and convenient user experience, tempting people to cancel cable subscription and join them. Driven by potential market and the competition, HBO launched the stand-alone portal HBO Now on March 2015, and distributed GOT on it immediately to attract subscribers (HBO Now). Observing the current development of television industry, Gillian Doyle states that there is a tendency among television content providers to develop their own digital platform and distribute their content on it, which she defines as multi-platform distribution, and she further argues that this new strategy significantly improves the value proposition of the service they provide to their audience (Doyle, Channels 444). HBO’s multiplatform distribution indeed benefits its television consumers with a more convenient way to access and consume GOT and other HBO’s show. This strategy seems also beneficial for HBO, because it not only improve its value in order to retain and attract subscribers, but also by circulating the content on its different platforms, HBO can extract more value of its content, especially of high-end dramas like GOT. As I argued above, GOT is part of HBO’s branding strategy to increase cable subscription, and this strategy is also working well with HBO Now. It is reported that after the first week of GOT’s season 7 premiere, HBO Now was downloaded over 5000,000 times (Roettgers). As a 15-dollar monthly-subscription portal available without cable subscription, HBO Now adds an additional source of revenue to HBO, and significantly expands its market size by targeting “cord-nevers” – those who have no cable subscription. In a nearly three-year time, HBO Now has attracted more than 5 million subscribers in the U.S. (G. Smith). The launch of HBO Go and HBO Now significantly alter the traditional distribution practice of HBO, and enables it to generate more value from its original

41 content. Traditionally, due to its linear transmission mechanism, HBO can only distribute its original content on television for a limited time, then HBO is forced to seek additional ways to exploit its content, such as making syndication deals with basic cables and broadcast networks after a show finished airing. Although GOT’s popularity makes it an appealing deal for syndication, the abundant nudity, violence and coarse language contained in the show might deter the advertiser-supported networks to syndicate the show, or require re-editing and additional shooting to make it acceptable for syndication (J. Steinberg). Comparatively, distributing GOT exclusively on the networks’ multiple digital platforms opens up an arguably more valuable way. As one of HBO’s signature show, GOT increases the value proposition of the digital content library of HBO GO and HBO Now. Despite of GOT’s current market appeal, in the long run, as long as there are television consumers want to watch GOT, they will subscribe to HBO’s different platforms. This indicates that internet distribution enables HBO to draw long-term value from the show, and further exploit its content. It is also important to note that although HBO Now is still a new product, but its distribution mechanism without cable subscription indicates that HBO is stepping out of cable context and exploring new ways of business in internet-distributed television. HBO, as a cable network, collects its revenue through MVPDs, who are responsible for providing cable service and handle billing (Lotz, The Television 137). Nearly half of actual subscription fee goes to MVPDs. However, by launching HBO Now and taking charge of it without MVPDs, HBO can extract more profit from every subscription. Moreover, it can directly address audience changing behavior and expand its market.

4.2.4 The International Distribution of GOT: Licensing, Simulcasting, and HBO Go Although GOT is considered as “TV’s first global blockbuster” (Lotz, Game of Thrones), when it was initially produced, it did not prioritize a global market, and followed traditional ways of international distribution. HBO has distributed GOT to its own country-specific HBO-branded affiliates,

42 such as HBO Latino and HBO Asia, and licensed it to third-party television providers in several territories, such as Canal+ in France, and Sky Atlantic in Italy, but in both cases, the show was aired with typical delay comparing to its original transmission in the U.S (Lotz, Game of Thrones). Furthermore, HBO has remained unavailable in some other territories, leaving them have to wait for a period of time and then buy digital or DVD copy of GOT for a relatively higher price. HBO services is said to be available in more than 50 countries (HBO, FAQs), but this traditional distribution mechanism, which comes with a time delay, extra costs in paying for a third-party provider, or a total unavailability, seems rather complex and cumbersome compared to other international television providers such as Netflix. The inconvenience or unavailability of GOT frustrate many international GOT audience, encouraging them to pirate the show through unauthorized sources (MacNeill 552-53). In addition, same as U.S. audience, there is also a strong demand for watching GOT “when they liked, where they liked” among international fans (ibid). Facing the growing global demand to watch GOT at the same time with the audience in U.S., and the severe piracy problem, HBO has adjusted its international distribution strategies. One adjustment is achieved through simulcasting. In 2015, HBO proclaimed that GOT would be aired simultaneously in more than 170 territories (B. Steinberg). There are two major advantages in simulcasting. By simultaneously releasing GOT, HBO is able to create social “buzz” on a worldwide level, thus can reinforce the brand in many countries. At the same time, simulcasting eliminates the previous “time delay” problem, which most pirates take advantage to sell illegal copies in market, and, to some extent, reduces illegal downloading (Havens and Lotz 236). Another distribution practice HBO has recently attempted is that it launched HBO Go as a stand-alone portal in international markets. As a newly-launched service, it currently remains separate and scattered. Take Europe as example, the television consumers in several countries, such as Poland, Denmark, and Bulgaria, are able to watch GOT’s all current episodes by subscribing to the service. However, in the Netherlands and Germany, the service is not available, partly because of its complicated

43 licensing deals in these countries. Although HBO Go is not yet widespread in international markets, this attempt is still significant in multiple ways. It helps HBO to draw more value from its content in international markets, and signifies HBO is also exploring an international opportunity in internet-distributed television. This service opens up a broader international market for HBO, and also enables it to reach the global audience directly.

4.3 Sense 8 4.3.1 The Financing of S8: Cost-plus to Self-Financing Observing the recent financing models in the television industry, Gillian Doyle argues that rather than using the long-established financing norm “deficit financing”, the television portals, leaded by Netflix, are adopting a “cost plus” approach (Digitization 637). In cost plus model, the portals pay a high fees to cover the whole production costs plus a certain amount of “profit” (Doyle, Television Production 83), so that they could hold a content’s global exclusive (licensing) rights for a relatively long period of time. The financing of the first season of S8 follows cost plus model. The copyright of S8’s first season is reserved by Reliance Entertainment Production 2 Ltd. (REP2 for short), which means that after the deal between Netflix and REP2 ends, this studio will be able to increase the licensing price, or pull the content off from Netflix’s library and sell its syndication right to other television providers. Therefore, alternatively, Netflix produced the second season on its own and held the exclusive right on its own. The main reason for Netflix’s different financing model is its desire for exclusivity. It can be seen from previous two cases that exclusivity is also integral in linear distribution, however, exclusivity works differently in linear context. CBS only holds TBBT’s domestic exclusivity for a year, then WB licenses it to domestic and international windows for syndication, and also sell TBBT’s DVD and digital rights; even though CBS holds long term exclusivity of TBBT, due to its linear affordance, CBS can only generate revenue when it airs TBBT on its network. In HBO, by using the self-financing, is in charge of perpetual exclusivity of its content, however, due to

44 its linear transmission mechanism, HBO has to seek out other sources, such as DVD sales, electronic-sell-through, and international licensing, to maximize its profit. Consequently, in both cases, the viewers “could wait for content to pass into a preferred window” rather than watching the content on the network (Lotz, The Paradigmatic Evolution 137), this would, in turn, steal away CBS’s advertising money or HBO’s subscribers. Comparatively, since Netflix depends on internet distribution technology, it can retain the content in its library till the licensing deals end. As long as a content remains exclusive on Netflix’s library, it will encourage the television consumers to subscribe (ibid, 137). In other word, in order to drive long-term value of a content, it is more viable for Netflix to hold exclusive rights as long as possible. However, the cost plus financing still leaves a pitfall to harm the exclusivity, as the Netflix’s Chief Content Officer Ted Sarandos puts it: “When they (production studios) produce for Netflix, they produce in profit. No one loses money in making shows for Netflix, ever. It’s a different paradigm for production. It enables more flexibility for exclusivity and distribution. The downside of doing a show with a studio is that if they keep DVD and home entertainment rights; a year after being on Netflix you can buy it on iTunes and it becomes less attractive being on subscription. That’s HBO’s problem. Everything on HBO you can buy on DVD or iTunes, so there’s no reason to have HBO. Unless you want to watch it right now” (Ted Sarandos; interviewed by Neil Landau 16). The cost plus financing helps Netflix to hold global exclusive rights of S8, however, the production studio REP2, as the copyright owner of S8’s first season, is able to withdraw the content from Netflix when the licensing deals ends, or sell DVDs. In both cases, it will harm Netflix’s subscription. Moreover, as discussed in Chapter 3, the challenges Netflix are facing from its rivals and the production studios emphasized the importance of its original content. By producing the content on its own, Netflix will be able to hold S8’s copyright eternally, so that viewers who want to watch S8 will continuously subscribe to its channel rather than wait for a longer time to watch it elsewhere. Therefore, self-financing the original

45 content is one of Netflix’s production adjustments in response to the challenges. Nowadays Netflix is gradually using this strategy - producing self-owned content – to produce its original content. Its latest original shows, such as Stranger Things (2016- present), and Mindhunter (2017- presnet) all are financed in this model, in an attempt to drive a long-term value, and to have more control over its content library.

4.3.2 The Creation of S8: High Production Cost and Global Cast When S8 premiered in the summer of 2015 on Netflix, it created an immediate buzz. On one hand, it was an ambitious science fiction television series which can rarely be found on small screen. Portraying a complicated story about emotionally and mentally linked 8 strangers living in different parts of the world, it was shoot on location in 8 countries (11 countries in second season), and featured global casts from various backgrounds. This type of global production practice is often aligned with motion pictures rather than television, and television production used to stay domestic both in shooting and cast selecting. On the other hand, the production assets behind this drama is noteworthy. Not only did the show have the huge financial support of Netflix, but the show was also being produced by the Wachowskis, the famous film directors who produced The Matrix Trilogy (1999-2003) and Cloud Atlas (2012), and J.Michael Straczynski, the prestigious creator of Babylon 5 (1995-1998). Having a high-standard in mind, the former motion picture producers went all the way up to pursue high-quality both textually and visually. The producers planned to develop an intriguing and complicated scientific story, the story initially begun with 8 storylines, if not more, and intentionally discussed various themes such as religion, politics, sexuality, and gender (Orley). The story then demands a corresponding artistic quality, such as sci-fi-like special effect, and “future-proof” visual style, and action scenes (Newman). All these high standards, which requires not only a huge budget, but also a platform to make challenging innovations, made this nearly “impossible” to achieve (Hughes), and impeded any studios from purchasing it in its early days (Straczynski, interviewed by Tangcay). So, in this case, Netflix’s decision to produce

46 this show is a risky move, however, Netflix not only provided the producers with financial and artistic support, but also push them to achieve high-production value. It is interesting to note here that the creation of S8 and GOT share many similarities: both of them are high-concept serialized dramas that require huge-budget and vast innovation space; both were conceived as too challenging and impossible to be made for broadcast networks; both were eventually picked up by subscription-based television providers, and lavishly financed in a way to achieve high production value; both the executives and the producers both claimed that the ground-breaking and the high quality show were only possible on HBO or Netflix respectively. Comparing this scenario to which when HBO decided to make GOT, it can be argued that Netflix, like HBO, has been using a same strategy in content production: they both boldly invest in and produce high-end dramas in an attempt to increase their value, highlight their brand, thus boosting their subscription. First, content lies in the core part of television business. According to the chief content officer in Netflix, the highly serialized dramas, such as S8, has been bringing considerable value to the company, because “so many people watch them and love them” (Sarandos; Interviewed by Curtin et al. 141). Therefore, by adding S8 to its content library, Netflix definitely increases its value. Second, high-end content, or “big-statement content” often plays an integral role in the branding and market positioning of a television service (Doyle, Digitization 642), especially for subscription-driven services such as Netflix. This strategy has been well applied by HBO: it often associate “quality” to its original content to position itself as “a superior form of TV, one that offered exclusive access to quality programming” (Tryon 107), to attract subscribers who has a taste for excellence. High-end drama has a kind of hype that can easily be highlighted and that can easily grab television consumers’ attention. In S8’s case, Netflix and the creators repeatedly advertised the show’s unique concept, multiple-locations, diverse cast members, huge production budget, and also the reputation of the show’s director, and described it as a “unique, edgy, well-written, well-produced, movie-like” show. The creator J. Michael Straczynski also stated in interviews that the show was not possible in broadcast

47 network, and argued that “we could only do this show with them [Netflix]” (Straczynski, interviewed by McCabe), highlighting Netflix as an international powerhouse for big- budget artistic dramas. As a result, the show works as a marketing tool for Netflix, which not only attracts a number of audience by its own story, but also signifies Netflix’s brand identity as the home for artistic excellence. To Netflix’s expectation, S8 garnered a number of viewers on its early days (ranked among the most binge-watched shows on Netflix) (Pallotta). It is also important to note S8’s global scale in cast and production, which is rarely to be found in small screens. As the television portals rise and gradually become international, they are willing to produce content with global appeal (Doyle, Digitization 642). As the S8 was shot on location in 8 countries (which was extended to 11 countries in the second season), namely, the U.S., the U.K, Iceland, Germany, Kenya, Mexico, India, and South Korea, which mainly contained all the continents, and the casts also consist of global diversity. This is arguably one of Netflix’s strategy to attract global audience by targeting the viewers in these countries, and building a demand for subscribing to Netflix. When expanding globally, media companies usually face a variety of challenges, most obvious and difficult of which are cultural and language differences. In response to these challenges, international companies have developed a wide range strategies, such as emphasizing universal elements in texts, and co-producing content (Havens and Lotz 231). Therefore, even though transnational production and casts will, to some extent, increase the production cost and complicate the creation practices, S8 is worth to produce because it might be able to attract the audience in these respective markets to subscribe to Netflix. The global diversity of S8 also contributes to highlighting Netflix as an international brand. In addition, Netflix also provides subtitles and dubbing in multiple languages in order to help it expand in different territories. By producing a show as global and diverse as S8, Netflix not only targets the viewers in these corresponding markets, but also aims to present itself as a global and diverse television provider.

4.3.3 The Distribution of S8: Exclusivity, Simultaneous Whole Season Release, and Infrastructural Features Comparing to previous two cases, the distribution of S8 is relatively simple and straightforward: Netflix exclusively and globally distribute S8 on its content library, and whoever is interested in this content could subscribe to Netflix and watch the show via various internet-connected screens. Netflix does not even sell S8’s DVDs, in an attempt to avoid the situation that some people may rather wait for the DVDs than subscribing to Netflix. In addition to this simplified distribution practices, Netflix also fully utilizes the features of its digital interface to intensify viewers’ engagement with the show, and also with the platform. Netflix debuted the entire first season of S8 online on June 5th, 2015 and, whole second season on May 5th, 2017. This practice is significant in multiple ways. First, the full season release provides the subscribers with the freedom to arrange their own viewing schedule, and encouraging them, if they preferred, even watch the whole series in one session, rather than “being slaves to a weekly network TV schedule” (Cunningham and Silver 90). Before television portals emerge, there was already a trend that some avid viewers would wait until a full season was available on DVD and then watch the show “at a self-determined pace” (Lotz, The Television 72), Netflix’s move to release the whole season simultaneously is analogous to providing a (non- physical) DVD disc to its subscribers, which enables audiences watch the show at their own pace. Second, by releasing all episodes of a season, it would encourage marathon viewing – watching many episodes in one sit, also known as binge-watching. According to Hills, DVD culture encourages audience-text ‘closeness’ (Hills 48-49; qtd in Jenner, Is this TVIV 264), and in Netflix’s case, after the release of S8’s full season, the subscribers can build “closeness” with the text through self-scheduling and binge- watching, and this closeness will intensify the engagement with the television provider – Netflix. By releasing the whole season of this show, Netflix not only provides a superior service/viewing experience, but also encourages the viewers’ engagement with this show, as well as the platform itself. Observing the unique operation of Netflix,

Mareike Jenner argues that binge-watching, which is encouraged by simultaneous whole season release, is a “crucial business strategy” for Netflix, by stating that “the fewer episodes viewers have to watch to take part in the cultural ‘trend’ of binging the longer they will remain customers” (308). In addition to its content, Netflix’s multiple technological features also encourages the viewers to keep engaging with the platform. Netflix’s auto-play feature, which automatically play the next episode of the show, encourages the viewers to keep engaging with the service. In addition, the algorithmic recommendation system provides viewers with a personalized experience, and is able to test audience preference, which is proven to be especially useful in engaging audience and forming loyal customers (Lotz, The Television 127-28). The interface also offers dubbing and subtitles in multiple languages, enabling viewers to personalize their own viewing experience to watch S8. Another interesting aspect of the distribution of S8 is that even though it was cancelled, it can still be accessed in Netflix. Linear broadcast networks and cable channels, constrained by their scheduling, will have to remove its cancelled shows from its schedule. The audience who wants to watch the show will, in turn, have to wait for its DVD release. However, Netflix’s distribution technology removes this constraints. Therefore, even if it is cancelled, when a viewer wants to watch the show, he/she have to subscribe to Netflix to watch it. This unique capacity of internet distribution provides Netflix with more opportunity to fully exploit content value.

4.4 Findings and Discussion By closely examining the financing, creation and distribution of TBBT, GOT, and S8, this chapter set out to explore how CBS, HBO, and Netflix are responding to the challenges and competition in contemporary television industry. I argue that all three television distributors seek to utilize different practices to sustain their business, and they are all actively making adjustments on their production practices in order to overcome challenges. However, their adjustments vary due to the specific challenges

50 they are facing. When it comes to financing, two traditional television distributors CBS and HBO maintained their financing model throughout their production processes. The deficit financing model that CBS is following once again showcased CBS’ conventionality in investing in programs, as this model seeks to reduce potential risk in program development (Doyle, Television Production 83). As the result, this financing model allows CBS to retain TBBT’s exclusive distribution rights for one year, and to generate advertising revenue throughout its airing. HBO, by comparison, finances GOT all by itself. By holding the exclusive copyright all by itself, HBO aims to offer GOT exclusively on its channels, so that viewers who want to watch the original content will subscribe to HBO. Importantly, an adjustment can be found in Netflix’s financing strategy, where it changed from cost-plus model to self-financing. As a subscription- based portal, it also aims to provide exclusive original content to attract subscribers. Although cost-plus model enables Netflix to enjoy S8’s exclusive rights for a longer period of time, the challenge that Netflix is facing from other television portals and from competitive licensing deals encourages it to put more emphasis on its original content and seek to draw value from its content as long as possible, therefore Netflix financed S8’s second season by itself. Hence, Netflix is able to enrich its content library, and depend lesser on other production studios. Both three distributors share a similarity in content creation – all TBBT, GOT, and S8 require a high production cost – however, their motivation for big investment differ from each other. The threat that CBS is facing in new show development makes CBS to retain its market proven old shows as long as possible. Although TBBT requires a budget unusual for a sitcom, CBS is willing to pay for it because it is more profitable and less risky to invest in TBBT, which has established audience base and a profit guarantee, rather than investing in a new show which is less likely to stand out in current market. Unlike CBS, the reason for HBO and Netflix to invest huge budget in their original programs is that they aim to produce “compelling” high-quality content in order to “establish their reputations and build subscriber levels” (Doyle, Digitization

639). In addition, these television providers also utilized different content creation practices to increase profit. CBS used TBBT’s popularity to launch a promising new show; Netflix also incorporates global elements – various location and global cast – in attempt to expand its global market. As for distribution, Netflix’s distribution practices is simple but innovative. Netflix released S8’s whole season simultaneously and enabled its subscribers to arrange their own viewing experience, further encouraging them to binge-watch the show. Various features of Netflix’s interface, such as auto-play and algorithmic recommendation, increase viewers’ engagement with the service. Significantly and interestingly, both CBS and HBO adjusted their distribution practices – they both launched their studio portals, and distributed their content in order to overcome the challenge that their linear distribution technology is facing. Launching CBS All Access and HBO Now (or HBO Go in international markets) is significant in four ways: firstly, the portals reduces the challenges CBS and HBO are facing by catering to audiences’ non-linear viewing habit; secondly, it provides an alternative revenue stream for CBS and HBO. For CBS, it signals a dual revenue model – an advertising model on its linear channel, and a subscription model on its portal. Although due to its advertising model, CBS faces “new show crisis”, but by depending on subscription model, CBS is able to make strategic investments on its made-for-portal new shows; For HBO, it can take more control of its revenue, because HBO Now does not depend on cable subscription, and removes aggregation of MVPDs; thirdly, both CBS and HBO can build a content library rather than a 24-hour schedule, and can extract greater value from its old and new content on their television portals (Doyle, Resistance of Channels 695); lastly, the launch of CBS All Access and HBO Now means they are stepping out of broadcast and cable context, and taking advantage of portals’ features to expand their market and influence. Especially, HBO’s move to launch its portal in international market promises a more competitive and dynamic television landscape in the future.

Chapter 5: Conclusion

As new technologies emerge and industrial practices evolve, the U.S. television industry has undergone profound changes, and contemporary television landscape is more competitive than ever. By drawing on three case studies – CBS, HBO, and Netflix, this thesis argues that U.S. broadcast networks, cable channels, and newly-emergent television portals alike are all actively adjusting their production practices in order to overcome general and specific challenges in current competition. This thesis has shown that contemporary competition is characterized by the increasing audience fragmentation caused by the proliferation of television portals and content, and audience changing behaviors and expectation towards non-linear viewing. However, due to broadcast networks, cable channels, and television portals vary in their business models, technological affordances, and industrial strategies, the competition caused different challenges to different distributors. For example, although all three cases are influenced by audience fragmentation, CBS face more severe threat than others because it is advertising-supported; CBS and HBO are facing frustrations because of audience changing behavior, while Netflix is concerned with its licensing deals. When looking closer into their production practices in their specific shows, it can be found that all CBS, HBO and Netflix are revising their production practices and coming up with new strategies figuring out new strategies to minimize threats, and to utilize potential conditions to increase revenue. For instance, Netflix is adjusting its financing model to have more advantage in original programming; CBS and HBO are launching their portals to overcome challenges, and also to have more assets. Putting this study into broader context, it can be argued that newly-emergent television portals indeed have brought substantial disruptive changes to the industry, and managed to expand rapidly, however, they are not “unstoppable” – they also face challenges in contemporary fierce competition, and also have to reconsider their practices to adapt to the changing environment.; On the other hand, although the traditional broadcast television and cable channels encountered substantial challenges in the competition, they prove to be resilient and flexible, managing to adjust to the

53 environment, and also actively stabilizing new conditions into their advantages.

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