THE BUSINESS BEHIND THE SCREEN How Television Shows Make Money in Today’s Media Landscape A LimitlessNewsletter Special Report

Inside this issue:

• The Complex Economics of Television Production
• Revenue Models: From Traditional Broadcast to Streaming
• Case Study: The Stephen Colbert Show’s Financial Challenges
• The Future of Television Monetization

THE ECONOMICS OF ENTERTAINMENT

When you settle in for an evening of television entertainment, you’re likely not thinking about the complex financial machinery working behind the scenes. Yet every show you watch represents millions of dollars in investment, countless business decisions, and intricate revenue strategies designed to turn your viewership into profit.

Television production is an expensive venture—one that has grown increasingly complex in the digital age. The traditional models that sustained the industry for decades are evolving rapidly, creating both new opportunities and significant challenges for networks and production companies.

“The television landscape has fundamentally transformed,” says media analyst Sandra Chen. “What once was a straightforward business of selling advertising time has become a multi-faceted ecosystem where content serves as currency across numerous platforms and revenue streams.”

In this special report, we’ll explore how television shows actually make money in today’s fragmented media environment, examine the challenges facing even the most popular programs, and take a deep dive into one of the industry’s most talked-about financial stories: the surprising cancellation of “The Late Show with Stephen Colbert” amid reports of significant financial losses.

THE DUAL REVENUE MODEL: HOW TV TRADITIONALLY MADE MONEY

For decades, television has operated on what industry insiders call a “dual revenue stream” business model. This framework allowed broadcasters to generate income from two primary sources simultaneously: advertising and carriage fees.

Advertising: The Traditional Backbone

Advertising has long been the fundamental pillar of television economics. The model works through a relatively straightforward mechanism:

1. Audience measurement: Networks track viewership numbers through rating systems to determine how many people watch specific programs.
2. Rate establishment: Based on these viewership metrics, networks establish rates for advertising spots during different time slots.
3. Commercial sales: Advertising time is sold to companies wanting to promote products to the program’s demographic audience.

The effectiveness of this model depends on a channel’s ability to deliver audiences to advertisers. Prime-time slots command premium prices because they attract the largest viewership. A 30-second advertising spot during major events like the Super Bowl can cost upwards of $7 million due to the massive audience these events draw.

Subscription Fees and Carriage Payments

The second major revenue stream comes from subscription fees, which became increasingly important with the rise of cable and satellite television. This approach works through:

• Carriage fees: Cable and satellite providers pay networks for the right to carry their channels.
• Subscriber payments: Viewers pay monthly fees to service providers to access television content.
• Premium tiers: Special channels like HBO or Showtime charge additional fees for exclusive content.

This subscription model has created significant stability for networks that can negotiate favorable carriage fees based on the popularity of their programming. For cable networks, these fees often account for 40-60% of their total revenue, complementing advertising income.

THE DEFICIT FINANCING MODEL

One of the most important concepts to understand in television economics is “deficit financing.” Major television studios typically employ this approach for scripted programming:

• Initial loss: Studios produce episodes at costs exceeding what networks initially pay for broadcast rights.
• Long-term recoupment: The deficit is recovered through syndication, international sales, and streaming rights.
• Backend participation: Talent often accepts lower upfront payments in exchange for a percentage of future revenues.

This model explains why television series typically need to reach about 100 episodes (the traditional threshold for syndication) to become truly profitable. Shows canceled before this milestone often represent financial losses for their production studios.

THE STREAMING REVOLUTION

The rise of streaming platforms has fundamentally altered the television business model. Streaming services like Netflix, Amazon Prime Video, and Disney+ operate under a different paradigm:

• Subscription-only model: Many streaming platforms generate revenue exclusively through subscription fees rather than advertising.
• Direct-to-consumer relationships: Streaming services bypass traditional distributors, creating direct relationships with viewers.
• Global scale: Unlike traditional television, streaming platforms can launch simultaneously worldwide, spreading production costs across a global subscriber base.
• Content ownership: Many streaming platforms produce their own content, eliminating the traditional separation between studios and networks.

This shift has created both opportunities and challenges. Streaming platforms can offer creators significant upfront payments, often eliminating the deficit financing model entirely. However, this also frequently means creators lose the potential for substantial backend profits from syndication or international sales.

CASE STUDY: THE FINANCIAL CHALLENGES OF “THE LATE SHOW WITH STEPHEN COLBERT”

In July 2025, CBS shocked the entertainment world by announcing the cancellation of “The Late Show with Stephen Colbert,” scheduled to conclude in May 2026. What made this announcement particularly surprising was that Colbert’s show had been the most-watched late-night program in its time slot and was the only program to gain viewers as 2025 progressed.

In its statement, CBS said the decision was “purely financial” and “not related in any way to the show’s performance, content, or other matters happening at Paramount,” CBS’s parent company. Industry publication Puck News subsequently reported that Colbert’s show “has been losing more than $40 million a year” for CBS and had a budget of “more than $100 million per season.”

These financial figures immediately sparked controversy within the industry. Fellow late-night host Jimmy Kimmel publicly questioned the accuracy of these numbers, telling Variety: “I just want to say that the idea that Stephen Colbert’s show was losing $40 million a year is beyond nonsensical. These alleged insiders who supposedly analyze the budgets of the shows—I don’t know who they are, but I do know they don’t know what they’re talking about.”

Kimmel suggested that the reports focused solely on advertising revenue while ignoring affiliate fees, which he described as “numbering in the hundreds of millions—probably in total billions.” He added, “There’s just not a snowball’s chance in hell that that’s anywhere near accurate.”

The Cost Structure of Late-Night Television

To understand the financial challenges facing “The Late Show,” it’s important to examine the cost structure of late-night television. Unlike scripted programming, talk shows produce new episodes year-round, typically four to five nights per week, resulting in approximately 200 episodes annually.

While specific financial details for “The Late Show” are closely guarded by CBS, industry experts have provided insights into the show’s likely cost structure:

1. Production budget: Reports indicate “The Late Show” had a budget exceeding $100 million per season. This covers all aspects of production, including:
   • Talent costs (host, band, writers, producers)
   • Studio operations and maintenance
   • Set design and technical equipment
   • Research and preparation
   • Guest booking and talent coordination
2. Staff size: Late-night shows typically employ between 80-150 full-time staff members across various departments:
   • Writing team (15-25 writers)
   • Production staff (30-50 people)
   • Technical crew (20-30 people)
   • Administrative and support staff (15-25 people)
   • Band members and musical direction (10-15 people)
3. Host salary: Top-tier late-night hosts like Colbert reportedly earn between $15-25 million annually, making the host’s compensation a significant portion of the overall budget.
4. Marketing and promotion: Networks spend millions promoting late-night shows across various media channels, costs that are typically attributed to the show’s budget.

Revenue Challenges in Late-Night

The reported financial losses stemmed from several factors challenging the traditional late-night television business model:

1. Declining linear viewership: While Colbert maintained his position as the most-watched late-night host, overall viewership for broadcast television has declined significantly over the past decade. In the early 1990s, “The Tonight Show with Johnny Carson” regularly attracted 9-10 million viewers. In contrast, today’s late-night shows typically draw 1.5-2.5 million viewers per night.
2. Changing advertising landscape: The fragmentation of media has reduced the premium advertisers are willing to pay for television spots, even in high-profile programming.
3. Shift to digital consumption: Many viewers now watch late-night content through clips on YouTube or social media rather than tuning in to the full broadcast, creating challenges for traditional advertising models.
4. Production inflation: The costs of producing television have increased substantially, particularly for high-quality productions with prominent talent.
5. Competition from streaming: Streaming platforms have diverted viewership from traditional television while simultaneously driving up talent costs across the industry.

The Debate Over Profitability

The claim that “The Late Show” was losing $40 million annually has been disputed by industry insiders who point to incomplete accounting of revenue streams. Jimmy Kimmel specifically highlighted the omission of affiliate fees in these calculations.

Affiliate fees—the money cable and satellite providers pay to carry network signals—represent a substantial revenue source for broadcast networks. While these fees aren’t directly attributed to specific programs, popular shows like “The Late Show” significantly contribute to a network’s leverage in negotiating these fees.

Additionally, late-night shows generate revenue through:

• International distribution: Format and content licensing to international broadcasters
• Digital content: YouTube revenue sharing and social media partnerships
• Merchandising and licensing: Products, books, and other extensions of the show’s brand
• Promotional value: Using the platform to promote other network programming

These additional revenue streams make it difficult to assess a show’s true financial impact using traditional accounting methods.

THE EVOLVING ECONOMICS OF TELEVISION

The challenges facing “The Late Show” reflect broader transformations within the television industry. Several key trends are reshaping how television makes money:

1. The Rise of Cost+ Deals

Traditional deficit financing is giving way to “Cost+” deals, particularly with streaming platforms. Under this model:

• The network pays 100% of the agreed-upon budget, plus a premium
• In exchange, the network receives exclusive rights to exhibit the show worldwide for an extended period (typically 10 years)
• The premium represents pure profit for the studio
• Profit participants share revenue based on their percentage after profits go through the “waterfall”

This approach reduces risk for studios but potentially limits the upside for creators and talent.

2. International Markets and Content Globalization

Television economics have become increasingly global, with international markets playing a crucial role in content financing and profitability:

• Format sales: Show concepts are licensed to foreign broadcasters for local adaptation
• Risk reduction: Adapting proven formats from other markets reduces development uncertainty
• Cultural customization: Local production teams modify formats to suit regional audiences while maintaining core elements

This approach has created a global marketplace for television concepts, with programs generating significant revenue through format licensing across dozens of territories.

3. Co-production Economics

International financing partnerships have become essential for premium content production:

• Shared investment: Multiple broadcasters from different countries jointly finance ambitious productions
• Tax incentives: Productions are strategically located to maximize regional production subsidies
• Rights division: Partners receive distribution rights for specific territories or platforms

These arrangements enable higher production values than single-market economics would support.

4. The Integration of Advertising and Content

As traditional advertising faces challenges, new approaches to monetization are emerging:

• Branded content: Integrating sponsors directly into programming rather than relying solely on commercial breaks
• Advanced targeting: Using data to deliver personalized advertisements to specific viewer segments
• Interactive commerce: Enabling viewers to purchase products featured in programs directly through their viewing devices

These innovations represent attempts to maintain advertising as a viable revenue stream in an increasingly fragmented media landscape.

THE FUTURE OF TELEVISION ECONOMICS

The cancellation of “The Late Show with Stephen Colbert” highlights the challenging economics of traditional television in the streaming era. However, it would be premature to declare the death of television as a business model.

Instead, we’re witnessing an evolution—one where successful shows will need to generate revenue across multiple platforms simultaneously. The future likely belongs to content that can:

1. Attract traditional viewership while also generating significant online engagement
2. Create valuable intellectual property that can be monetized across various media
3. Build dedicated fan communities willing to support the content through different channels
4. Adapt quickly to changing consumption patterns and technological innovations

For creators, producers, and networks, the key to success will be flexibility—understanding that television is no longer just about what appears on a broadcast schedule but encompasses a much broader ecosystem of content and experiences.

“The most successful television enterprises of the future won’t think of themselves as television shows at all,” predicts media futurist Marcelo Rodriguez. “They’ll see themselves as content franchises that happen to include a television component alongside many other manifestations of their intellectual property.”

This evolution represents both challenges and opportunities. While traditional revenue models face increasing pressure, new avenues for monetization continue to emerge. The shows that navigate this transition successfully will be those that embrace innovation while maintaining the fundamental quality that has always been at the heart of successful television: compelling storytelling that resonates with audiences.

In this complex and rapidly changing landscape, one thing remains certain: the business of television will continue to evolve, creating new economic models that we can barely imagine today. The cancellation of established shows like “The Late Show” may mark the end of certain approaches to television economics, but they also create space for new models to emerge—models that will shape how we create, distribute, and monetize content for decades to come.

This special report was prepared by the editorial team at LimitlessNewsletter. For more in-depth analysis of media business trends, subscribe to our monthly publication.

© 2025 LimitlessNewsletter. All rights reserved.