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Finance a la shmoop what is deficit financing? well its debt, debt used to you

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know buy stuff but the phrase deficit financing gets applied in lots of

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creative ways so here's one courtesy of your friends in Hollywood in [Hollywood sign in the hills appears]

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the glory days of sitcom financings like when cheers and the Brady Bunch and

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Friends were still alive and kicking think you know 1970s 80s and pre 500

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channel 90s sitcoms were funded via deficit financing well a given TV series

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err 22 23 24 25 ish episodes with a flashback or a blooper show thrown in

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for good measure well that might cost a million bucks an

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episode to produce and were kind of rounding the numbers a lot here so

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that's 25 million bucks for a season of yucks the network ABC NBC CBS and Fox [TV network logos appear]

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that's all the network was allowed to air the show twice and for complex legal

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reasons was not allowed to own the show or really participate in its profits if

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there were any yes poor you network that's it so NBC might have paid in

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fifteen million dollars to shmoop Warner mount you know producers of

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friends for the right to broadcast 2 airings of the show over a one-year

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period that's 15 million for a product that costs 25 million so the show's

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producers lost 10 million dollars each year that they were in primary

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production gulp yeah that's a lot of dough but wait Jennifer Aniston has a [Private jet appears on runway]

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really nice jet and gallons of Botox and the hair thing going on there yeah it

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cost big bucks even if most of it really isn't hers well she had to have gotten

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paid a big fat profit participation right well not right away you know like

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she got a salary to be on the show in the first part but you know you get

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money for reruns well in fact friends might have lost say

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four years worth of 10 million bucks a year before the auction floodgates then [Man standing on floodgates]

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opened into the land of reruns where the producers were then paid handsomely for

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their hit show and if you think about the math of a rerun all you have to do is

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hit play on the VCR again and you get paid for that right? so

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really high margin business somebody had to have taken the very big risk of

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deficit financing that 40 million bucks up front though waiting praying hoping

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for that billion dollar win at the end so a given deficit financier might

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contribute 20 million dollars to buy two-thirds of the "back end"

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of the show and we like big back ends we cannot lie meaning the future profits [Profits from ad sales and friends appear]

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that would come from hitting the rerun button on that VCR and selling ads

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against it so how or why could a 20 million dollar investment turn into half

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a billion dollars in a decade or less well because oh so many shows fail and

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if a show goes only two seasons on a network well it has pretty much zero

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after life like nobody watches it in reruns it just dies on the vine

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worthless and all the money that the deficit financier invested well pretty

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much goes up in smoke so yeah deficit financiers are kind

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of like the friends on friends kind of like the venture capitalists of

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Hollywood or at least how Hollywood used to be as long as there's a pile of cash [A big pile of cash on a hill]

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at the end of the rainbow they'll look you know you know it goes

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sing it with me....I'll be there for you yeah I was the original song

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there and then they fired me for some other yutzy band

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