Deficit Financing

Deficit financing was a Thing in the TV and film biz in the old days. Here's how it worked: A TV network would green light the production of 6 episodes (along with the pilot), and they'd pay, say, $250,000 per episode. The problem? It cost the producer of the TV show $400,000 per episode to produce. So they'd be losing $150,000 an episode if they went forward. Why would they, um...do this?

Because if the show works and is green lit for a full season and then 3-4 more, the producer (who owns the copyright on the show), then owns 100 episodes of a given series, which she can then sell into reruns a zillion times. But in the process of making those 100 episodes, where the producer loses $150,000 a show, they rack up $15M or more in deficits. So they have to get paid big time for the risk, because soooo many shows make it only those first 6 episodes, or only one season.

And then the producer loses basically everything. So the deficit on that capital need is made up by risk-friendly investors who stand to make windfall profits if the show is a hit. They are funding the deficit of that $150,000 a show, hoping to make $10 million or more an episode over the long run, which would make everyone...Friends.