(Yet Another) Reason Old Media will continue to decline

In another mind-boggling example of why television networks will continue to decline in relevancy and dominance, there is a circumstance that networks foist upon small production companies with great frequency.

That circumstance is called "Deficit Financing."

More and more, I see companies being "forced" into production by a network they want to do a show for, without any funding in place from the network.

With increasing reliance on reality-television formats, which by default means higher reliance on smaller companies less able to cope with the intense cash flow demands of production, I'm pretty certain we're going to continue to see a lot of churn of production companies going out of businesses as their cash flow gets hammered by this setup.

A single reality show episodic pilot might set you back $200-300K, a full series order, several million.

The network says "we want the show delivered on this date" and the production company says, "well, we have to start production on this date to make that date." The problem is the networks drag their feet on cash-flowing production.

With contracts that never account for the current value of money, or have any sort of penalties or interest, production companies put up and shut up, hoping they'll get paid soon enough to not lose their companies.

In the process, they delay payroll, rental payments and a host of other payments that virtually guarantee they'll have more difficult and more costly labor and services agreements on the next show, if they get a next show. Vendors and employees loathe doing business with a company they know is going to screw them and leave them holding an empty bag for a month or more.

This is a self-perpetuating cycle driven by networks that over-value their distribution chain, and by producers who are clinging to the old models because no one has figured out the new one yet.

In the end, this practice leaves behind a lot of carnage and will only result in a lot of pain, and a continued decline of network relevance. Creatives with any wit of business sense will flee farther and farther from these companies until all those networks have left are the idiots who produce junk and will put up with permanent cash-flow handicaps.

There is one note to add; however. That is to say that there *are* a few networks who cash-flow properly, and quickly, and turn around payments in fair time-periods. Those are an exception, not the rule, they will survive, and eventually attract the smartest talent to their networks.