How Valuable Are Big Hits for the Entertainment Industry?

Big hits continue to be important to the TV industry, although that comes with a caveat. The higher cost of producing hit shows requires a higher number of viewers to make them profitable, and that comes at a time when TV viewership is steadily falling.

This is one of the reasons that studios have gone with so much reality TV lately: the costs are much lower for these shows and they attract decent audiences. That means that the risks are much lower too. To lower risk on the scripted side, companies tap into proven franchises for spin-offs.

Here we'll look at three popular shows that buck the trend and see how they impact the companies that own the rights to them. They are the newest hits -- The Blacklist, along with Duck Dynasty and The Walking Dead. The Blacklist is on Comcast's NBC, The Walking Dead is on AMC Network's AMC TV, and Duck Dynasty is on Disney's A&E channel (the business is A+E, while the channel is A&E).  Hearst Corp. of New York owns 50% of A+E, with Disney owning the other 50%.


The Blacklist
The Blacklist is a fascinating depiction of the relationship between a former serial killer who comes out of hiding to interact in a unique way with a young female FBI agent. It is the most popular new series on television, and is no. 1 in the 18-49 demographic so far this season. It is also the top-rated show for all viewers.    

In the last show of the season, it drew a 3.5 rating in the 18-49 demographic, and 12.3 million overall viewers. NBC has renewed the series for a second season, scheduling 22 episodes. It was the first of the new TV series' to be renewed in 2013.

The 18-49 demo attracts the highest ad dollars. Since The Blacklist is the highest-rated scripted TV series for this group, it will bring in the most money of any series on TV. This of course assumes that it continues to lead the pack for the rest of the season in 2014.

I've watched every episode, and I believe it has some long legs if the stories are written as well as they were in the first half of the season. If the writing quality holds up, NBC could benefit from this series for many years.

Duck Dynasty
Duck Dynasty has become one of the most popular non-scripted TV show of all time, and it continues to draw a huge number of viewers.

The popular reality TV show opened its 4th season with 11.8 million viewers, with 6.3 million of them in the 18-49 demo. It closed out the season with 8.4 million viewers, with 3.5 million of them 18-49 adult demographic. That's strong when you consider it was competing directly against the World Series and a new fall lineup. 

To confirm that it continues to be wildly popular, Duck Dynasty's recent Christmas special attracted just under 9 million viewers--that's almost 40% higher than the Christmas special aired in 2012.   . Most importantly, 4.5 million of those viewers were in the all-important 18-49 demo. Any show that attract cross-generational viewers has inherent longevity, and that means a lot of ad revenue over the long haul.

The Walking Dead
Finally we have the immensely popular The Walking Dead series on AMC. Interestingly, not only is The Walking Dead one of the most popular scripted shows on all of television, it also spun off the popular live talk show Talking Dead which analyzes and summarizes the most-recent show immediately after it airs. While separate, they are connected to one another and will rise or fall together based upon the continued popularity of The Walking Dead.

There are concerns over how long the show will hold up, but there is also talk of a spinoff that would focus on another location in the United States. That show is reportedly scheduled for a 2015 release. If successful, it would mirror other popular spin-off franchises like NCIS. Walking Dead launched its fourth season with record-breaking numbers, as more than 16 million viewers tuned in. Of those, 10.4 million were in the coveted 18-49 demo, a 40% increase over the opener in 2012.   AMC Networks advertising revenue was up 36.3% in the latest quarter to $146 million, with most of that attributed to AMC TV.   

Bottom line
The final take on popular TV shows is they are an important part of any company that has the ability and luck to create one. There is no guarantee that those in the industry can continue to produce such shows, however. If they could, it will be evident over time.

I keep an eye out for companies that are able to generate more than one TV series that ranks high in critical acclaim and viewership. Disney, AMC Networks, and Comcast's NBC have been very successful at this lately, and that bodes well for investors.Big hits are valuable, not only as revenue-generators, but also as bragging rights and the free marketing as they get a lot of media coverage.

If you're investing in entertainment companies, continue to do your own research and keep up-to-date on the performance of the companies that are producing more than one big hit. Hits add a lot of value to a company, but they can also tank quickly once they run out of steam.

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The article How Valuable Are Big Hits for the Entertainment Industry? originally appeared on Fool.com.

Gary Bourgeault has no position in any stocks mentioned. The Motley Fool recommends AMC Networks and Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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