How do television production companies make money from tv ratings?

Answer 1

Production companies don't make money directly from television viewing ratings. Having high ratings are good for a production company in that the program becomes more attractive to broadcasters.

Broadcasters generally make their profits from commercials and sponsorship of programs. A popular program will allow the broadcaster to sell commercial slots at a far higher rate than programs that have a small number of viewers. Slots for commercials during the Superbowl for example can cost well into six figures.

As broadcasters want to offer their clients time slots with large numbers of viewers, they are keen to buy content that will generate high viewing figures in the ratings. They will be willing to buy the broadcast rights to a popular program at a far higher price than a program with a limited appeal and lower viewing figures.

It is the popularity of a show that defines its value far more than the production quality. It is a fact of life that a program about underwater yoga will be unlikely to generate the same income for the production team as American Idol will. (with apologies to anyone who happens to be an underwater yoga enthusiast)