Film Accounting Glossary
Deficit financing
What is deficit financing?
Also called deficit, or network deficit.
Deficit financing is the television model in which a studio produces a series for a license fee that is less than the cost of production, absorbing the shortfall in expectation of recouping through downstream sales.
The per-episode deficit is a planned number, tracked as carefully as any budget line. Streaming cost-plus deals largely replaced this model for originals, but it still governs much of traditional network and cable production.
Example
An episode costs $4.2M to produce against a $3.1M network license fee, leaving a planned $1.1M per-episode deficit. Across ten episodes the studio funds $11M, betting on downstream sales to recoup it.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Traditional network and cable series accounting. Tracked as carefully as any budget line, because the deficit is the studio's actual investment.
Common mistake
Reading the licence fee as the budget. The studio funds the gap between fee and cost, and that per-episode deficit is the actual investment being made.
Related questions
- How does deficit financing work in television?
- A studio produces a series for a licence fee below its cost, absorbs the per-episode shortfall, and looks to recoup through downstream sales and library value.
- Is deficit financing still used?
- It still governs much traditional network and cable production, though cost-plus commissioning largely replaced it for streaming originals.