The New York Times reports on the sharp decline in profits at CBS.  This is despite the fact that their TV Network has the highest ratings of the big 4 (CBS, NBC, ABC, and Fox).  But here's what's interesting...

For decades, the big three, now big four, networks all had the same game plan: spend many millions to develop and produce scripted shows aimed at a mass audience and national advertisers, with a shelf life of years or decades as reruns in syndication.

But that model, based on attracting enough ad dollars to cover the costs of shows like “Lost” and “ER,” no longer appears viable. Network dramas now cost about $3 million an hour.

While keeping that in mind (particularly the cost) I'd like to draw your attention to a Business Week article from last year...

Then again, luring viewers is an increasingly expensive proposition. Cable executives are loath to talk dollars. But industry insiders estimate that production costs are rising at about 10% a year, pushing the per-episode cost of a scripted drama to more than $1 million at basic cable networks and as much as $3 million at pay TV channels. Everything from catering to editing is going up.

Now there are two questions I want you to consider before I make my point...

1.  Why does a Basic Cable drama only cost $1 million while a Network TV drama costs $3 million?  Is there a quality difference between an episode of "The Closer" or "Burn Notice" and an episode of "Law and Order" or "CSI:Miami"?  I don't see it

2.  In an era where the technology costs in making a scripted TV show have plummeted why are shows costing more to produce? 

The answer here is that the Entertainment industry is out of control in what they pay each other.  Charlie Sheen makes $800,000 per episode to film Two and a Half Men while Kyra Sedgwick only makes $275,000 per episode to film "The Closer."  Those salary differences go across the board and that is why there's a difference between cable dramas and network TV.  It's all in the people

But is Charlie Sheen really worth $800,000 an episode?

The market clearly doesn't think so because his salary is causing the CBS network to lose money.  That loss is how we get to the technology angle here.  What people in the TV industry have to realize is the same thing that web entrepreneurs are realizing now.  Advertising as a business model is becoming less and less viable. 

I mean, really look at TV.  Other than DVD sales (a fairly recent addition) TV is identical to the Web 2.0 business model.  They sold ads on the first airings and then sold the shows in syndication to stations who were in turn making ad money off the re-runs.  So the entire industry was run on Ads.

But with a generation that just ignores ads that profit channel is drying up. 

So now it's time for those in TV to start making the same big cuts that web companies have been making for months.  You can easily make quality TV for $1 million an episode.  Cable's proven that and in doing so demonstrated Network TV is spending 3 times more than they should be.  That's a lot of waste.

Especially for an industry running on a dying business model.