The Big Business of 'Mad Men'
The highly anticipated sixth season of "Mad Men" returns to AMC Sunday night with a two-hour debut show.
"Mad Men" is known for its rave reviews and a cultural impact much bigger than its viewership—just 3.5 million viewers tuned in to the season five premiere. The show has repeatedly swept the Emmy Awards and it's drawn an incredible amount of press coverage.
It has also sparked a resurrection of a certain retro style—Banana Republic struck a deal with the show to sell the Mad Men Collection. Perhaps most impressively, it launched the renaissance of what was once a quiet basic cable network, AMC, and its parent company, AMC Networks.
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AMC started its transition away from being a traditional movie channel into original programming with the launch of "Mad Men" in July 2007. The show's success was used as a launch pad for "Breaking Bad," which then helped "The Walking Dead" get off to a strong start, becoming a consistent record-breaker. The season finale of "Walking Dead" on Sunday was the show's highest-rated, bringing in 12.4 million viewers. It was the most-viewed program among 18-to-49 year olds.
"Mad Men," "Breaking Bad" and "Walking Dead" were big risks for AMC, and they all have paid off in droves.
Matthew Weiner's "Mad Men" pilot was passed on for years, and producing a show set in the 60s brings a number of expensive challenges. "Breaking Bad" is about a chemistry teacher turned meth dealer who lies to his family, not exactly the most appealing protagonist, and "The Walking Dead" is about battling zombies in a post-apocalyptic world. None of them were obvious picks for a movie network trying to get into original programming.
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Fueled by these hits, Cablevision spun off its series of assets known as Rainbow Media Holdings in July 2011, renaming them AMC Networks after their successful flagship channel. Since starting to trade publicly as AMCX the stock has gained more than 75 percent. Higher ratings and critical acclaim has allowed the channel to boost ad prices as well as raise the fees it charges cable and satellite TV companies per subscriber.
Plus, AMC has a track record of striking special deals with blue chip advertisers, taking advantage of the fact that it's a show about advertising. This year, "Mad Men" is teaming with Nationwide Insurance for a sponsorship deal with more than $2 million.
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The show's producer, Lionsgate, is also a big winner, not just from the fees AMC pays it to distribute the show, but also from additional home entertainment revenue. Lionsgate struck a deal with Netflix to stream episodes of the show back in 2011. And there's also revenue from the likes of Apple—Mad Men Season 6 is currently the #1 season pass on the iTunes store.
The show also generates licensing revenue from its deal with Banana Republic, now in its fourth year. To celebrate the launch of the collection, Banana Republic hosted a mod-themed pop-up shop at an upscale outdoor mall in Los Angeles. And it's a win-win—the show promotes the clothes, and Banana Republic's ad campaign for its clothes also promotes the show.
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin