How ‘Game of Thrones’ Generated $2.2 Billion Worth of Profit for HBO

Let’s start with the easiest estimates to find, the production costs. Since the show first started shooting, HBO has been proud to tell us that this show cost a fortune. The pilot was rumored to be the most expensive of all-time (at the time), then the “Battle of Blackwater” in Season 2 was the biggest battle on TV. Since then, the costs have crept up, and up, and up. Here’s the rough costs to just produce the show according to Wikipedia and my research:

These costs are driven by a few things. First, the top actors are paid handsomely. The top five actors—according to court documents from a lawsuit involving Nikolaj Coster-Waldau—showed that the top talent made over $1.1 million an episode this season. Other actors are paid less than that—$200K an episode by some estimates—but that’s almost as much as what other lead actors get for their series. (The Westworld actors earn $250K for their highest paid stars, for instance.)

Second, the gigantic battles are as huge as I described above. It costs some serious coin to hire crews, equipment and extras to staff all those days to film a 55 day battle. Top that off with a lot of CGI for dragons, dire-wolves and giants, and you have one of — if not the— most expensive shows in television.

HBO starts to make up the money for all those battle scenes and actors by selling subscriptions. HBO has three main ways it sells these subscriptions: in the US through cable and satellite providers, internationally through their pay TV providers, and now digitally direct-to-consumers through its HBO Now service. (It also licenses content to other premium pay TV channels, but I’ll get to that next.) The bulk of the value of GoT comes from this initial window.

GoT is clearly great at driving new subscriber growth, but quantifying that is pretty hard, because it involves determining how much value any individual subscriber puts on GoT. As a result, that pot of money is both substantial, and probably less than you think.

Let’s go over what we know. First, subscriber and profit growth. HBO had been flat in subscriber growth from about 2010 to 2011, even declining between 2009 and 2010. Then, in 2011, Game of Thrones came and domestically (the United States and territories) HBO went from 39.4 million subscribers in 2011 to 54 million subscribers by 2017. (Those numbers include both HBO and Cinemax subscriptions, and digital.) Internationally—primarily, Latin America, Asia and Central/Eastern Europe—the sub growth was similarly impressive going from 53 million subscribers to 88 million. Digitally, they launched HBO Now in 2015 that currently reaches more than 5 million subscribers. (All these numbers come from formerly Time Warner’s annual reports.)

And, over the same time period, HBO’s revenues increased from $4.5 billion per year in 2011 to $6.3 billion in 2017, including growth in operating income of $1.4 billion to $2.1 billion.

Is it a coincidence that HBO has experienced this growth as GoT took over the collective conscious? Starting in season 1, GoT‘s ratings have gone up every year, and almost every episode. This table—using Wikipedia and news reports—shows the live and total viewership numbers by season.

In short, there are now 43 million people watching GoT in just the US alone. Maybe more if some of those viewings are by families or groups. And it’s not just the US. We know this is the biggest subscription show in the United Kingdom, Australia and has experienced huge growth in Canada, Italy, Russia, Singapore and many more countries.

It can be tempting to assume, then, that all of HBO’s growth is due to Thrones by itself. That’s a bit too aggressive. There’s other bad ways to try to make this determination. (The worst is simply multiplying viewers by price per month. Don’t do that. Read here for why not.) The best way is to attribute the number that the viewers (new and returning) that the show was responsible for. Then you multiply those customers by their “lifetime value” to HBO.

So I made a bunch of estimates using this methodology, assuming that 10% of new US subscribers, 5% of new international subs and 50% of new digital subscribers were owed to Game of Thrones. I also gave GoT credit for keeping current subscribers “retained” at a 2% rate. (That sounds low, but in my experience is very reasonable.) Using those numbers and a bunch of other estimates—like my own customer lifetime value calculations—it got me to my estimate of the value per subscriber:

Conservatively, I think that Game of Thrones alone has driven $1.9 billion in subscription value for HBO over the last 9 years or so. (And some of these benefits will carry over for a few years.)

So that’s a lot of money, but HBO isn’t done raking it in. Back in the yesteryears of 2011, DVDs and Blu-Ray discs were still a thing. HBO made a lot of money selling Game of Thrones into home entertainment. The first two season DVD launches sold hundreds of thousands of units in their first week released each. And I found one estimate where after a year season 1 had sold nearly a million copies. I’ve even heard a rumor that this series had sold over $1 billion in total home entertainment. I couldn’t get that high with the decay in DVD sales, so I put all home entertainment at around $610 million, with HBO taking home about $168 million in total.

As I said above, HBO also sells the rights to its shows to certain foreign markets. Season 1 reportedly sold for $2.5 million per episode internationally. I assume this rate continued, with a big bump for Season 5 and beyond. In all, I think GoT netted $301 million for HBO in international sales.

After that, HBO has been relatively stingy on selling Game of Thrones to other TV channels. Even in its big library deal with Amazon for $300 million per year, GoT wasn’t included. Therefore, it’s unlikely HBO sells GoT into syndication or to someone else in the near future. Which doesn’t mean it doesn’t have value for HBO as a library show, especially when the prequel premieres next year. I’m assuming that the value of future “library” deals would be around $780 million going forward, or 125% of the production cost.

Since a lot of the series is filmed in Ireland, HBO takes advantage of some pretty nice tax breaks that have added up over the years. I have it at about 10% of production costs, or $36 million total. Ireland has previously said through the first three season they provided about $14 million in tax credits to the production and I just extended that rate.

HBO doesn’t do any product placement within Game of Thrones, unless you count Starbucks.

Then, there is all the merchandise. Oh, so much merchandise. I found countless articles describing how much GoT merchandise there is, but couldn’t find any specific revenue numbers. To fill the gap, I made some estimates based on my knowledge of adult TV merchandise. Still, the revenue that makes it back to HBO will be small. As I’ve written before, my rule of thumb is 5% of total retail sales go to the studio. In all, I guesstimate that HBO made a huge $2.6 billion on total sales, collecting about $132 million. HBO even had a small run at IMAX theaters for Season 4, and I included that at about a million dollars.

There are some other costs and fees that I’ll go over quickly. First, HBO has to market this series. Fortunately, the show markets itself. HBO primarily uses “owned and operated” channels, meaning previews after shows. GoT‘s highest per season marketing budget was $20 million for Season 8, up from $7 million in previous seasons according to the Wall Street Journal. (I also assumed Season 1 had a similar, $20 million marketing/launch spend.)

Then, I’ve added in some “fees” for my final calculations. In the agent’s case, they get a 3% fee off the production budget for “packaging” the series. (I’m assuming this is CAA, who reps the showrunners.) Then, HBO will also take a “distribution fee” for all the additional revenue after the first window. I’ve put this at 20%, but could go as high as 40%. This “fee” is really an accounting tool to avoid paying talent for as long as possible. Finally, given that this is a union show, HBO will pay residuals to the guilds (screen actors, writers, directors) for the additional revenue they make, which is about 6-14%, depending on the window.

If you’re still with me, here’s all the calculations, with my estimates per season:

In all, talent takes home a whopping $213 million, split between the showrunners, actors, George R.R. Martin and more. The agents take $79 million more. I came up with 27% profit share using the traditional “Modified Adjusted Gross Receipts” definition. This number isn’t as high as HBO’s profit, partly because HBO doesn’t calculate subscriber revenue, instead relying on the first run license fee for the initial window.

So, like the headline of this article states, it appears that HBO made about $2.2 billion from Game of Thrones. That’s roughly $285 million per season, or even $31 million per episode, numbers which were growing over time. Credit HBO’s CEO at the time, Richard Plepler, for having the vision to scrap the series’ original “piece of shit” pilot —which reportedly cost somewhere between $5-10 million— and give creators David Benioff and D.B. Weiss more time and money to get the series right. That just may have been the single most profitable decision in the history of the Home Box Office.

The Entertainment Strategy Guy writes under this pseudonym at his eponymous website. A former exec at a streaming company, he prefers writing to sending emails/attending meetings, so he launched his own website. You can follow him on Twitter or LinkedIn for regular thoughts and analysis on the business, strategy and economics of the media and entertainment industry.