Jeopardy is taking a financial drubbing … or is it?

Let’s look at he economics of the current champ’s winning streak.

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Jeopardy wunderkind James Holzhauer extended his winning streak to 26 games and upped his total haul to $1,991,135.

Note: Last night, Holzhauer was off his game, but won in a nail-biter.  He was slow with the buzzer (despite a relatively easy set of questions) and faced a formidable competitor who would have mopped-up  ‘normal’  competitors..

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Today, let’s take another angle: Financially speaking, is Holzhauer’s winning streak good or bad for the Jeopardy show?

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The basic economics are pretty straightforward.

Holzhauer is winning an average of about $75,000 each day.

A typical Jeopardy champ scores about $25,000 per session … with relatively low variance across the population of champs.

So, Jeopardy has been paying out an additional $50,000 in prize money per show during Holzhauer’s streak.

That’s $1.3 million in total ‘overage’.

I’d call that statistically significant, even for a notoriously profitable game show … which incurs relatively low production costs and doesn’t have to pay actors.

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That brings us back to the question that got us started this week:

Does Jeopardy have so-called “hole in one” insurance to protect against an over-achiever going on a streak?

Basic answer: I don’t know … Jeopardy hasn’t revealed that.

My hunch: no.

Why?

Again, A typical Jeopardy champ scores about $25,000 per session … with relatively low variance across the population of champs.

Because of the relatively low variance, the show’s pay-offs don’t really differ much whether a player goes on a winning streak or not … the economics stay the same.

So, why insure?

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OK, so Jeopardy is paying out a lot more … isn’t it reaping a windfall from higher ratings?

For sure, ratings are up.

Jeopardy normally averages just shy of 10 million viewers each night. Source

Once Holzhauer got rolling viewership surged by over 30% to 13.3 million per night.

That ratings boost must be an ad windfall for Jeopardy, right?

Nope.

First, if there were any windfall, it would go to the stations carrying the show, not directly to the show.

But ad buys are are usually made  in advance … and, stations can’t simply simply jack up the contracted rates.

Of course, if Holzhauer’s streak creates a higher sustained interest in the show — i.e. viewer’s keep watching after he loses — then Jeopardy can, in due course, jack up its syndication fees.

Is that likely to happen?

Well, there’s a good test case that says ‘no’.

Holzhauer’s streak was interrupted by a 2-week Teacher’s Tournament.

During that 2-week period, viewership immediately reverted back to its ‘normal’ 10 million viewers per night. Source

So, unless Jeopardy can guarantee a steady stream of interest-inducing Holzhauer-like characters, syndication fees are likely to stay where they are.

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My take: Clear winners are Holzhauer who’s making a lot of money … and we viewers who are enjoying his streak.

It’s not so clear that Jeopardy is getting much more than a sugar-high during the streak,

The show is probably taking a financial drubbing … unless, of course, the producers were savvy enough to insure themselves against this 100-year storm

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Follow on Twitter @KenHoma

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