Article at a glance:

Black-Scholes meets Seinfeld

Commercial television programming is a high-risk business, and it's difficult for programmers to know what day and time to broadcast a given show or whether to pay a premium for the content. Options theory and the Black-Scholes pricing formula—tools borrowed from financial-asset management—offer useful insights for reducing the risk around these programming decisions.

The take-away

The application of options theory has helped TV executives realize an average increase of 25 to 50 percent of the original value from TV programs. Television executives should institutionalize the process of recognizing, evaluating, and exercising the options embedded in programs.