Single Cam is like The Office, Modern Family, Parks & Rec. Where the camera is part of the scene, like you're there experiencing it.
Multi Cam is like a traditional show like Seinfeld, Married with Children, The Cosby Show, etc..
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Multi-cam is where the actors are basically on a stage, often in front of a live audience, and there are multiple cameras filming the scene from multiple angles. The sets are built in such a way so that the cameras and the audience can see what's going on.
Single-cam shows are shot more like a movie. For example, think of a scene where two people are talking to each other face to face. You might have one camera angle which is a close up on one of the actors. And another camera angle with a close up on the other actor. And the placement of the cameras means that you should be able to see the one camera from where the other is. But because of the way they shoot, they only set up for one camera angle and film the scene. Then they set up for the other camera angle and film the same scene again. Then the editors can take those two different takes and edit them together to make them seem like one seamless conversation where you can't see either camera. Single cam shows can be shot on a soundstage, but they can also be shot on location because the style of the show doesn't require an open set.
Generally, sitcoms with audience laughter or laugh tracks are multi cam. Sitcoms without laughter, plus nearly all dramas are single cam.
Just for clarification, single cam doesn't mean there's only one camera filming any given scene. But generally, each scene is set up with lighting and angles to only be ideal from one camera angle, and then they run it from the other direction with different lighting.
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What's the big deal about a show going from one format to the other ?
Surely in your example, the conversation could be filmed "over the shoulder" in both multicam and single cam situations ?
I'm not sure it's a big deal so much as it signals a shift in NBC's target. Most people consider their current Thursday night sitcoms (30 Rock, The Office, Parks & Recreation, and Up All Night) to be aiming more toward more intelligent, more affluent viewers. Most people consider multi-cam sitcoms to be aimed at a more "lowest-common denominator" demographic. 30 Rock and The Office are ending this year, so there's no change to be made to those. Community is also single cam and likely in its last season.
So it basically means that NBC is going to favor multi cams in its next development cycles, and is hoping to keep Up All Night around to pair with those shows and maintain a consistent look and feel.
There was an excellent episode of Scrubs where they highlighed the difference between the two formats. It was called "My Life in Four Cameras." Halfway through the episode, they change from a single-cam format to a multi-cam format and show how different the show would be in the other format.
I think the biggest issue is the quality of the lighting that's available. With a multi-cam shoot, the lighting has to be even for all angles, so that what's captured from any of the four cameras can be used interchangeably. This means the set is bathed in bright light and there is no subtelty at all. But with single-cam, they can set up each individual shot and light the shot to match the way the scene is supposed to feel. This gives the director much more artistic control over the look and feel of the scene.