Business of Television What would happen if commercials disappeared from broadcast stations and networks and cable networks?

Business of Television

What would happen if commercials disappeared from broadcast stations and networks and cable networks?

Business of Television

We watch TV to be entertained or to learn – very few of us turn on the TV to watch commercials.

However, advertising drives the business and helps pay for nearly everything that we watch.

Business of Television

Advertisers spend over $30 billion a year on broadcast television.

Non-Program Matter on TV

Commercials (:10, :15, :30, :60) Promotional Spots Ids Infomercials Personal Inquiry Ads Trade Agreements Sponsorships Public Service Announcements (64 % donated by station

or network; 36 % purchased)

Non-Program Material Per Hour in Primetime TV

CBS 18:16 Minutes ABC 18:06 Minutes Fox 17:23 Minutes NBC 16:46 Minutes MTV 15:37 Minutes ESPN 14:05 Minutes

Non-Program Material

Early Morning (7-9) 15:00 Morning (9-12) 18:02 Daytime (12-5) 20:57 Late Night (11:30-1) 16:00 Local News 17:10 Syndication 18:12

Advantages of TV Ads

Broad Reach and Appeal Constantly Available Timely Psychological Advantage/Prestige Target Audience Entertaining

Problems of TV Ads

Limits to target marketing Limited inventory Zapping Recording Devices Lack of Convenience Expensive No tangible reminder of product Certain products not advertised

How Is Advertising Sold?

Broadcast Network Local Stations Spot Advertising Syndication Cable Satellite

Network

Advertiser buys commercial time through the broadcast network (ABC, CBS, CW, Fox and NBC)

Advertiser is “guaranteed” that commercial has a chance to be seen by millions of people; commercial is fed within the body of the program

Networks “presell” their inventory upfront.

Network

Network advertising reaches masses of people

Network ad revenue continues to fall because of competition from cable and other venues

Network Costs

American Idol $620,000 Desperate Housewives $594,000 24 $364,000 CSI $374,000 Grey’s Anatomy $344,000

Network Costs

ER $282,000 Dancing with the Stars $229,000 Football in America $350,000

Network “Events”

2007 Super Bowl $2.6 million Academy Awards $1.7 million American Idol Finale $1.3 million

Local

Advertiser buys commercial time through the individual broadcast station.

Local advertising accounts for over half of all advertising you see on television.

Local stations make 1/3 of their revenue from spots in newscasts.

Local Costs

Early newscasts $400 Late newscasts $450 Ellen $150 Oprah $250 Local primetime average $550

Spot

Local stations hire a representation firm that serves as an extensive of its sales staff. The rep firm entices national clients to buy time on individual stations during non-network programming.

Syndication

Advertisers can now buy time directly in syndicated programming from the program distributor.

This practice provides more revenue for program syndicator/distributor/producer but creates headaches for local station.

Ad Costs -- Syndicated

Friends $167,000 Seinfeld $165,000 Oprah $69,000 Live $15,000

Cable

Cable advertising works similar to network advertising. Advertisers buy time directly from the cable network.

Cable can be more efficient buy. Cable TV networks have seen tremendous growth

– up 10 percent over a year ago.

Political Advertising

1992: $225,807,000

1996: $336,661,900

2000: $605,233,100

2002: $1.1 billion

2004: $1.4 billion

2006: $1.25 billion

Political Advertising

Political advertising is local television’s second largest national ad category.

Other Advertising Strategies

Product Placement Sponsorship Agency created and produced shows

Advertising Concerns

Content Plugola/Payola Conflict of Interest Issues Billing Practices Clipping News Content

FCC Restrictions

Children’s Television Act of 1990 requires restrictions on advertising during children’s programming. Commercial time is limited to 10.5 minutes per hour on weekends and 12.5 minutes per hour on weekdays. Toys directly associated or based on a program’s theme or character cannot be advertised during that show.

Cigarette advertising was banned from television by Congress in the 1970 and went into effect on January 1, 1971.

CPM=Cost Per Thousand

:30 Price

# of HH x 1000 =

The Cost of Reaching 1000 Households

Top Broadcast Advertisers

ABC: PSAs, Proctor and Gamble, General Motors, Johnson and Johnson, McDonald’s

CBS: General Motors, PSAs, Proctor and Gamble, Pfizer, GlaxoSmithKline

NBC: General Motors, Proctor and Gamble, Philip Morris, Ford, AOL/TW

Fox: General Motors, TriconGlobal Restaurants, Pepsi, Volkswagen, Philip Morris

Top Cable Network Advertisers

ESPN: WorldCom, General Motors, Philip Morris, Coors, AT&T

Nick: Mattel, General Mills, Philip Morris, Hasbro, National Amusements

MTV: Proctor and Gamble, Sony, National Amusements, Pepsi, U.S. Government

Lifetime: Proctor and Gamble, Philip Morris, Pfizer, GlaxoSmithKline, Progressive Corp.