chapter 3

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The Business of Broadcasting, Cable and New MediaPages: 158-163How to do it

What is the primary product that a radio or TV station has to sell?Entertainment.Advertising time.Listeners to advertisers.Weather updates.

One of them is correct others are less correct.Over the air broadcastingCommercial mass media have a unique dual nature.Mass-media technology is designed to link audiences with program suppliers and with sponsors.Stations are attracting audiences because of their programming, but it is the advertising revenue generated as a result of having a desirable audience that really pays for the programming.Cable industryIt works a little differently from broadcasting:Cable has advertising and they must sell the audiences attention to advertisers.Cable companies charge viewers a monthly subscription fee.Cable has a dual income.Some companies offer additional services as high speed Internet and telephone (Comcast) as additional sources of income.Sometimes consumers are willing to pay extra fees for noncommercial channelsWeb sitesWeb sites make money through ad placement, like a newspaper or magazines, or by selling goods or services like the iTunes store.Without profit there will be no money for program development.Therefore we need to understand how a station generates revenues and spends money.Competition & Electronic MediaRadio, TV, Cable, Satellite broadcast and Web sites are facing fierce competition.Government oversight of the electronic media is tied to how competitive those media are.More competition = less regulation.Radio is less heavily regulated.11,000 radio # 1370 TV.Competition & Electronic MediaFew places in USA have more than one cable operator in a franchise area. Therefore the cable operator can be mandated to provide government and public access channels for the local municipality.The Internet is like a magazine stand with thousands of different choices and lots competition.The electronic media have different levels of competition and face different amounts of government oversight as a result.Competition & Electronic Mediaa medium faces no competition = monopoly.*Hard to find in the USA today.A limited number of competitors (3) = oligopoly.*Each one gain a share of available advertising revenue.A large radio market with 25 radio signals = marketplace solution or pure competition.*the listeners decide which stations will become popular and thereby gain a large share of ads dollars.Pure competition likely force weak stations to go out of business or get purchased. Competition among different media typesPeople use the various forms of media differently.Competition is defined by how people use a specific medium and what competition it faces from all other competitors.Example: radio is the most intimate, highly portable and personal medium. It is more likely to compete against other portable devices such as MP3 players and smartphones than against cable or TV.Competition among different media typesAdvertisers will frequently buy different media to reach as many customers as possible.They will also spread their messages over different times in the broadcast day to ensure the broadcast dissemination of their message.Figure 7-1 shows that time spent listening to the radio and watching TV is greater than other media thus advertisers are particularly concerned with these two media.Determining a medium to buyA triangle relationship in the media business between programmers, media sellers and media buyers.How advertiser actually decide?Many factors can influence the media purchase (called a buy)1- internal: such as the budget allocated to a particular product line.2- external: such as the usage of new media by potential customers.Determining a medium to buyA station needs to evaluate how many viewers watch the program to determine its success.Findings out about the age, gender, and income of viewers (demographics) is important too.Stations use that information to attract certain advertisers.Determining a medium to buyMarketers and advertisers put together a buying plan developed on three basic elements:Population or market size and other demographic information.Effective buying income (EBI) which is a reflection of the disposable income of the average family.Retail sales for each geographical area where they sell their products. Advertising agencies and marketing firms collect data relevant to that product and may develop a buying power index (BPI) for markets they are interested in the higher the BPI, the greater buying power for that market.Determining a medium to buyIf the media plan is sizable, there is a substantial amount of money allocated for advertising the product, the advertiser may use the services of a company that competing national advertisers spend on various media.Research companies break down advertising expenditures according to specific classifications of products, such as nonprescription drugs.

Determining a medium to buyIt is a way to gauge what the competition is spending on media.After data collection, the advertiser will develop media plans for the product.The time segments available for commercials in radio and TV are called spots, and this term is also used to refer to the commercials themselves.Various formulasMedia buyers use various formulas for determining the effectiveness of ad placement.Gross rating points (GRPs) gives the buyer a way to evaluate a run of x number of commercials over the specific time period (frequency) that has a consistent rating for the target audience (reach.)Gross impressions: reflects the total of all persons reached by each commercial in the advertising campaign.Various formulasTo determine audiences and effectiveness, advertisers will calculate how much money they want to spend to achieve their marketing goals.Occasionally an advertiser will select or not select specific media based solely on cost.Certain media work better for some advertisers, coupons work well for grocery products but are not easily used in electronic media.Placing the AdAdvertisers determineThe kind of media they want to buy (radio, TV..)When (morning drive time on radio, prime time on TV.)

They evaluate the benefits of purchasing time on one or more specific media outlets.Placing the AdA package: advertising time sold for a specific number of spots and covers a specific period (called flight dates.)Time buyers want to be able to compare the cost of doing business at station A with B, they used rate cards (see Figure 7-2) to help time sellers and buyers to evaluate the cost of advertising.As advertiser purchases more time, the cost per spot decreases.CPM: measuring the cost of adCPM: measuring the cost of adCPM: measuring the cost of adSometimes, we spend more money to reach audience with specific demographic characteristics. (luxury car)Cost per point (CPP) is another good way of measuring.example: the cost of advertising unit (3second spot) was divided by the average rating of males 35 years and older.Marketers try to determine reach: the number of different audience members exposed to an ad at least once during the period an advertisement is run.Local marketsMany advertisers are not large enough to hire an agency or media buyer.A sales representative will work directly with a store owner to develop a commercial package.One the commercial is written and approved, he will schedule the spot in the stations commercial rotation for play.

Local marketsBoth, they may develop a long term contract that reflects a discount for sponsoring a specific time slot.The sales rep will place a standing order for the commercial to run over a specific period.Small market radio stations dont subscribe to ratings service (no CPM to calculate) store owner may simply work out the best deal possible.