Broadcasting, Cable, the Internet and Beyond
Chapter 7
 Most expensive advertising time slots: 1999 Super Bowl
 Amount of money spent on radio for prescription drug advertising: $82.9 million (2001)
 Most profitable television station in the U.S.: WNBC-TV
 Cost of a 30 second advertisement time slot during “Ally
McBeal”: 177,000 (1999)
 Ratio of advertising dollars spend on TV versus billboards: 10 to 1
 Total cable advertising revenue: $15.5 billion (2001)
 Number of DBS subscribers: 16 million (2001)

Broadcasting, Cable, the Internet and Beyond
Chapter 7
 Broadcasting and cable are ways of linking viewers with advertisers while entertaining and informing an audience.
 Stations attract audiences because of their programming
 Advertising revenue generates the profits that make programming possible
 Television and cable have different revenue streams

Broadcasting, Cable, the Internet and Beyond
Chapter 7
 Mass media technology - an economical way to link large numbers of peoples with advertisers
 In electronic media there is an interplay between
 technology
 the consumer
 economics of each medium

Broadcasting, Cable, the Internet and Beyond
Chapter 7
 Television and Radio model - Single Revenue Stream
 The audience is the product that media delivers to an advertiser.
 Cable model - Dual Revenue Stream
 Like broadcasting cable delivers an audience to an advertiser
 Cable charges a monthly subscription fee for receiving the program

Broadcasting, Cable, the Internet and Beyond
Chapter 7

 Electronic media all face competition
 Government oversight is tied to how competitive the media
 Radio - 11,000 commercial stations - fewer regulations
 Television - 1,300 commercial stations - more regulations
 Cable - Local franchise - local mandates for serving the community

Broadcasting, Cable, the Internet and Beyond
Chapter 7
 MONOPOLY - where there is no practical competition
 OLIGOPOLY - there are a limited number of competitors
 PURE COMPETITION - few market barriers allow many players to enter

Broadcasting, Cable, the Internet and Beyond
Chapter 7
 People use various forms of media differently
 Competition for radio listeners - radio is personal
 Other portable devices (Walkman’s, CDs) compete with radio
 Radio programs music, news, and talk
 Competition for television viewers -
 TV competes with cable, movie rentals, etc
 Television programs dramas, stories, news and talk
 Advertisers will buy different media to reach listeners/viewers during different times of the day

Broadcasting, Cable, the Internet and Beyond
Chapter 7
Media Usage Per Year Per Person - 2002
Source: Veronis, Suhler Stevenson Communications Industry Forecast 2002
Consumer Magazines
Consumer Book s
Daily News papers
Consumer Internet
Video Games
Recorded Music
Home Video
Radio
Total TV
0 250 500 750 1000
Hours per year
1250 1500 1750
Series 2
Series 1

Broadcasting, Cable, the Internet and Beyond
Chapter 7
 The triangular relationship in the media business between
 Programmers
 Media sellers
 Media buyers
 Successful programs develop audiences
 Media buyers buy time from sellers within or near those programs

Broadcasting, Cable, the Internet and Beyond
Chapter 7

 Marketers and advertisers develop a buying plan based on
 Population or market size
 Effective buying income
 Retail sales for the market (geographical area)
 Buying Power Index - data related to expenditures of classifications of products for the specific market
 BPI tells the advertiser how much the competition is spending on similar or competing products

Broadcasting, Cable, the Internet and Beyond
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
 Media Buyers use various formula for determining the effectiveness of ad placement
 Gross Ratings Points - evaluates a run of x number of commercials over a specific time period that has a consistent rating for the target audiences.
 Gross Impressions - reflects total of all persons reached by each commercial in an ad campaign
 Buyers use data to calculate how much money to spend to achieve their goals

Broadcasting, Cable, the Internet and Beyond
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 Media Buyers buy specific audiences for their products based on several criteria:
 Demographics
 Age
 Sex
 Education
 Income
 Psychographics
 values and lifestyles of the audience (likes, dislikes, style, other cultural factors)

Broadcasting, Cable, the Internet and Beyond
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
 Advertising Time Purchases
 Rate Cards - the cost of advertising on specific stations
 Packages - a specific number of spots to run on one or more stations
 Specific Times -
 Advertisers can buy specific time periods (e.g. primetime on television, drivetime for radio)
 Advertisers can buy time throughout the broadcast day (run of schedule)

Broadcasting, Cable, the Internet and Beyond
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 Media Buyers use standard formulas to figure out the actual cost of a commercial spot
 COST PER THOUSAND (CPM) is used to express the cost of reaching 1,000 members (M) of the audience
 Calculating the CPM - you need to know the cost of the spot and the size of the audience. (look at the examples in the book - 157)
 CPM is a good way of expressing ‘efficiency’ of the media buy

Broadcasting, Cable, the Internet and Beyond
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 Station ad rates - pegged to share and make-up of the audience
 Radio Sales Dayparts
 Morning Drivetime - most important time
 Afternoon Drivetime - second in importance
 Mid-day and Evening - next in importance
 Cooperative advertising - cost of ad is shared between manufacturer and local store

Broadcasting, Cable, the Internet and Beyond
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Radio Advertising Volume, 1965-2002 (in $ millions)
Year Network National Spot Local Total
1965 60
1970 56
275
371
582
881
917
1308
1975 83
1980183
1985365
436 1461
779 2740
1335 4790
1980
3702
6490
1990433
1995512
2001893
1626 6780
1741 7987
3036 13932
8839
10240
17861
Source: Universal-McCann
**2001 revenue breakout is estimated

Broadcasting, Cable, the Internet and Beyond
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 Radio and television sales are divided into several categories:
 Local Spot Sales - local commercials purchased to run on local stations (local appliance store)
 Network Sales - time purchased within a television network program or on a radio network
 National Spot Sales - buying time at various local stations using a national sales representative

Broadcasting, Cable, the Internet and Beyond
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 Network Television is purchased in several ways:
 Upfront Market - media purchases made before the television season actually begins
 Scatter Markets four ‘seasons’ where advertisers purchase time.
 Purchasing time upfront or in the scatter markets each have advantages.

Broadcasting, Cable, the Internet and Beyond
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 Television Programming
 Dramas - most expensive to produce
 Comedies - less expensive
 Reality - least expensive
 Some first run programming loses money until syndication
 Advertising revenue is NOT sufficient to pay the cost of the television series, particularly dramas
 CPM for network television is consistent with other national ad venues

Broadcasting, Cable, the Internet and Beyond
Chapter 7
(30 second spot)
Friends
Survivor
Will & Grace
CSI
Good Morning, Miami
Girls Club
$455,700
$418,750
$376,617
$280,043
$279,813
$178,400
Boston Public $146,887
The Osbournes
Source: Electronic Media 9/30/2002
$100,000+

Broadcasting, Cable, the Internet and Beyond
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 Local television programming is usually built around local news and syndicated programming
 Syndication
 First Run - New non-network produced programming (e.g.
Wheel of Fortune)
 Off Network - network reruns (e.g. Will and Grace)
 Local Stations may purchase syndication rights or barter time for the program
 Barter syndication has commercials embedded within the programs.

Broadcasting, Cable, the Internet and Beyond
Chapter 7
T V Sales 2001 (in billions)
Network TV
($14.3)
National Spot
($9.2)
Local Spot
($12.2)
Syndicated TV
($3.2)
Network TV ($14.3)
Local Spot ($12.2)
Syndicated TV ($3.2)
National Spot ($9.2)

Broadcasting, Cable, the Internet and Beyond
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
 Public radio and television stations do not have commercials
 Corporations provide underwriting
 Underwriting usually airs at the beginning of the program
 Membership drives usually occur twice a year
 Federal funding for public television works out to about
$1 per person per year

Broadcasting, Cable, the Internet and Beyond
Chapter 7