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Post by George WK Newman on Jun 3, 2009 15:52:47 GMT -5
Broadcast networks and stations derive nearly all of their revenue from the sale of commerical time.
Share points are not used to calculate the cost of advertising. Instead they provide television programmers with the audience measurement stats they need to make decisions about scheduling.
When a media buyer compares pssible buys in prime time television they consider rating points based on specific demographic groups. For example, women comprise approximately 60 million of the 180 million available television viewers in the US (110 million households x 2.2 people per household). The rest are men and children.
During the 2004 season of Law & Order the price per 30 second ad was about $225,000. Given its 10.2 rating, the cost per rating point was $22,000. By comparison, the 30 second spots on Everyone Loves Raymond went for $315,000; divide by its 12.3 rating, and the cost per rating point was nearly $26,000. The costs per spot and per rating point are generally lower during the daytime hours, and on cable.
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Post by George WK Newman on Jun 3, 2009 16:23:18 GMT -5
Network Television Advertising
The Upfront Market Network Prime Time; The networks offer advertisers approximately 65-75% of prime time available spots ("avails") at a 15% discount. This prime time upfront buying season generally begins in May. Saturday morning children's programming and other dayparts often begin as early as March. Upfront discounts go through early July.
The network's advertising department will work with media buyers to get a package of spots that will give them the frequency and reach that they want.
Negotiations are done on several fronts. A deal often includes the option to cancel up to 25% of the upcoming orders. Rates can vary with the size of the combined orders. Deals are often made on the basis of a guaranteed gross ratings points (GRP's) within specific demographics.
For simplicity of this game we will just use the adult 18-49 group as our basis or "demos". However the price per GRP in that demo may be higher if the audience delivered is consistently skewed in an even more desirable demo. For instance, many of the CW shows get more per GRP then CBS shows because advertisers will pay more to reach a young female then an older adult. It's not because the young female has more money to spend, its because she watches less TV and is harder to reach.
If a program fails to deliver on its promised ratings then the network makes good on its committment by adding rating points by placing additional commercials in other programs. ("make goods").
If a program delivers a greater number of ratings points then anticipated one of 2 things will happen depending on the contract; 1) the advertiser walks away happy 2) it can be used to make up for lower producing shows instead of having to use "make good" ads.
Overall the upfront market is worth about $8 billion. The major networks take in about $1-2 billion each.
Daytime, News, Sports
The cost per million for daytime is roughly 25% of prime time. Daytime television still delivers a relatively pure audience of women under 50.
The upfront buying season for network news also takes place during the summer. Most advertisers buy time on the news because it is the best way to reach the 25-54 and 55-plus groups.
The key concept for sports programs, from the perspective of large national advertisers, is exclusivity within product categories. Because of this the idea of an upfront buying season is not as strict here as in other parts of network television. The sales department begins to sell time shortly after rights to sporting events are purchased.
Sports ad rates take a big blow in a soft market, dropping by as much as 50%.
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Post by George WK Newman on Jun 3, 2009 16:26:48 GMT -5
Scatter Market
opens several days before each quarter, offering packages of unsold inventory.
Spot Market
individual commercial spots sold as available.
often used as "make goods".
discounts get bigger as the date gets closer.
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Post by George WK Newman on Jun 4, 2009 12:32:07 GMT -5
Product Placement
No standard on pricing, all negotiations.
Most deals for inclusion run from hundreds of thousands of dollars to $1 million to $5 million. This type of advertising has a lot of buzz, and is growing rapidly. Unlike commericials the audience can not skip over the ad or switch channels.
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Post by George WK Newman on Jun 4, 2009 12:35:59 GMT -5
Advertising Time
The major networks have generally restricted advertising on prime time programs to 8 to 14 minutes per hour. Currently most prime time programs have 12 - 14 minutes of advertising per hour. For daytime programming the maximum has typically been 12 to 15 minutes. Ad time on cable and local stations may run in the range of 12 to 15 minutes, or even more in daytime segments.
The FCC rules limit advertising time during children's programs to no more then 10.5 minutes per hour on weekends and 12 minutes on weekdays.
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