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 CBS18:16 Minutes ABC18:06 Minutes Fox17:23 Minutes NBC16:46 Minutes MTV15:37 Minutes ESPN14:05 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 News17:10 Syndication18:12

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, :$336,661, :$605,233, :$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.