Broadcasting, Cable, the Internet and Beyond Chapter 7

1. Broadcasting, Cable, the Internet and BeyondChapter 7 • Quick Facts • 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)

2. Broadcasting, Cable, the Internet and BeyondChapter 7 • What is the Business of Broadcasting? • 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

3. Broadcasting, Cable, the Internet and BeyondChapter 7 • The Business of Broadcasting • 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

4. Broadcasting, Cable, the Internet and BeyondChapter 7 • Economic Models for Electronic Media • Television and Radio model - Single Revenue Stream • The audience is the product that media delivers to an advertiser. • Cable model - Dual Revenue Stream • Likebroadcasting cable delivers an audience to an advertiser • Cable charges a monthly subscription fee for receiving the program

5. Broadcasting, Cable, the Internet and BeyondChapter 7 • Competition and Electronic Media • 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

6. Broadcasting, Cable, the Internet and BeyondChapter 7 • Competition and Electronic Media • 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

7. Broadcasting, Cable, the Internet and BeyondChapter 7 • Competition among Different Media Types • 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

8. Broadcasting, Cable, the Internet and BeyondChapter 7

9. Broadcasting, Cable, the Internet and BeyondChapter 7 • Determining a Medium to Buy • 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

10. Broadcasting, Cable, the Internet and BeyondChapter 7 • Determining a Medium to Buy • 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

11. Broadcasting, Cable, the Internet and BeyondChapter 7 • Determining a Medium to Buy (continued) • 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

12. Broadcasting, Cable, the Internet and BeyondChapter 7 • 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)

13. Broadcasting, Cable, the Internet and BeyondChapter 7 • Placing the Ad • 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)

14. Broadcasting, Cable, the Internet and BeyondChapter 7 • CPM - Measuring Advertising Costs • 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

15. Broadcasting, Cable, the Internet and BeyondChapter 7 • Broadcasting Sales Practices • 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

16. Broadcasting, Cable, the Internet and BeyondChapter 7 • Radio Advertising Volume, 1965-2002 (in $ millions) • Year Network National Spot Local Total • 1965 60 275 582 917 • 1970 56 371 881 1308 • 1975 83 436 1461 1980 • 1980 183 779 2740 3702 • 1985 365 1335 4790 6490 • 1990 433 1626 6780 8839 • 1995 512 1741 7987 10240 • 2001 893 3036 13932 17861 • Source: Universal-McCann • **2001 revenue breakout is estimated

17. Broadcasting, Cable, the Internet and BeyondChapter 7 • Broadcasting Sales Practices • 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

18. Broadcasting, Cable, the Internet and BeyondChapter 7 • Television Sales • 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.

19. Broadcasting, Cable, the Internet and BeyondChapter 7 • Economics of Networking • 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

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

21. Broadcasting, Cable, the Internet and BeyondChapter 7 • Syndications • 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.

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23. Broadcasting, Cable, the Internet and BeyondChapter 7 • Public Television • 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

24. Broadcasting, Cable, the Internet and BeyondChapter 7