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Business of Television

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.

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Business of Television

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  1. Business of Television • What would happen if commercials disappeared from broadcast stations and networks and cable networks?

  2. 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.

  3. Business of Television • Advertisers spend over $30 billion a year on broadcast television.

  4. 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)

  5. Non-Program Material Per Hour in Primetime TV • CBS 18:16 Minutes • ABC 18:06 Minutes • Fox 17:23 Minutes • NBC 16:46 Minutes • MTV 15:37 Minutes • ESPN 14:05 Minutes

  6. 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 News 17:10 • Syndication 18:12

  7. Advantages of TV Ads • Broad Reach and Appeal • Constantly Available • Timely • Psychological Advantage/Prestige • Target Audience • Entertaining

  8. 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

  9. How Is Advertising Sold? • Broadcast Network • Local Stations • Spot Advertising • Syndication • Cable • Satellite

  10. 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.

  11. Network • Network advertising reaches masses of people • Network ad revenue continues to fall because of competition from cable and other venues

  12. Network Costs • American Idol $620,000 • Desperate Housewives $594,000 • 24 $364,000 • CSI $374,000 • Grey’s Anatomy $344,000

  13. Network Costs • ER $282,000 • Dancing with the Stars $229,000 • Football in America $350,000

  14. Network “Events” • 2007 Super Bowl $2.6 million • Academy Awards $1.7 million • American Idol Finale $1.3 million

  15. 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.

  16. Local Costs • Early newscasts $400 • Late newscasts $450 • Ellen $150 • Oprah $250 • Local primetime average $550

  17. 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.

  18. 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.

  19. Ad Costs -- Syndicated • Friends $167,000 • Seinfeld $165,000 • Oprah $69,000 • Live $15,000

  20. 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.

  21. Political Advertising 1992: $225,807,000 1996: $336,661,900 2000: $605,233,100 2002: $1.1 billion 2004: $1.4 billion 2006: $1.25 billion

  22. Political Advertising • Political advertising is local television’s second largest national ad category.

  23. Other Advertising Strategies • Product Placement • Sponsorship • Agency created and produced shows

  24. Advertising Concerns • Content • Plugola/Payola • Conflict of Interest Issues • Billing Practices • Clipping • News Content

  25. 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.

  26. CPM=Cost Per Thousand • :30 Price # of HH x 1000 = The Cost of Reaching 1000 Households

  27. 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

  28. 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.

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