The Business of Broadcasting,

Satellite and Cable

Chapter 7

The product
Stations are in the business of
selling an audience to
advertisers
Broadcast TV needs revenue
generated from advertising to
pay for programming costs;
programming draws the
audience advertisers are
willing to pay more to get
more of the audience
Cable TV has a dual income
they sell advertising, as well as
collect monthly subscription
revenues, and they sell non-TV
services (internet, phone)

Competition & Electronic Media

The more competition faced by an
industry, the less regulation on that
industry is needed (self-check)
If a medium faces no competition, it is
a monopoly
If there are a limited number of
competitors, it is called an oligopoly
If a market faces complete
competition (pure competition), the
audience decides what is popular,
and there by gains a large share of
advertising dollars

Competition among different media

types
People use media
differently
Competition can be
defined by how
people use a specific
medium and what
competition it faces
from other
competitors (iPod in
the car, newspaper
on iPad, TV vs. radio)

Competition among different media

types
Radio is the most intimate of the
mass media
Highly portable and personal
medium
Likely to compete against other
portable devices like iPods, that
compete against cable or TV
Radio centers around music, news
and talk; practically no dramatic
programming
Radio is omnipresent
People can listen to a radio in
places where TV watching would
be difficult (car, at work)

Competition among different media

types
Television is used differently
than radio
Used for relaxation
Couch potato
People are unlikely to be
doing other activities while
watching TV
Competes directly with cable
and movie rentals

Making media buying decisions

Advertisers buy different media to reach as
many customers as possible
How does an advertiser choose to buy TV
time from one station over another? Why
choose newspapers over radio? Direct mail
over billboards? Efficient media buying

Making media buying decisions

Broadcasters need programs to be
successful in order to attract an audience;
advertisers want a large audience
A programs success is evaluated by how
many viewers are watching ratings
Ratings can tell an advertiser what type of
audience they reach (demographics)

Determining what to buy: the

advertisers perspective
Buying plan: based on three criteria
1.population or market size
2.effective buying income
3.retail sales for each geographical area where
people buy their products
Buying Power Index (BPI): the greater the
buying power, the higher the BPI
BPI is determined through data collection,
analysis, allocation of advertising funds
BPI tells an advertiser where to most effectively
spend their advertising dollars

Media Buying terms:

Spots: time segments available for commercials in radio
or TV. A marketer/advertiser will purchase a flight of
spots for a campaign
Effectiveness of ad placement is determined by Gross
Rating Points (GRP)
GRPs give the buyer a way to evaluate a run of X number
of commercials over a specific time period that has a
consistent rating for the target audience
Gross Impressions: reflects the total of all persons
reached by each commercial in the advertising campaign
Both methods help advertisers calculate how much
money needs to be spent to achieve certain marketing
goals

Placing the Ad
After advertisers determine what kind of
media to buy, where to buy it, and for when
they can evaluate the benefits of purchasing
the time
Package: advertising time sold for a specific
number of spots over a specific period of time,
called flight dates
Rate cards: used by both television and radio,
they give the cost of advertising, to help time
buyers evaluate the cost of advertising

CPM: Measuring the cost of advertising

on two stations
Media buyers use a standard
formula to figure out the actual
cost of a commercial spot
The unit cost is expressed as the
cost to reach 1000 audience
members
CPM: Cost Per (M) Thousand
CPM is a good way to express
efficiency
CPP (Cost Per Point) is similar to
CPM, but it measures an
audience that is part of a specific
demographic
CPM and CPP utilize ratings data
for audience information

Local Markets
In many smaller markets, a client will work with a
broadcast salesperson to do a media buy, instead
of having a third party advertising/marketing
agency
Salespeople may place a standing order, meaning
a client will have a longer-term, consistent
advertising sponsorship, in which they are the only
ones allowed to advertise in that time period
This situation creates a non-preemptible spot
meaning it cannot be bumped for another
commercial

Broadcasting Sales Practices

The goal of a radio station is to gain a large number
of a certain type of listener
Local sales: refers to the sale of commercial
advertising by stations to advertisers in their
immediate service area
Station ad rates are pegged to the share of the
audience that is listening
Share is determined through ratings
The larger the share, the more money a station can
charge for their commercial spots
Ads cost more or less depending on the time period
in which they air

Dayparts
Morning drive, afternoon drive, midday, evenings,
overnights
When an advertiser buys a package that will run on
a station throughout the broadcast day, the term
run of schedule (ROS) is used to designate that the
spots are to be played through all dayparts

Broadcasting Sales Practices

Cooperative Advertising (co-op): when a
national firm will share the cost of advertising with
the local business
Co-ops allow local retailers to tie their businesses
in with a local campaign
National Spot Sales: sale of commercial radio
time to major national and regional advertisers
Network Sales: the sale of commercial advertising
by regular networks (ABC, NBC) or special radio
networks (Westwood One, Buffalo Bills Radio
Network) that carry specific programs (sports,
Tom Kent)

The future of radio sales

Today, nearly 80% of all radio sales are local
National spot sales account for only $1 out of every
$6 spent in radio advertising
Most national spot sales go to the top-rated stations
in the largest markets
Stations that considerably rank above their
competitors out-bill and out earn their competition

Sales in public radio/TV

Financed by local or educational community
entities, Corporation for Public Broadcasting (CPB),
listener support and grants
Noncommercial stations can solicit corporate or
advertiser support through underwriting
Underwriting cannot make a call to action, such as
Call now for a great deal! or Stop in and see us!

Television
Television stations are more structurally
complex than radio; they have a greater
reliance on outside programming sources.
Network programming is based on shows
of a fixed length that are meant to reach
very large audiences
TV programming is acquired, aired, and
sold rather differently than radio
programming

Television
Most TV stations are affiliated with a
network
Affiliates receive programming from the
network feed via satellite
Station breaks between network programs
allow local stations to sell advertising
adjacencies (lucrative, local spots that are
inside network programming)

Television Ratings
The amount of money a station/network
can command from sponsors is directly
linked to how many people are predicted to
watch a given program
The larger the ratings estimate, the more
a station/network will charge for the spot
When there is no network feed, TV stations
turn to syndication (prime-time reruns,
first-run syndication)

Network Sales
To make network television profitable,
networks charge a large amount of money for
30-second spots during the most popular
programs
CPM is around $30.00, in line with local TV
advertising CPM
However, the audiences are enormous
Hit shows that go on to syndication make
money in the back-end market after the
shows have originally aired

Syndication and local sales

Off-network syndication: reruns

First-run syndication: shows created

especially for the syndication market
TV stations license syndicated show
packages obtaining the rights to show each
episode a certain number of times in the local
market

Syndication and local sales

For example, if a station purchases 150
episodes, and plays them 3 times each
striped across a 5-day schedule, this gives the
station about 1.5 years of programming
Stations make money on syndicated
programming by selling the commercial
minutes available inside the program to either
national or local spot sales

Syndication and local sales

The station must make back the cost of
syndication, sales commissions and overhead
to reach a profit target
Some programs are expensive; others are
relatively inexpensive to produce
Usually game shows are the cheapest to
produce, with prizes provided by barter
agreements, or product placement

Other aspects of
broadcast sales
Station identification: extremely important; stations need to
make themselves identifiable to the audience, who rates
them
Promotions: also important, at sweeps times, stations will
conduct high-ticket item contests to try and gain more
listeners during ratings survey times
Commercial-free drive times: attract listeners during key
ratings times/dayparts, encourage extended listening
Stunting: when a station changes formats, they promote the
change with special programming, meant to boost ratings
(upon which sales rates for the year will be determined)

Other aspects of
broadcast sales
Local TV stations do promotion as well, i.e.
special investigative reports, website
promotions, giveaways, special news series
Public Service Announcements: unpaid
advertisement for social issues. PSA
campaigns are often organized and
implemented by the National Association of
Broadcasters and the Advertising Bureau