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 fr...
Competition & Electronic Media
• The more competition faced by an
industry, the less regulation on that
industry is needed...
Competition among different media
types
• People use media
differently
• Competition can be
defined by how
people use a sp...
Competition among different media
types
Radio is the most intimate of the
mass media
Highly portable and personal
medium
...
Competition among different media
types
Television is used differently
than radio
Used for relaxation
“Couch potato”
Pe...
Making media buying decisions
Advertisers buy different media to reach as
many customers as possible
•How does an advertis...
Making media buying decisions
• Broadcasters need programs to be
successful in order to attract an audience;
advertisers w...
Determining what to buy: the
advertiser’s perspective
Buying plan: based on three criteria
1.population or market size
2.e...
Media Buying terms:
• Spots: time segments available for commercials in radio
or TV. A marketer/advertiser will purchase a...
Placing the Ad
• After advertisers determine what kind of
media to buy, where to buy it, and for when –
they can evaluate ...
CPM: Measuring the cost of advertising
on two stations
• Media buyers use a standard
formula to figure out the actual
cost...
Local Markets
• In many smaller markets, a client will work with a
broadcast salesperson to do a media buy, instead
of hav...
Broadcasting Sales Practices
• The goal of a radio station is to gain a large number
of a certain type of listener
• Local...
Dayparts
• Morning drive, afternoon drive, midday, evenings,
overnights
• When an advertiser buys a package that will run ...
Broadcasting Sales Practices
Cooperative Advertising (co-op): when a
national firm will share the cost of advertising with...
The future of radio sales
• Today, nearly 80% of all radio sales are local
• National spot sales account for only $1 out o...
Sales in public radio/TV
• Financed by local or educational community
entities, Corporation for Public Broadcasting (CPB),...
Television
• Television stations are more structurally
complex than radio; they have a greater
reliance on outside program...
Television
• Most TV stations are affiliated with a
network
• Affiliates receive programming from the
network feed via sat...
Television Ratings
• The amount of money a station/network
can command from sponsors is directly
linked to how many people...
Network Sales
• To make network television profitable,
networks charge a large amount of money for
30-second spots during ...
Syndication and local sales
• Off-network syndication: reruns
• First-run syndication: shows created
especially for the sy...
Syndication and local sales
• For example, if a station purchases 150
episodes, and plays them 3 times each –
striped acro...
Syndication and local sales
• The station must make back the cost of
syndication, sales commissions and overhead
to reach ...
Other aspects of
broadcast sales
• Station identification: extremely important; stations need to
make themselves identifia...
Other aspects of
broadcast sales
• Local TV stations do promotion as well, i.e.
special investigative reports, website
pro...
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COM 110 Chapter 7

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COM 110 Chapter 7

  1. 1. The Business of Broadcasting, Satellite and Cable Chapter 7
  2. 2. 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)
  3. 3. 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
  4. 4. 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)
  5. 5. 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)
  6. 6. 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
  7. 7. 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
  8. 8. Making media buying decisions • Broadcasters need programs to be successful in order to attract an audience; advertisers want a large audience • A program’s success is evaluated by how many viewers are watching – ratings • Ratings can tell an advertiser what type of audience they reach (demographics)
  9. 9. Determining what to buy: the advertiser’s 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
  10. 10. 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
  11. 11. 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
  12. 12. 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
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. 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)
  17. 17. 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
  18. 18. 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!”
  19. 19. 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
  20. 20. 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)
  21. 21. 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)
  22. 22. 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
  23. 23. 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
  24. 24. 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
  25. 25. 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
  26. 26. 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)
  27. 27. 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

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