1. Broadcasting, Cable, the Internet and Beyond Chapter 7 Quick Facts zMost expensive advertising time slots: 1999 Super Bowl zAmount of money spent on radio for prescription drug advertising: $82.9 million (2001) zMost profitable television station in the U.S.: WNBC-TV zCost of a 30 second advertisement time slot during Ally McBeal: 177,000 (1999) zRatio of advertising dollars spend on TV versus billboards: 10 to 1 zTotal cable advertising revenue: $15.5 billion (2001) zNumber of DBS subscribers: 16 million (2001)

2. Broadcasting, Cable, the Internet and Beyond Chapter 7 What is the Business of Broadcasting? zBroadcasting and cable are ways of linking viewers with advertisers while entertaining and informing an audience. zStations attract audiences because of their programming zAdvertising revenue generates the profits that make programming possible zTelevision and cable have different revenue streams

3. Broadcasting, Cable, the Internet and Beyond Chapter 7 The Business of Broadcasting zMass media technology - an economical way to link large numbers of peoples with advertisers zIn electronic media there is an interplay between y technology y the consumer y economics of each medium

4. Broadcasting, Cable, the Internet and Beyond Chapter 7 Economic Models for Electronic Media zTelevision and Radio model - Single Revenue Stream yThe audience is the product that media delivers to an advertiser. zCable model - Dual Revenue Stream yLike broadcasting cable delivers an audience to an advertiser yCable charges a monthly subscription fee for receiving the program

5. Broadcasting, Cable, the Internet and Beyond Chapter 7 zCompetition and Electronic Media zElectronic media all face competition zGovernment oversight is tied to how competitive the media yRadio - 11,000 commercial stations - fewer regulations yTelevision - 1,300 commercial stations - more regulations yCable - Local franchise - local mandates for serving the community

6. Broadcasting, Cable, the Internet and Beyond Chapter 7 Competition and Electronic Media zMONOPOLY - where there is no practical competition zOLIGOPOLY - there are a limited number of competitors zPURE COMPETITION - few market barriers allow many players to enter

7. Broadcasting, Cable, the Internet and Beyond Chapter 7 Competition among Different Media Types zPeople use various forms of media differently zCompetition for radio listeners - radio is personal yOther portable devices (Walkmans, CDs) compete with radio yRadio programs music, news, and talk zCompetition for television viewers - yTV competes with cable, movie rentals, etc yTelevision programs dramas, stories, news and talk zAdvertisers will buy different media to reach listeners/viewers during different times of the day

8. Broadcasting, Cable, the Internet and Beyond Chapter 7

9. Determining a Medium to Buy zThe triangular relationship in the media business between yProgrammers yMedia sellers yMedia buyers zSuccessful programs develop audiences zMedia buyers buy time from sellers within or near those programs

10. Broadcasting, Cable, the Internet and Beyond Chapter 7 zDetermining a Medium to Buy zMarketers and advertisers develop a buying plan based on yPopulation or market size yEffective buying income yRetail sales for the market (geographical area) zBuying Power Index - data related to expenditures of classifications of products for the specific market yBPI tells the advertiser how much the competition is spending on similar or competing products

11. Broadcasting, Cable, the Internet and Beyond Chapter 7 zDetermining a Medium to Buy (continued) zMedia Buyers use various formula for determining the effectiveness of ad placement zGross Ratings Points - evaluates a run of x number of commercials over a specific time period that has a consistent rating for the target audiences. zGross Impressions - reflects total of all persons reached by each commercial in an ad campaign zBuyers use data to calculate how much money to spend to achieve their goals

12. Broadcasting, Cable, the Internet and Beyond Chapter 7 zMedia Buyers buy specific audiences for their products based on several criteria: zDemographics yAge ySex yEducation yIncome zPsychographics yvalues and lifestyles of the audience (likes, dislikes, style, other cultural factors)

13. Broadcasting, Cable, the Internet and Beyond Chapter 7 zPlacing the Ad zAdvertising Time Purchases zRate Cards - the cost of advertising on specific stations zPackages - a specific number of spots to run on one or more stations zSpecific Times - yAdvertisers can buy specific time periods (e.g. primetime on television, drivetime for radio) yAdvertisers can buy time throughout the broadcast day (run of schedule)

14. Broadcasting, Cable, the Internet and Beyond Chapter 7 CPM - Measuring Advertising Costs zMedia Buyers use standard formulas to figure out the actual cost of a commercial spot zCOST PER THOUSAND (CPM) is used to express the cost of reaching 1,000 members (M) of the audience zCalculating 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) zCPM is a good way of expressing efficiency of the media buy

15. Broadcasting, Cable, the Internet and Beyond Chapter 7 Broadcasting Sales Practices zStation ad rates - pegged to share and make-up of the audience zRadio Sales - Dayparts yMorning Drivetime - most important time yAfternoon Drivetime - second in importance yMid-day and Evening - next in importance zCooperative advertising - cost of ad is shared between manufacturer and local store

16. Broadcasting, Cable, the Internet and Beyond Chapter 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 4361461 1980 1980183 7792740 3702 1985365 13354790 6490 1990433 16266780 8839 1995512 17417987 10240 2001893 3036 13932 17861 Source: Universal-McCann **2001 revenue breakout is estimated

17. Broadcasting, Cable, the Internet and Beyond Chapter 7 Broadcasting Sales Practices zRadio and television sales are divided into several categories: zLocal Spot Sales - local commercials purchased to run on local stations (local appliance store) zNetwork Sales - time purchased within a television network program or on a radio network zNational Spot Sales - buying time at various local stations using a national sales representative

18. Broadcasting, Cable, the Internet and Beyond Chapter 7 Television Sales zNetwork Television is purchased in several ways: zUpfront Market - media purchases made before the television season actually begins zScatter Markets - four seasons where advertisers purchase time. zPurchasing time upfront or in the scatter markets each have advantages.

19. Broadcasting, Cable, the Internet and Beyond Chapter 7 Economics of Networking zTelevision Programming yDramas - most expensive to produce yComedies - less expensive yReality - least expensive zSome first run programming loses money until syndication yAdvertising revenue is NOT sufficient to pay the cost of the television series, particularly dramas zCPM for network television is consistent with other national ad venues

20. Broadcasting, Cable, the Internet and Beyond Chapter 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 Beyond Chapter 7 Syndications zLocal television programming is usually built around local news and syndicated programming zSyndication yFirst Run - New non-network produced programming (e.g. Wheel of Fortune) yOff Network - network reruns (e.g. Will and Grace) zLocal Stations may purchase syndication rights or barter time for the program yBarter syndication has commercials embedded within the programs.

22. Broadcasting, Cable, the Internet and Beyond Chapter 7

23. zPublic Television zPublic radio and television stations do not have commercials zCorporations provide underwriting zUnderwriting usually airs at the beginning of the program zMembership drives usually occur twice a year zFederal funding for public television works out to about $1 per person per year

24. Broadcasting, Cable, the Internet and Beyond Chapter 7