The Television Industry Basic Economics of Broadcast Television
Programs are scheduled interruptions of marketing bulletins
And in some cases it s hard to tell the difference between the program and the marketing
The Industry Players Producers Distributors Exhibitors Advertisers Consumers
The relationship What about the internet? DVD Rental Outlets DVD Distributors
The relationship DVD Rental Outlets Programs Time Money Audiences DVD Distributors Programs Money Money Programs
Producers Manufacture shows equivalent to movie producers
Areas of competition among Sale of programs producers Talent to make programs Indirect competition for audience Inter-temporal competition due to reruns, recording and internet availability This may result in competing with itself
Who buys programs? Networks Independent stations Network affiliates filling out schedules Internet content providers Netflix
What do they purchase? From producers new shows From syndicators game shows talk shows some sitcoms rights to reruns
2000 2010
New This Year The New Celebrity Apprentice Post my Party Kiss Bang Love Returning Favorites Survivor Amazing Race Keeping up with the Kardashians
Distributors Networks are middlemen Buy audiences by purchasing programs Sell audiences to advertisers
Why networks as distributors? Decrease transaction costs Fewer contracts to negotiate Economies of scale in TV scheduling Efficiency in distributing ad budgets Easy to promote other network shows Economies of scale in transmission
TV Stations Product measured in people/time delivered Price quoted in $/1000 viewers/ unit time 30 second units most common
Measuring viewers Ratings points = percentage of households able to receive signal that are tuned in Share = percentage of sets in use that are tuned in
La Crosse metro area has 100,000 households If 25,000 are watching Off Pitch then rating is 25,000/100,000 = 25 If only 50,000 sets are in use then share is 25,000/50,000 = 50
Measurement Types Measured each minute and reported as per minute average Measure of only minutes ads shown Ratings include figures for actual broadcast plus same day recorded
Other Measures Person 2+ = percentage of population over age 2 able to receive signal who are tuned in results in slightly higher ratings measure than does the use of the traditional ratings points
Other Measures Time shifted Same day = recorded and watched on same day as original broadcast 7 day = recorded and watched within 7 days
2013 Nielsen data
And when streaming enters the picture...
Ratings increase dramatically when 7 day viewing is considered
All Time top rated telecasts Program Date Rating 1 Ed Sullivan Show (Elvis debuts) 2 I Love Lucy Lucy in the Hospital Sept 9, 1956 82.6 Jan 19, 1953 71.7 3 M*A*S*H final episode Feb 28, 1983 60.2 4 Dallas Who Shot JR? Nov 21, 1980 53.3 5 Roots part 8 Jan 30, 1977 51.1 6 Super Bowl XVI Jan 24, 1982 49.1
So, why aren t there any recent shows on this list? Where s Off Pitch?
Top regularly scheduled programs week of April 3, 2017 Telecast Network Rating NCAA Basketball Championships CBS 13.2 NCIS CBS 8.5 NCAA Basketball Pre Game Show CBS 8.3 The Big Bang Theory CBS 7.6 60 Minutes CBS 7.2 Bull CBS 7.0 Dancing with the Stars ABC 6.8
Exhibitors are manufacturers
Advertisers Only interest is in selling products TV is just one way to do it Substitutes: newspapers, radio, billboards, webpages, etc..
Demographics Age Gender Is bigger better? Geographic location Income Cost of reaching largest audience may be too high
Is the Super Bowl worth $10 million a minute? 60 Super Bowl Advertising $6,000 50 $5,000 40 $4,000 30 $3,000 20 $2,000 10 $1,000 0 $0 rating 30 sec ad ($000)
Advertising rates Set during sweeps months February, May, July, November Types of ads National Regional Local
Determining ad rates Reach = percentage of households exposed to an ad over a predetermined time span (e.g. ratings points) Frequency = number of times an ad is run during time span Gross rating points = reach x frequency
Budweiser ad shown twice during Monday Night Football frequency = 2 25,000 La Crosse sets are tuned in (out of 100,000). GRP for La Crosse = 2 x 25 = 50
Viewers willing to pay for ads are most desired They reveal their preferences Easier to target prospective buyers Ads in specialty magazines Commercials on specialty channels: ESPN, Food Network, Home and Garden Network, etc.
Viewers are consumers 1962 Glick and Levy study quantity of TV watched is not a function of quality of programming if TV is on, people watch
So how do people watch tv?
What does that mean for advertisers? Millennials are the coveted 24-48 demographic
In 2013 online ad revenue passed cable tv ad revenue Though it still trailed broadcast tv ad revenue
Four years later it exceeds cable and network spending combined
Why is cable so expensive?!
The cable advantage This is why cable bills are rising
This is the future...
The online age gap foretells the future
The changing television product Advertisers are paying more for fewer viewers But getting online ads as well as on air ads Consumers are paying more for cable television But it is bundled with internet and phone service A changing product mix for changing consumer preferences
The future of television Time shifting Watching on computer/mobile devices HD transmission Wonkavision
Questions?
And now a bit of the past
Regulation 1912 Congress nationalized broadcast spectrum FCC allocates space Small amount for TV Many other uses: radio, cell phones, military, microwave systems, satellites
Carroll doctrine New license granted only if new station wouldn t damage existing service
decision made to serve public interest maximize signal quality by restricting number of local stations effect is to restrict choice of stations and shows effective maximum was 3 per city thus effective maximum number of networks was 3
price deregulation movement research showed FCC regulations were enriching broadcasters, not viewers part of broad movement (airlines, trucking, banks) quantity
deregulation 1976 receive only satellite dishes allowed 1977 pay cable channels allowed 1987 cable deregulated 1995 networks allowed to own rights to TV shows 21 st century Telephone and internet providers may also carry television signals