The Business of Broadcasting,

Cable and New Media

Pages: 158-163

How to do it

What is the primary product that a radio or TV station has to sell?

A.

Entertainment.

B.

Advertising time.

C.

Listeners to advertisers.

D.

Weather updates.

One of them is correct others are less correct.

Over the air broadcasting

Commercial mass media have a unique dual nature.

Mass-media technology is designed to link audiences with program suppliers

and with sponsors.

Stations are attracting audiences because of their programming, but it is the

advertising revenue generated as a result of having a desirable audience that
really pays for the programming.

Cable industry

It works a little differently from broadcasting:

1.

Cable has advertising and they must sell the audiences attention to
advertisers.

2.

Cable companies charge viewers a monthly subscription fee.

3.

Cable has a dual income.

4.

Some companies offer additional services as high speed Internet and

telephone (Comcast) as additional sources of income.

5.

Sometimes consumers are willing to pay extra fees for noncommercial

channels

Web sites

Web sites make money through ad placement, like a newspaper or magazines,

or by selling goods or services like the iTunes store.

Without profit there will be no money for program development.

Therefore we need to understand how a station generates revenues and

spends money.

Competition & Electronic Media

Radio, TV, Cable, Satellite broadcast and Web sites are facing fierce
competition.

Government oversight of the electronic media is tied to how competitive

those media are.
More competition = less regulation.

Radio is less heavily regulated.

11,000 radio # 1370 TV.

Competition & Electronic Media

Few places in USA have more than one cable operator in a franchise area.
Therefore the cable operator can be mandated to provide government and
public access channels for the local municipality.

The Internet is like a magazine stand with thousands of different choices and
lots competition.

The electronic media have different levels of competition and face different
amounts of government oversight as a result.

Competition & Electronic Media

a medium faces no competition = monopoly.

*Hard to find in the USA today.

A limited number of competitors (3) = oligopoly.

*Each one gain a share of available advertising revenue.

A large radio market with 25 radio signals = marketplace solution or pure

competition.
*the listeners decide which stations will become popular and thereby gain a
large share of ads dollars.

Pure competition likely force weak stations to go out of business or get

purchased.

Competition among different media

types

People use the various forms of media differently.

Competition is defined by how people use a specific medium and what

competition it faces from all other competitors.

Example: radio is the most intimate, highly portable and personal medium. It
is more likely to compete against other portable devices such as MP3 players
and smartphones than against cable or TV.

Competition among different media

types

Advertisers will frequently buy different media to reach as many customers as

possible.

They will also spread their messages over different times in the broadcast day
to ensure the broadcast dissemination of their message.

Figure 7-1 shows that time spent listening to the radio and watching TV is
greater than other media thus advertisers are particularly concerned with
these two media.

Determining a medium to buy

A triangle relationship in the media business between programmers, media

sellers and media buyers.

How advertiser actually decide?

Many factors can influence the media purchase (called a buy)

1- internal: such as the budget allocated to a particular product line.
2- external: such as the usage of new media by potential customers.

Determining a medium to buy

A station needs to evaluate how many viewers watch the program to

determine its success.

Findings out about the age, gender, and income of viewers (demographics) is
important too.

Stations use that information to attract certain advertisers.

Determining a medium to buy

Marketers and advertisers put together a buying plan developed on three basic
elements:
1.

Population or market size and other demographic information.

2.

Effective buying income (EBI) which is a reflection of the disposable

income of the average family.

3.

Retail sales for each geographical area where they sell their products.
Advertising agencies and marketing firms collect data relevant to that
product and may develop a buying power index (BPI) for markets they are
interested in the higher the BPI, the greater buying power for that market.

Determining a medium to buy

If the media plan is sizable, there is a substantial amount of money allocated

for advertising the product, the advertiser may use the services of a company
that competing national advertisers spend on various media.

Research companies break down advertising expenditures according to

specific classifications of products, such as nonprescription drugs.

Determining a medium to buy

It is a way to gauge what the competition is spending on media.

After data collection, the advertiser will develop media plans for the product.

The time segments available for commercials in radio and TV are called spots,
and this term is also used to refer to the commercials themselves.

Various formulas
Media buyers use various formulas for determining the effectiveness of ad
placement.
1.

Gross rating points (GRPs) gives the buyer a way to evaluate a run of x
number of commercials over the specific time period (frequency) that has a
consistent rating for the target audience (reach.)

2.

Gross impressions: reflects the total of all persons reached by each

commercial in the advertising campaign.

Various formulas

To determine audiences and effectiveness, advertisers will calculate how

much money they want to spend to achieve their marketing goals.

Occasionally an advertiser will select or not select specific media based solely
on cost.

Certain media work better for some advertisers, coupons work well for
grocery products but are not easily used in electronic media.

Placing the Ad
Advertisers determine
1.

The kind of media they want to buy (radio, TV..)

2.

When (morning drive time on radio, prime time on TV.)

They evaluate the benefits of purchasing time on one or more specific media
outlets.

Placing the Ad

A package: advertising time sold for a specific number of spots and covers a
specific period (called flight dates.)

Time buyers want to be able to compare the cost of doing business at station
A with B, they used rate cards (see Figure 7-2) to help time sellers and buyers
to evaluate the cost of advertising.

As advertiser purchases more time, the cost per spot decreases.

CPM: measuring the cost of ad

The unit cost is expressed as the cost to reach 1000 audience members.

Cost per thousand is abbreviated CPM

M is the roman numeral for 1,000.

If a shoe store owner wanted to advertise on station Wxxx which charged

$240 per spot and had a listening audience of 20,000 people, the CPM formula
CPMxxx = = = $ 12

CPM: measuring the cost of ad

Cost

of reaching 1000 listeners would be $12 on Wxxx.

CPMzzz = = = $ 9
Though Wzzz charges slightly more per spot, the CPM is lower because it has a
larger listening audience.

For advertisers, the goal is to reach the largest potential audience for the
smallest dollar investment.

CPM: measuring the cost of ad

Sometimes, we spend more money to reach audience with specific

demographic characteristics. (luxury car)

Cost per point (CPP) is another good way of measuring.

example: the cost of advertising unit (3second spot) was divided by the
average rating of males 35 years and older.

Marketers try to determine reach: the number of different audience members

exposed to an ad at least once during the period an advertisement is run.

Local markets

Many advertisers are not large enough to hire an agency or media buyer.

A sales representative will work directly with a store owner to develop a

commercial package.

One the commercial is written and approved, he will schedule the spot in the
stations commercial rotation for play.

Local markets

Both, they may develop a long term contract that reflects a discount for
sponsoring a specific time slot.

The sales rep will place a standing order for the commercial to run over a
specific period.

Small market radio stations dont subscribe to ratings service (no CPM to
calculate) store owner may simply work out the best deal possible.