• What is the Business of Broadcasting and Cable?• Broadcasting and cable – have traditionally worked on the concept of linking viewers with advertisers while entertaining and informing the audience• Stations and cable networks– attract audiences because of their programming.• Advertising revenue – generates the profits that make programming possible• The Business of Broadcasting• Mass media technology – Affords an economical way to link large numbers ofpeople with advertisers• In electronic media there is an interplay among– technology– the consumer – economics of each medium• Economic Models for Electronic Media• Broadcast stations and cable have different revenue streams.– Television and Radio model – Originally a single revenue stream business• The audience is the product that media delivers to an advertiser.– Cable model began as dual revenue streammodel• Like broadcasting cable can deliver an audience to an advertiser• Cable also charges a monthly subscription fee for receiving the program delivered to the audience• This dual stream model works for system operators and for cable networks• Economic Models for Electronic Media• Both Television and Cable have added revenue streams over time– TV has added• Retransmission consent income• Digital programming distribution– Cable• ISP• VOIP • Digital programming distribution • Competition and Electronic Media• Electronic media all face competition• Government oversight is tied to how competitive the media are– Radio - 11,000+ commercial stations - fewer regulations– Television - 1,300+ commercial stations - more regulations– Cable - Local franchise - local mandates for serving the community• Competition and Electronic Media• Pure Competition– few market barriers allow many players to enter• Oligopoly – there are a limited number of competitors• Monopoly – where there is no practical competition• Fewer competitors; more government regulation• More competitors; less government regulation• Competition among Different Media Types• People use various forms of media differently• Competition for radio listeners - radio is personal– Other portable devices (MP3 players and smartphones) compete with radio– Radio programs music, news, and talk• Competition for television viewers– TV competes with cable, movie rentals, etc – Television programs dramas, stories, news and talk• Advertisers will buy different media to reach listeners/viewers during different times of the day• Media Usage Comparison 2004 and 2010 Usage Per Person• Determining a Medium to Buy• The triangular relationship in the media business among– Programmers– Media sellers– Media buyers• Successful programs develop audiences • Media buyers buy time from sellers within or near those programs• Determining a Medium to Buy• Marketers and advertisers develop a buying plan based on– Population or market size– Effective buying income – Retail sales for the market (geographical area)• Buying Power Index - data related to expenditures of classifications of products for the specific market– BPI tells the advertiser the market share of those offering similar goods/services– Advertiser may obtain additional data indicating how much the competition is spending on media• Determining a Medium to Buy (continued)• Media Buyers buy specific audiences for their products based on several criteria:– Demographics • Age• Sex• Education• Income– Psychographics • values and lifestyles of the audience (likes, dislikes, style, other cultural factors)• Placing the Ad• Advertising Time Purchases– Rate Cards - the cost of advertising on specific stations• Placing the Ad• Packages - a specific number of spots to run on one ormore stations (within a time frame known as a flight)• Specific Times– Advertisers can buy specific time periods (e.g. primetime on television, drivetime for radio)• Television Dayparts• Placing the Ad• Specific Times– Advertisers can buy specific time periods (e.g. primetime on television, drivetime for radio)– Advertisers can buy time throughout the broadcast day (run of schedule)• Spot Position– Fixed Position– Adjacencies (next to network or other programming)• Preemptible• Non-Preemptible• ROS• Alternative Ideas• Per Inquiry• Trade Deal or Trade Out– Ads for goods or services• Time Brokerage• Program Length Commercials• Determining a Medium to Buy (continued)• Media Buyers use various formulas for determining theeffectiveness of ad placement– Gross Ratings Points • evaluates a run of x number of commercials over a specific time period that has a consistent rating for the target audiences.– Gross Impressions • reflects total of all persons reached by each commercial in an ad campaign• Buyers use data to calculate how much money to spend to achieve their goals• CPM - Measuring Advertising Costs• Media Buyers use standard formulas to figure outthe actual cost of a commercial spot– COST PER THOUSAND (CPM) is used to express the cost of reaching 1,000 members (M) of the audience• Calculating the CPM - you need to know the cost of the spot and the size of the audience.• CPM is a good way of expressing “efficiency” of the media buy• Buying the Superbowl v. American Idol• Viewers for Superbowl XLV = 162.9 million • 30 Second Ad Rate = $3 million• 3 million / (162.9 million / 1,000) = CPM– $18.42• Viewers for AI Season 10 Finale = 29.3 million • 30 Second Ad Rate = $700,000/(29.3 million/1,000) = CPM– $23.89• CPP - Measuring Advertising Costs– COST PER POINT (CPP) – takes analysis to the next level.• Allows the measurement of reaching a specific demo• Broadcasting Sales Practices• Radio and television sales are divided into several categories:– Local Spot Sales – • local commercials purchased to run on local stations (local appliance store)– Network Sales – • time purchased within a television network program or on a radio network– National Spot Sales – • buying time at various local stations using a national sales representative• Defraying the Cost of Local Broadcast Advertising• Cooperative advertising - cost of ad is shared between manufacturer and local store • Co-op Example (Joe’s Sporting Goods)• Nike might offer a 50/50 co-op plan based upon a 5 percent accrual rate.– This means, if