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UMass Amherst COMM 122 - Advertising Cost

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COMM 122 1st Edition Lecture 9Outline of Current Lecture I. NewsII. AdvertisingIII. Cost to Produce a Commercial IV. Buying and Selling AdsV. Advertising ComponentsVI. Advertising in the 17th CenturyVII. Commercial ClutterVIII. CPMIX. Advertising Termsa. Per-inquiry Adsb. Clippingc. Adjacencies d. Pode. Cooperative Advertising f. Double BillingCurrent LectureNews: people our age are watching less tv (not less tv programming)- People between 18-34—last 4 years viewing on a traditional tv is down 20%, online and time shifted is up 24%o Worried about losing this group because this is who they target- NBC—1/2 million people are watching on digital device These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.o Scheduling, appointment tv—not watching things when they’re on so advertisers aren’t making money o Most people seeing it within a week on the DVR (huge increase)—can fast forward on the commercials so the people aren’t as valuable Advertising: most conspicuous product of a society (sets the consumer agenda)- Newspapers: 60% of space, 75% of the income- Magazines: 50% of space, 50% of the income- Commercial tv: 25% of time, 100% of incomeo Even though advertising is still 90% of the income for local tv advertising, it is decreasingo Online/digital ads and Retransmission fees make up approximately a combined 10%, but it is increasing  Retransmission fees: fees that they get from local cable companies for retransmitting their programs - Where does the cable system get the money? – Subscriptions from us to pay for the local stationsOld Days: they paid compensation to the affiliates for carrying the program (broadcast network—>$$ compensation—> affiliates (local stations)- They then stopped paying because they didn’t have the money (no compensation)Now: cable systems—>$$ returns, fees—> affiliates (local stations)—>affiliates getting money from local stations so they have to payAnd: Broadcast networks  $$ reverse compensation  affiliates (local station)- More networks and stations looking to get money from the retransmission fees- Even though we pay for so much, advertising is still the main product—however, tv and online ad spending are becoming closer and closer Global ad spending: growing fast but still less than tv- 4 years ago: virtually nothing was being spent on mobile advertising - 2 years from now, mobile advertising is expected to increase Cost to produce a commercial: 30 seconds national network commercial production costs: - Average (estimate): $381,000- Can exceed $15,000/ second o People pay different amounts depending on which show they want to advertise ono The most popular and watched shows aren’t always the most expensive because itdepends on the age group watching it If too many people are watching on a DVR, they lower the price even if they have a huge audience Buying and Selling Ads: Inventory: every network has a certain amount of time to sell (total ad time available to sell)Upfront: market (IN SPRING)—60-70% - Every spring the networks put together all their pilots for their upcoming programs—theytry to sell a certain amount of their inventory for the springScatter market: leftovers—when the fall comes around the 30-40% left are sold - Advertising time becomes more scarce so it costs more because it is more valuable - If a program turns out to be more popular—they can charge moreMakegoods: adjustments- In the upfront market when they buy time for the fall—they get a certain guarantee (10 million viewers)—if the program gets 12 million (that 2 million is free); however if the advertiser only gets 8 million then the network has to over make goods o Reduces the scatter market Upfront Market 2014-2015:- Cable: 50 networks-- $9.7 billionAdvertising started somewhere in the 17th century- They were more classified ads (cures, medicines)—Very informative and straightforward- Confined to specific sections—not all over the place—didn’t have mass literacy—it was directed and targeted at the upper class that could read newspapers- 18th century: tricks on headlines to make people notice - Industrial revolution: new modes of productions required new modes of consumption o More people able to read—papers could be distributed more and people could read them (part of the proliferation and explosion of advertising)- Post WWII economic boom: people bought things that didn’t exist before Advertising is divided into 2 components (official art of the industrial order—make us want to continuously keep buying)- Information: for sale—no manipulation of emotion (not controversial)- Emotional appeal: use emphasis to persuade people o Fake promises and manipulation - Many more men than women in commercials- Men are shown in many more different jobs- Consumption solves everything—if you’re unhappy, buy somethingCommercial Clutter: we see so many, so often that we can’t remember the commercials - Broadcasters are using the public airwaves o They should be required to do things to serve the public—there used to be a limit as to how much broadcasting there could be - FCC eliminated limits on radio in 1982 and tv in 1985 (deregulation, leave it up to the market place)- 1992 Children’s TV Act: 12 min/hour weekdays, 10 (1/2) min/hour weekdays (broadcaster overusing—they have to do something, regulation)CPM (Cost per Thousand): how much an advertiser has to pay for every thousand people- Cost of ad/ (audience/1000)o 90,000 viewers, cost= $180, 180/90, CPM=$2o 50,000 viewers, cost $500, 500/50, CPM=$10- Even as the average audience has gone up, the cost for the audience has continued to go upo The more channels—watching different channels, smaller audienceso Less channels—watching more of the same, bigger audiencesAdvertising Terms: - Per inquiry ads: the advertiser doesn’t buy time fro the station; the station gives the advertiser time for free, the station gets paid when the someone calls the station and buys something - Clipping: when a show is sold on syndication—station buys a syndicated station, 22 min of show, 2 min of promos, 6 min of advertising when they buy the show—they started to clip out the last 30 seconds in order to add more advertising (illegal—not supposed to edit)o Now: “time warping”—Speed it up digitally—may take 20 minutes so they cram more adso Stations use


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