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30 Second commercials in the 2002 Super Bowl ranged from $1.5 Million to $2 Million. (Friedman, 2002) [That's four-million dollar minute.....] The post-9-11 event was down from the previous years. ABC was expected to made over $130 Million on the 2000 telecast with the average spot going for $2.2 million. That was a 38% increase over 1999. (Ad Age, 1/30/00)
Advertisers are generally considered to be "smart" people. A smart person doesn't usually spend four million dollars for a minute's worth of something if it isn't going to matter.......Hold that thought concerning impact of advertising, and let's look at how those commercials get on the air.
Five types of television advertising:
Network Advertising:
National Spot Advertising:
Regional Spot Advertising:
Syndication Advertising:
Local Advertising:
Spots are sold in several categories based on their scheduling:
Regional and National Advertising Spots are sold by National Sales Reps. These firms represent the local stations to the national advertisers, and they represent several stations, though never more than one in the same market.
Commerical Formats:
PROOF OF PERFORMANCE:
Logs: stations must keep accurate records of when and what spots run.
Monitoring services:
BAR: Broadcast Advertising Report: this was a manual service
Media Watch:
Sponsorship ID: Sponsors must always be identified. It's the law. (Sec 317)
Infomercials:
New format in advertising.
Has been extremely successful.
Paxson Communications was doing a mini-network predominately of infomercials. Advertisers buy chunks of time. This is a good deal for broadcaster because they neither have to buy programming, sell time or do anything but run the program. In fact they get PAID for doing it. Broadcasters love it. For years, infomercials were looked at as being rather tacky and disreputable and many have been proven to make false claims. But infomercials have been very effective for advertisers, and have earned more respectability over the past few years. (Paxson abandoned that strategy and introduced PAX NET a family-friendly entertainment channel which debuted in 1998; that network was ultimately purchased by NBC.)
Disadvantages of Broadcast Advertising:
Networks have been increasing the number of commercials in their prime time programs:
In the first Part of the 1997-8 season:
| Program | Commercial Minutes | Increase |
| Friends | 5 minutes 30 seconds | 21% increase over '96-97 season |
| Prime Time Live | 4 minutes 21 seconds | 15% gain |
| NYPD Blue | 4 minutes 33 seconds | 10% gain |
| Frazier | 4 minutes 57 seconds | 9% gain |
| Seinfeld | 4 minutes 54 seconds | 9% gain |
| Cybill | 4 minutes 54 seconds | 6% gain |
| Spin City | 5 minutes | 5% gain |
In some cases the increases were to compensate advertisers for lower than expected ratings.
Clutter:
Clutter is a term for the increasing number of commercials and non-programming content in television. It is a big problem for advertisers, because research shows that the more commercials air in a commercial break, the less impact those spots will have on a viewer.
An extra 9 hours and 44 minutes of commercials were squeezed in to shows in the first 10 weeks of 1997 season. Some advertising buyers indicate they don't think the public notices, but others are monitoring the clutter and letting the networks know about it. The Big 4 networks averaged 11. Min., 12 sec. Of prime time advertising and with "clutter" added, there's 15 minutes of non-programming content per hour.
Time devoted to commercials is up two minutes from 1991.
WB's Buffy the Vampire Slayer had the most - 23.46 minutes of commercials.
In day time the networks had nearly 20 minutes of commercials.
The American Association of Advertising Agencies and the Association of National Advertisers did a study of the average prime time hour. They found that the average hour in November, 1998 revealed 15 minutes and 44 seconds of advertising material. That was 25 seconds more than the year before and the highest level in the 10 years the study had been done. (Moore, 1999)
Clutter can be defined a couple of ways:
E! Entertainment Television, TBS and MTV were among the most cluttered networks around. They had over 18 minutes of commercials in an average hour.
In 2002, ABC was the most cluttered network again, with one of every four minutes non-program material. ABC's non-program content hourly average was 16:58 minutes up from 14:50 in last year's same quarter year. ABC defended its position claiming that the network airs more public service announcements than any other broadcast network. The group, MindShare, measures non-program material in network television. It found that 60 minutes had only 41 minutes and a few seconds of actual programming. There were 18:16 minutes of non-program material during that hour. Some of the other high ranking clutter shows are
NBC had an average of 14:9 minutes per hour and CBS had the least non-program material on the average hour with 14:09. As a rule, cable channels had less clutter than broadcast networks.
Advertising Changes in the 2000-2001 season...
Problems with the stock market added to concerns some advertisers have had about television advertising and there is concern that Broadcast Network and Spot advertising may trend lower in the future. Proctor and Gamble, historically the largest television advertiser and now second behind General Motors, decreased its spending on television in the last three years...PG spending was down $203 million or 16% between 1998 and 2000 for a total of $1.12 billion Local television stations came off their worst year in several years with revenues down .5% due to a weak national spot market. Some analysts say the reason is that spot prices have increased, but packaged goods advertisers can't keep up. Advertisers can't raise their prices to pay for the ads because the rate of inflation in the general economy is much lower that the inflation of advertising rates on television. (McClellan, 3/13/2000).
If broadcasters thought they had a hard time in 2001, things got worse after the 9/11 incident. Not only were many advertising dollars lost in cancelled programs and regular advertising schedules, some advertisers thought it was inappropriate to advertise after such a tragedy. When advertising did resume, content was carefully scrutinized for taste and appropriateness. The impact was felt on the local and national fronts. One industry article said "the bottom fell out of the ad market." (McClellan, 9/9/02 ) It turned out to be the first "down market" in a decade. In fact, three weeks before the 2002 Super Bowl, 20% of the inventory remained unsold, and it was going at bargain rates, some as low as $1.5 million / 30 seconds. (Friedman, 2002) In the fall season 2002, the market bounced back. While it's still not great, it's significantly higher than 2001 and growth is predicted through 2005 by TvB. (McClellan, 9/9/2002)
How are these decisions made?
In an Broadcasting and Cable interview with Robert Wehling of P&G, some interesting perspectives are offered on our current advertising situation. Wehling believes TV advertising works if the product is great, the copy is persuasive and the product really meets a consumer need. He provided a great example:
"We've been running for years this advertising on Folgers coffee: "The best part of waking up is Folgers in your cup. "Recently, the agency came up with two new TV spots in that advertising. One was with a singing group, and was was an Irish dancing class. Those two commercials, from the day they went on the air, lit up our 800-line. We got comments on the Internet, and we got letters. People were calling up and saying things like, 'I love them better than the programs that they're in.' Within three months or so after--when those two commercials went on television--our share was up by five points. That's a dramatic increase in a tough category. Nothing else was different except those television commercials." (McClellan,4/24/2000 p. 23)
Another example of an outstandingly effective campaign (though not offered by Wehling) is the "Make 7-Up Yours" flight. When the campaign was initiated in 1999, nobody knew how effective the spots with comedian Orlando Jones would become. The campaign was extensively tested before it aired and results have been thoroughly tested as well. Since the spots hit television, 7-UP has had a 40 increase in advertising awareness, a 142% increase in "unaided brand awareness with 12-to-24-year-olds and sales volume is up 1.8% with steady increases in the last four quarters. 7-UP is outselling its lemon-lime competitors in volume and market share gains. (PRNewswire, 10/2/0000)
But back to Proctor and Gamble.... P&G's spot advertising was cut by 50% in the last three years...and a significant part of their advertising pie was going to print and other media over broadcast. Why?
How Proctor and Gamble is spending it's media dollars...
| Medium | 1995 % | 1997% | 1999% |
| Network | 42.4 | 39.3 | 36.9 |
| Spot | 13.1 | 11.5 | 6.7 |
| Syndication | 13.8 | 11.1 | 9.2 |
| Cable TV | 12. | 14.2 | 16.3 |
| Magazine | 16.4 | 21.6 | 27.1 |
| Other | 2.3 | 2.3 | 3.8 |
(Source: Competitive Media Reporting cited in Broadcasting and Cable 4/24/2000 p. 23)
Some of these problems are beginning to show up in the amount of advertising sold in television. 1999 was the first "down" year for local advertising since 1991 (McClellan, 3/13/00). And while P & G was reducing it's TV buys, national network broadcast advertising was actually up 10% in 1999 to $18 Billion. Syndicated advertising was up in the same year 11.3% to $3 billion and counting national spot business, total Broadcast TV advertising was up 5.7% to $36.58 billion.
Sometimes big events don't deliver the ratings expected, and such was the case of the Olympics, 2000. As of the first week, the Sydney Olympics had the lowest ever ratings -- only a 14.6 average. NBC actually hedged it's bets a bit by selling only 9 minutes per hour rather than the 9.5 minutes in 1996. This allowed them to put make-good spots in the subsequent weeks if necessary without compromising the inventory after the Olympics. (Tedesco, 9/25/00)
Not all TV Spots get positive response. In class we discussed the Saudi Arabian PSA designed to create good will for the nation in a time when the U.S. is concerned about terrorism and a war with Iraq. In November of 2001, one of the largest cigarette manufacturers wanted the FCC to force broadcasters to remove a PSA that pointed out that urea, a chemical in dog urine, was also present in cigarettes. The ad was one of several prepared by the American Legacy organization in its effort to persuade young people not to smoke. The dialogue in the ad an actual recorded conversation between a member of American Legacy and a cigarette company employee. (McConnell, 11/12/01)
Networks "clear" advertising. That means they review the ads, scripts and video before agreeing to let them air on their network. Sometimes this is done by a "standards and practices division" or by another designated office in the network. Networks have their own individual standards which depend on how they perceive their audience, taste and decency. No commercial should go into production without the script and storyboard first having been approved by the standards and practices division of the network on which it is intended to air. (Adlaw.com, 2002)
Advantages of Television Advertising:
There are lots of reasons why television advertising is a good buy for advertisers. The primary site for such information is the Television Bureau of Advertising (www.tvb.org) and check the "TV basics" link. Some basic facts:
Controversies:
Alcohol Advertising:
****TV stations are revisiting the liquor ban which as been in effect for 48 years: Seagrams has been trying to get local and cable channels to accept advertising for products such as Crown Royal Whiskey. It succeeded in getting an NBC affiliate in Corpus Christi, Texas to carry the ads and is approaching stations in more than 50 cities. Several cable channels have been approached including TNT and USA. USA is owned by Seagrams-Controlled MCA, so they will probably so it, but nobody wants to be first.
Congress and the FCC are very concerned about this issue and are examining whether or not legislation or regulation is necessary. (When beer is responsible for more dwi's than hard liquor, is it reasonable to restrict hard liquor commercials and not restrict beer commercials? What do you think broadcasters think about that in these times of reduced shares and concerns about viability of network television.)
Networks and broadcasters are concerned that advertising Seagrams may mean losing Gallo and Budweiser! Not worth it to them .
Several commissioners want to discuss the situation. James Quello was quoted in Bstg 10/14/96 as saying, that he doesn't want to allow "egregious" ads that encourage drinking among youths. He is also said to have compared the liquor ads to the recent indecency rulings which allow the commission to regulate content in order to protect children and youth. (p. 25)
As of August, 2001, the Distilled Spirits Council of America was gearing up for a major push into TV. They hope to increase television advertising dollars from the $25 Million it is today to up to $300 Million over the next few years. They believe that this is necessary if their brands and products are to be viable. Said one DISCUS officer, "McDonalds didn't get to be a household name by advertising in the newspapers." While individual stations are accepting some ads, the networks have a blanket ban on hard liquor advertising. (McClellan, 8/20/01 p. 12)
NBC agreed to run liquor ads, then changed its mind after a it began hearing angry responses from citizen groups, parents and even members of Congress. While many thought NBC had a measured and reasonable policy to air ads, requiring liquor advertisers to first pay for four months of "responsible drinking" spots before the ads appeared, Mothers Against Drunk Driving and others raised such a fuss, that NBC backed off. This is a very interesting issue and a good paper topic for someone. (McClellan, 12/14/01, Albiniak, 12/17/01, 12/17/01B, 2/28/02. 3/4/02, 3/22/02, 2/25/02; Forkan, 1/7/02;
Other products which have caused controversy include cigarette advertising which was removed from television in with the passage of the Public Health Cigarette Smoking Act in 1969. (Holtzinger, 1991)
Advertising Rates for network Programs:
In 1996, Seinfeld and E.R. became the most expensive regularly scheduled network programs with commercial network minutes going $1 Million for E.R. and $1.1 Million for Seinfeld. ($550,000/30 sec. spot)
Super Bowl $$ = for 1998 Super Bowl $1,200,000 per 30 second spot! In 2000, that number was an average $2.2 million!! In 2000 increased even more for some spots.
That means we saw FOUR MILLION DOLLAR MINUTES!
$80,000 per second!! ABC sold out at that price more than six weeks before the game.
1997 Network Programs: 30 second spot prices
In 2002, a 30 second spot in E.R. ran about $600,000. Spots in ABC's Millionaire ran a quarter of a million dollars when the show was at its height of popularity. On average, prime time shows will sell spots for at least $150,000 for 30 seconds.
Generally, advertisers are buying points. That is, exposure to 1000 people. So in local markets, commercials are often sold on a cost-per-point basis. Overnight time slots or small stations might sell spots for as little as $3 to $5.00 per point, so to reach 10,000 people, you'd have to spend $30,000 to $50,000 in those time slots. (Davis, 2002)
Some important terms you need to know:
Cable Advertising:
Advantages:
Disadvantages:
Advertising Rates:
Based on stable factors (those things you can't control):
Based on dynamic factors (you can control)
CPM: cost per thousand
"on the come" -- buying spot with estimated CPM. If that doesn't materialize, the net or station must provide a MAKE GOOD; i.e. free spots to deliver the promised audience.
In 1992, CBS was breaking even on the Olympics because they had saved spots for make-goods, and the ratings were good enough that they didn't need to use them. SO they could sell them and that generated enough income to recoupe their licensing and production costs.
KNOW
Prospects for 2000: As of fall, 1999, next fall is probably going to be good year for television advertising. (Tedesco, 9/13/99)
ISSUES TO CONSIDER:
As network ratings and shares decrease, prices Increase.
Clutter is becoming a serious problem for viewers and for advertisers, and may drive viewers away from traditional broadcast television.
While 95 % of prime time viewing is done directly off the air with commercial in tact, technology is making serious threats in the continuing of that viewing pattern:
Is there a problem with this lack of program and commercial separation? The FCC thought so and so has Congress. It prohibited program length commercials for children, as well as host-selling. There has to be a clear separation between the program and the commercial content. Now adults should be able to tell the difference, but then, there are some people who think "Hard Copy" is a news show.....
The Top 10 Advertisers 1999
|
Rank and Company |
Billions |
|
1. General Motors |
$2.786 |
|
2. Procter and Gamble |
1.684 |
|
3. Daimler Chrysler |
1.509 |
|
4. Philip Morris |
1.358 |
|
5. Ford Motor Co. |
1.192 |
|
6. Time Warner |
.920 |
|
7. Johnson and Johnson |
.838 |
|
8. AT&T |
.824 |
|
9. MCI Worldcom |
.759 |
|
10.Walt Disney |
.745 |
New Technologies: WSMV-TV in Nashville, TN was accused by NBC of using compression technology to imperceptibly reduce program content (and other network commercials) to create 30 seconds of space in which the local station added another local spot. The business editor of a local newspaper noticed the difference when he was watching West Wing while talking on the phone to someone watching it in another market. The sounds didn't match. He monitored the program several weeks and found it to be "regularly out of sync." Of course NBC isn't happy about this, and Meredith Corp. which owns WSMV and other stations isn't "'fessing up." It is reported that several Prime Image Time Machines were delivered to Meredith stations, but that is not proof that they were used in violation of agreements with networks. (Trigoboff, 10/21/02)
Some Important Trends ....
The changing role of the Station Rep: As we discussed earlier, station reps handle the selling advertising for the station to national advertisers. As ownership consolidates, station groups are increasingly relying on one station rep to handle all of the accounts for the entire group. There are advantages in group rates and station groups have more leverage to "deal" than single stations. (McClellan, 7/16/01 p. 10)
One Stop Shopping: As media consolidate and audiences are fragmented across old and new media, advertisers are not content to place advertising in just one or two places. The trend is to advertise across media, including product tie-ins and all kinds of promotional incentives. These integrated marketing deals will include "cross-platform" packages. That means radio, TV, in-store promotions, product placements and anything else the marketers can come up with. For an excellent article about the process, see Broadcasting and Cable 3/12/01 p. 23, "Advertisers Buy Into One-Stop Shopping" by Steve McClellan.
Depressed Advertising Market 2001: Projections for the 2001-2002 season were not good and they turned out to be accurate. Usually networks try to increase their rates each season, but in 2001 year that didn't happen. It was expected that advertising "up front" buying would be down by more than a billion dollars. In fact, the networks were appealing to those one-stop-shopping guys by offering sponsorships of events, programs, product placements and other value-added opportunities for advertisers. For the first time in decades, a program other than Hallmark Hall of Fame or a special movie was sponsored by a single advertiser. Nokia was the sole sponsor of the new ABC series Allias and Fugi is the only sponsor of The Amazing Race on CBS. Sponsors are getting special featuring in promos, websites and other options. Networks are willing to deal to get advertiser dollars.
With the economic difficulties resulting from the World Trade Center tragedy, look for the trend to continue. With networks taking losses in the millions, attracting advertisers will be even more important.
2002 has rebounded somewhat, but it's still a challenge. However, networks have been pleasantly surprised by more interest and higher prices than they expected to get six months ago. Upfront buying takes place during the summer before a new television season starts. Advertisers are given previews of the new fall shows and alterations made in returning series. They then decide which ones they want to buy commercials in. They usually buy big chunks of commercials, sometimes buying up several spots in key series. The commercials are sold on a grid type rate card so if Campbell's Soup offers X dollars for a spot in Friends, Honda can offer Y dollars and out bid them. So the more demand for the commercials, the higher the prices go. Everybody is guess how well a show will do. If it doesn't deliver the rating promised or expected, the network may have to offer a make-good so that the advertiser gets the number of points promised.
NBC set records for up front sales in June, doing even better than ABC's record breaking year in 2000. In prime time, 83% of its inventory was sold at an 8% increase over 2001 rates. WB pretty much sold everything the first day with rate hikes of 15% or more. UPN did well too. ABC and FOX got left-overs because of lower rating performance, but they did better than last year too.
Broadcasting and Cable reported the total upfront sales for the 2002 season in its June 10, 2002 issue. Its sources were the networks and advertising executives. These are the numbers of sales dollars in billions:
| NBC | $2.74 |
| CBS | $1.95 |
| ABC | $1.50 |
| FOX | $1.30 |
| WB | $.58 |
| UPN | $.25 |
While upfront buying is important, the real indicator is the rest of the season. If the sales numbers are up for the entire season, that will be a positive indicator for the economic future of the industry. Those additional buys are made in what is called the scatter market. Which mean that advertisers or simply buy the time as they need it and where it is available. The buys are more random and take place throughout the season.
Advertising on the Web: Technology has developed which will allow streaming media to differentiate the location of the user as well as demographic information, past spending habits and which internet sites the user frequents. Such an audience is extremely valuable to advertisers. This is one reason why broadcasters want to be on the web, but also a reason why the web is threatening to existing broadcasters...It may steal some of their advertising clout. Privacy is an issue, and an important one, but one the streaming-audio industry says it can protect. (Lindeman, 6/18/01)
Additional Key Terms:
As you read your text, be sure to pay attention to any terms indicated in bold. Those will be important to you on our next exam.
From your book:
Some valuable links to check:
Advertising Age at http://www.adage.com
Television Advertising Bureau at http://www.tvb.org
For a great site that explains how to get a commercial on the air, see the National Highway Traffic Safety Administration's "Buckle Up America" site. It offers information about how local groups can get traffic safety spots on their local stations. It is concise, clear and loaded with practical info., most of which is not in your book. Consider this one required reading: http://www.buckleupamerica.org/strategy/social_marketing/page_1.php
The Adlaw Handbook. This is a great resource for legal issues pertaining to advertising at http://www.adlaw.com/rc/rf_hndbk.html
Key developments in television advertising history:
Rebecca Garadyn compiled and interesting time line of broadcast advertising history that should be valuable to you.
Sources: