Television Advertising Costs-- Explained

Published: 24th August 2011
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Advertising costs (advertising rates) vary by medium. Television receives over 30% of total advertising spending. Time in television programs may be purchased in many different ways and in hundreds of geographic areas. This article will highlight the key factors driving advertisers’ media costs in television.



Television Advertising Costs



Television may be purchased nationally or in any of the 211 Designated Market Areas (DMAs). Many factors affect the cost of television time, including geographic coverage, commercial length, time of day, audience size, and supply and demand conditions.



Geographic Coverage - National coverage on a network or in a local market? Broadcast television networks (ABC, CBS, NBC, FOX) and hundreds of cable networks (A&E, Discover, ESPN, etc.) sell advertising on a national basis at national rates. Local station affiliates and cable systems also sell advertising on as local market basis at local market rates.



Commercial Length - Spots of different lengths may be purchased for spots running nationally and locally. The most common commercial length is:30;:15s &:60s also available. In television, the :30 is the basic unit of sale. :60s cost 100% more than :30s, but :15s will usually cost at least 60% of the :30 rate.



Broadcast or Cable – Due to larger program audiences and higher advertiser demand, broadcast television networks and stations normally command a premium price over cable TV. Unit prices and CPMs for cable TV are lower than broadcast rates which have helped cable overtake broadcast TV in advertising revenues.



Time of Day – Television rates and CPMs vary considerably by day part-- early morning, daytime, early evening, prime time and late night. Daypart prices are affected by size of available viewing audiences and advertising demand. For example, spots in prime time programming (8-11PM) command the highest daypart prices due to larger audience sizes and demand.



Audience Size – Audience size has a major impact on unit prices for television programs. Theoretically, a primetime program with a 10 rating would cost twice as much as another spot with only as 5 rating. There are, of course, other factors affecting the asking price and the advertiser’s negotiated price for programs.



Supply & Demand – Within any TV daypart, the forces of supply and demand drive television costs on a macro level. Like a commodities market, the higher the demand the higher the price and vice versa. During the recession, advertisers pulled back on their TV ad spending and TV advertising costs went down. Then, as the economy improves and companies decide to spend more in TV advertising, the increased demand may drive higher prices. Even the billions of dollars of television commercial inventory purchased by politicians will reduce the supply of time which could increase prices for other advertisers nationally and locally.



Negotiation – Ultimately, television prices and costs are determined through a negotiation process between buyers and sellers. Rate cards are generally irrelevant because any price has to be negotiated. The media try to charge what the traffic will bear and the media buyers will try to pay

as little as possible. When the buyers and sellers agree on a price (and other things) there can be a deal. Negotiation results set the expected pricing levels nationally and in individual local market.



For readers who would like to read more detail about advertising costs for television, the 2011 Thumbnail Media Planner provides estimated costs for both network and spot television compared to other media. (www.thumbnailmediaplanner.com)





Understanding advertising costs: How are television advertising costs determined? This subject and more is covered in the 2011 Thumbnail Media Planner (www.thumbnailmediaplannerr.com), a reference of fast marketing and media facts and advertising costs for television and other national and local media. Another new book, "Media Planning and Buying in the 21st Century" devotes a full chapter to Understanding Media Costs (www.21stcenturymediaplanning.com)

http://www.thumbnailmediaplanner.com

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