1. The Business of Broadcasting,
Satellite and Cable
Chapter 7

2. The product
• Stations are in the business of
selling an audience to
advertisers
• Broadcast TV needs revenue
generated from advertising to
pay for programming costs;
programming draws the
audience – advertisers are
willing to pay more to get
more of the audience
• Cable TV has a dual income –
they sell advertising, as well as
collect monthly subscription
revenues, and they sell non-TV
services (internet, phone)

3. Competition & Electronic Media
• The more competition faced by an
industry, the less regulation on that
industry is needed (self-check)
• If a medium faces no competition, it is
a monopoly
• If there are a limited number of
competitors, it is called an oligopoly
• If a market faces complete
competition (pure competition), the
audience decides what is popular,
and there by gains a large share of
advertising dollars

4. Competition among different media
types
• People use media
differently
• Competition can be
defined by how
people use a specific
medium and what
competition it faces
from other
competitors (iPod in
the car, newspaper
on iPad, TV vs. radio)

5. Competition among different media
types
Radio is the most intimate of the
mass media
Highly portable and personal
medium
Likely to compete against other
portable devices like iPods, that
compete against cable or TV
Radio centers around music, news
and talk; practically no dramatic
programming
Radio is omnipresent
People can listen to a radio in
places where TV watching would
be difficult (car, at work)

6. Competition among different media
types
Television is used differently
than radio
Used for relaxation
“Couch potato”
People are unlikely to be
doing other activities while
watching TV
Competes directly with cable
and movie rentals

7. Making media buying decisions
Advertisers buy different media to reach as
many customers as possible
•How does an advertiser choose to buy TV
time from one station over another? Why
choose newspapers over radio? Direct mail
over billboards? Efficient media buying

8. Making media buying decisions
• Broadcasters need programs to be
successful in order to attract an audience;
advertisers want a large audience
• A program’s success is evaluated by how
many viewers are watching – ratings
• Ratings can tell an advertiser what type of
audience they reach (demographics)

9. Determining what to buy: the
advertiser’s perspective
Buying plan: based on three criteria
1.population or market size
2.effective buying income
3.retail sales for each geographical area where
people buy their products
Buying Power Index (BPI): the greater the
buying power, the higher the BPI
BPI is determined through data collection,
analysis, allocation of advertising funds
BPI tells an advertiser where to most effectively
spend their advertising dollars

10. Media Buying terms:
• Spots: time segments available for commercials in radio
or TV. A marketer/advertiser will purchase a “flight” of
spots for a campaign
• Effectiveness of ad placement is determined by Gross
Rating Points (GRP)
• GRPs give the buyer a way to evaluate a run of X number
of commercials over a specific time period that has a
consistent rating for the target audience
• Gross Impressions: reflects the total of all persons
reached by each commercial in the advertising campaign
• Both methods help advertisers calculate how much
money needs to be spent to achieve certain marketing
goals

11. Placing the Ad
• After advertisers determine what kind of
media to buy, where to buy it, and for when –
they can evaluate the benefits of purchasing
the time
• Package: advertising time sold for a specific
number of spots over a specific period of time,
called flight dates
• Rate cards: used by both television and radio,
they give the cost of advertising, to help time
buyers evaluate the cost of advertising

12. CPM: Measuring the cost of advertising
on two stations
• Media buyers use a standard
formula to figure out the actual
cost of a commercial spot
• The unit cost is expressed as the
cost to reach 1000 audience
members
• CPM: Cost Per (M) Thousand
• CPM is a good way to express
efficiency
• CPP (Cost Per Point) is similar to
CPM, but it measures an
audience that is part of a specific
demographic
• CPM and CPP utilize ratings data
for audience information

13. Local Markets
• In many smaller markets, a client will work with a
broadcast salesperson to do a media buy, instead
of having a third party advertising/marketing
agency
• Salespeople may place a standing order, meaning
a client will have a longer-term, consistent
advertising sponsorship, in which they are the only
ones allowed to advertise in that time period
• This situation creates a non-preemptible spot
meaning it cannot be bumped for another
commercial

14. Broadcasting Sales Practices
• The goal of a radio station is to gain a large number
of a certain type of listener
• Local sales: refers to the sale of commercial
advertising by stations to advertisers in their
immediate service area
• Station ad rates are pegged to the share of the
audience that is listening
• Share is determined through ratings
• The larger the share, the more money a station can
charge for their commercial spots
• Ads cost more or less depending on the time period
in which they air

15. Dayparts
• Morning drive, afternoon drive, midday, evenings,
overnights
• When an advertiser buys a package that will run on
a station throughout the broadcast day, the term
run of schedule (ROS) is used to designate that the
spots are to be played through all dayparts

16. Broadcasting Sales Practices
Cooperative Advertising (co-op): when a
national firm will share the cost of advertising with
the local business
•Co-ops allow local retailers to tie their businesses
in with a local campaign
National Spot Sales: sale of commercial radio
time to major national and regional advertisers
Network Sales: the sale of commercial advertising
by regular networks (ABC, NBC) or special radio
networks (Westwood One, Buffalo Bills Radio
Network) that carry specific programs (sports,
Tom Kent)

17. The future of radio sales
• Today, nearly 80% of all radio sales are local
• National spot sales account for only $1 out of every
$6 spent in radio advertising
• Most national spot sales go to the top-rated
stations in the largest markets
• Stations that considerably rank above their
competitors out-bill and out earn their competition

18. Sales in public radio/TV
• Financed by local or educational community
entities, Corporation for Public Broadcasting (CPB),
listener support and grants
• Noncommercial stations can solicit corporate or
advertiser support through underwriting
• Underwriting cannot make a call to action, such as
“Call now for a great deal!” or “Stop in and see us!”

19. Television
• Television stations are more structurally
complex than radio; they have a greater
reliance on outside programming sources.
• Network programming is based on shows
of a fixed length that are meant to reach
very large audiences
• TV programming is acquired, aired, and
sold rather differently than radio
programming

20. Television
• Most TV stations are affiliated with a
network
• Affiliates receive programming from the
network feed via satellite
• Station breaks between network programs
allow local stations to sell advertising
adjacencies (lucrative, local spots that are
inside network programming)

21. Television Ratings
• The amount of money a station/network
can command from sponsors is directly
linked to how many people are predicted to
watch a given program
• The larger the ratings estimate, the more
a station/network will charge for the spot
• When there is no network feed, TV stations
turn to syndication (prime-time reruns,
first-run syndication)

22. Network Sales
• To make network television profitable,
networks charge a large amount of money for
30-second spots during the most popular
programs
• CPM is around $30.00, in line with local TV
advertising CPM
• However, the audiences are enormous
• Hit shows that go on to syndication make
money in the back-end market – after the
shows have originally aired

23. Syndication and local sales
• Off-network syndication: reruns
• First-run syndication: shows created
especially for the syndication market
• TV stations license syndicated show
packages – obtaining the rights to show each
episode a certain number of times in the local
market

24. Syndication and local sales
• For example, if a station purchases 150
episodes, and plays them 3 times each –
striped across a 5-day schedule, this gives the
station about 1.5 years of programming
• Stations make money on syndicated
programming by selling the commercial
minutes available inside the program to either
national or local spot sales

25. Syndication and local sales
• The station must make back the cost of
syndication, sales commissions and overhead
to reach a profit target
• Some programs are expensive; others are
relatively inexpensive to produce
• Usually game shows are the cheapest to
produce, with prizes provided by barter
agreements, or product placement

26. Other aspects of
broadcast sales
• Station identification: extremely important; stations need to
make themselves identifiable to the audience, who rates
them
• Promotions: also important, at sweeps times, stations will
conduct high-ticket item contests to try and gain more
listeners during ratings survey times
• Commercial-free drive times: attract listeners during key
ratings times/dayparts, encourage extended listening
• Stunting: when a station changes formats, they promote the
change with special programming, meant to boost ratings
(upon which sales rates for the year will be determined)

27. Other aspects of
broadcast sales
• Local TV stations do promotion as well, i.e.
special investigative reports, website
promotions, giveaways, special news series
• Public Service Announcements: unpaid
“advertisement” for social issues. PSA
campaigns are often organized and
implemented by the National Association of
Broadcasters and the Advertising Bureau