How Do Commercial Ratings Affect Demand?
June 17, 2007 9:00 PM
If you want proof that I’ve been spending too much time talking to people about commercial ratings and ad buying, this is it.
A lot of people have been discussing how commercial ratings will affect the supply side of upfront negotiations, but I haven’t been able to get a good answer to how they’ll affect demand.
It would seem that this year, buyers bought 10 rating points to reach 10 million program viewers, about 9 million of whom watched commercials.
So this year, shouldn’t buyers looking to reach those same 9 million commercial watchers have to buy only 9 commercial ratings points?
That sounds like a 10 percent reduction in demand for ratings points and if supply and demand really govern the market then prices should drop. Instead, the networks seem to be looking for big price increases.
Can that be right? Or is the answer that the price won’t go down because advertisers will be getting charged next season for those DVR users they got for free this year?
Let’s see if someone reading this has a better answer.
Del.icio.us 
Digg 
Fark 
StumbleUpon 
Comments (3)
Jon,
Very interesting question...I'm going to enjoying learning through your blog.
Cindy
Posted by Cindy Ronzoni | June 18, 2007 8:11 PM
Jon
ABC, CBS, FOX and NBC sell rating points which, unlike other products, are limited and finite in number. As a result, when there are fewer of them to buy, the law of supply and demand increases their price.
In other industries, to regain lost market share requires the lowering of the price since there normally is an unlimited supply of product. But, in TV, if there were 30 rating points to sell last year on Tuesday at 8, and only 27 this year, the price goes up because the supply goes down.
If not for the law of supply and demand raising prices, ABC, CBS, FOX and NBC would have been out of business years ago. This is why to evaluate management don't do so on revenue, they have no control over that; judge them on what they do control, which is market share. And those results clearly speak for themselves.
Ken Miller
Posted by Ken Miller | August 23, 2007 2:23 PM
The flip side to this is charging advertisers more, even if they negotiated a lower rate based on the huge chunk of inventory they bought before anyone else. Why have upfronts? Why RISK buying a new show and a chunk of you budget? Not!
I think that when a show runs; or the commercials; or product placement "on air" or "DVR"; or on any other device, it should be accounted for. MSO's can do this now, interactive can do this now and Satellite can too with minor tweaks. But there is one accountable answer for EVERYONE. One SIMPLE answer. Even for BROADCAST TV!
The KEY here is BPL. The one thing all the devices have in common is electricity. If the TV, Computer Screen or handheld device reports how many times the commercial was seen it will be a real number. Some might say... What if they play the show on their iPOD? At some point they have to charge it and the code is then sent over BPL. Even the TV in the kitchen built into the refrigerator with over the air tv programming can now be metered.
Unfortunately this could put a dent in Nielsen on some levels but I think they will find other ways to generate income from the new system too.
Just my 2 cents. However, investing a few dollars in your local power utility could be a good long term bet ;)
Plug in ANY device and it’s smart. Phone, Computer, TV and Power from one plug. Now your phone can talk to your TV and your computer by just a simple plug in the wall. One plug and you’re good to go. Let’s see who gets it first, does it right, and in the end..... makes money off it in TV.
Now TV's can have cookies? Pass the milk.
http://www.ExecutiveSearch.TV
http://www.filcro.com/page9.htm
http://www.filcro.com/digitalmediajobs
Posted by Tony Filson | September 5, 2007 1:40 PM