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While CBS experienced the steepest decline, all of the major networks saw significant pricing rollbacks, including NBC (down 13%), ABC (down 10%), and Fox (down 6%).
The prime-time unit price deflation is being caused by a number of factors, says TargetCast Senior Vice President, Director of Broadcast Gary Carr--but the two biggest factors are the economy and the networks' declining share of TV audience viewing.
"The continuing decline in ratings--an overall drop of 13% across all the networks from a year ago--coupled with a declining broadcast economy is a recipe for lower prices," he stated, adding that the situation became exacerbated during the fourth-quarter scatter marketplace, as economic conditions worsened, and "the networks were forced to drop their prices to get what little scatter money was available from advertisers."
TargetCast estimates that ratings for adults 2-54 have fallen 20% versus a year ago at ABC and 16% at NBC. Fox's ratings were down 9% and CBS was down 4%.
Although CBS had the smallest drop in ratings, the Tiffany network's unit price fell the most because it had more surplus inventory coupled with waning demand. In other words, CBS didn't have to give a lot of makegoods for under-delivering on audience guarantees and the ad units it had been holding in reserve were released for sale and suppressed the average price the network could charge.
The TargetCast analysis, derived from SQAD's NetCosts system, examined actual reported spending for prime-time ads on ABC, CBS, NBC and Fox to compute an average unit cost for each network.
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(As for me, I asked myself that same question two years ago, and subsequentially discontinued my subscription to Cable TV. I re-alotted the funds formerly used to pay for that subscription to get my programming elsewhere, and I have amassed a Video Library that is so large we'll know who will be our next President before I am forced to watch "Reruns"!)
So let's run with your idea of running less ads in this 30-minute slot. The broacaster has a few options to fill the 7-8 minutes. They could run more idents and promos (basically unpaid ads for their own network). Nett effect would be that you would still discern these as ads and the network's revenue drops - hardly a clever idea. They could run more CSAs - and many are - but again, as this is "non programme content" you would see this as yet another ad.
This leaves the final option ... "go to black" for a couple of minutes ... to keep you happy.
Of course, they could get the programmes to run for 25 minutes and not 22 minutes (increasing their costs around 13%) and reducing their income unless they raise their ad rates by the 13% to cover their increased costs, as well as by a further 60% to cover the fact that they have less ads running to recoup income from - I can't see advertisers stumping up for that !
So, William, could you please explain how this would work financially in an inelastic economy? That is why it is called "free to air" television - the cost the viewer pays is their time watching ads.