Commentary

Are Linear TV Price Comparisons Too Old School?

It’s way too soon to talk up OTT viewing growth comparisons to linear TV. So, for all that, let’s go old school: Broadcast versus cable.

David Zaslav, CEO, Discovery Inc., continues to plead the case of his cable networks -- especially around its big six channels -- when it comes to their collective power.

During a recent earnings call in May, he said: “The average CPM for broadcast is $55, and for us it’s $20, or less... We got the four players around us in price at $55 plus.. So you can go to a broadcast and buy a 0.8 for $55 or $58 and you come to us and buy a four [rating] for 40% of that.”

Now Zaslav didn’t specify what specific audience was attached for this CPM. But we are probably close in guessing he is talking about the old-school Nielsen 25-54 demographic -- something cable networks, as well as CBS and others, count on a lot to do business.

All that sounds like a bargain in buying Discovery.

But old-school thinking will talk up the issue around reach. Discovery’s networks don’t have the wherewithal to reach a wide variety of different TV consumers. Broadcast TV ad executives call this talking to the same viewers, over and over again.

Still, Zaslav isn’t greedy. He just wants a piece — giving advertising clients a great deal for some of their overall TV buy. During the earnings call, he said “broadcast is terrific. But you could also move some money...  we can give you a spot where you reach everybody at once across all of our -- across our top six networks.”

Now with Scripps Networks as part of Discovery Inc. — especially with Food Network and HGTV — he says the entire network group can deliver “20% of women in America.” That would be more good news.

Now let’s go to the new-school stuff: For many, the limited “reach” argument also extends to digital media platforms. Is that a good comparison for Discovery -- that traditional, linear TV has some big pluses going for it?

And yet, traditional TV networks might not still adequately address all the key performance indicators that advertisers increasingly want to look at -- engagement data, website visits, in-store traffic and other “business outcomes” -- that digital media alleges to offer.

Everything for this upfront goes back to the basics -- old-school basics: How important are price comparisons among traditional, linear TV platforms going forward?

2 comments about "Are Linear TV Price Comparisons Too Old School?".
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  1. Ed Papazian from Media Dynamics Inc, May 30, 2019 at 11:45 a.m.

    Interesting subject, Wayne. I don't know where that $55 CPM for broadcast TV comes from, however it has been established from the beginning that cable gets about half the CPM that broadcast TV garners for comparable time and/or content in most dayparts.There are exceptions to this rule and, as I recall ESPN, MTV and Discovery were among the early exceptions, however the "50% rule" is still more or less in force. Moreover, the buyers  structered the cable channels into tiers ---based not on program "quality" or even demographics but mainly on average minute audience size. Unless things have changed, channels that draw the most viewers earn higher CPMs than those with the smallest audiences.

    While all of this seems rather arbitrary and unfair, it all goes back the  beginnings --in the early 1980s---which I describe in my book, "TV Now and Then". At that time the network time buyers were totally oriented towards the three broadcast TV networks which had the lion's share of TV's audience and  by far, the best quality fare. Accordingly, they looked down on cable with its heavy reliance on reruns, its low budget original content, its cluttered commercial breaks and its tiny ratings. So, instead of paying more for cable's more selective audiences, thay paid half per viewer---and, faced with the prospect of taking or leaving it, most cable ad sellers grudgingly accepted that deal. Cable has been stuck with this situation ever since.

    With rating fragmentation, dramatically reducing broadcast TV's ratings and the introduction of cheapie reality fare by broadcast as well as cable, plus much better original content developed by many cable channels, one would think that cable would have closed the CPM gap---but this has not been the case---again, with a few exceptions. However, to be fair to the broadcast favoring buyers, many cable channels still hit their viewers with far more commercials as well as promos than  the broadcast networks---- which must have a negative impact on ad exposure, ad recall, etc. And the use of reruns is still much heavier on cable. So, the question arises---will cable be willing to trim its ad clutter--- making it about the same as broadcast TV--- and will cable be willing to use more original "quality" content and reduce its reruns---in exchange for getting broadcast level CPMs? Or does cable intend to keep doing exactly what is now does---in the process making a far better profit margin than broadcast TV ----and still expect to command broadcast level CPMs?

    These are interesting questions and both sides make valid points but I don't see the 50% CPM "rule" changing unless cable makes the kinds of changes I mentioned. And, let's face it, reducing ad clutter and reruns while upgrading program quality will cut deeply into cable's still impressve profit margins. Will higher CPMs ---in exchange for making these "improvements"---yield more---or less---- profits?

  2. Benny Radjasa from Armonix Digital, Inc., May 30, 2019 at 10:37 p.m.

    Engagement data, website visits, in-store traffic and other “business outcomes”, that digital media alleges to offer?  I think there are much proof and use cases out there, brands are shoveling money at Google, Facebook, and etc.  I would think that these spenditure are being tracked and analyzed by the advertisers.

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