Prime-Time TV Commercial Prices Plummet, CBS Faces Biggest Drop

by Joe Mandese , February 3, 2009

The cost of an average prime-time price plummeted 15% during the fourth quarter of 2008, and CBS led the decline with a whopping 22% decline, according to an analysis released this morning by independent media services agency TargetCast tcm. TargetCast estimates that the price of a prime-time network TV commercial fell to $122,133, down 15% from the fourth quarter of 2007.

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.

ad spending, media buying, television, tv

4 comments about "Prime-Time TV Commercial Prices Plummet, CBS Faces Biggest Drop".

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William Hughes from Arnold Aerospace, February 4, 2009 at 9:08 a.m.
Why don't you try doing what OPEC does whenever Oil Prices get low? CUT THE SUPPLY! What do you expect advertising prices to do when you throw 16-26 Minutes of Commercials at your viewers each hour? It's Supply and Demand folks! Supply of Commercials is HIGH while demand is LOW! To increase demand you have to cut supply! I'd scale the Advertising to a maximum of 15 Minutes per hour. Then as people return to the TV Screen, welcoming the increase in the quality of the programming, you can watch those advertising rates INCREASE.
Reply

John Grono from GAP Research, February 4, 2009 at 3:47 p.m.

Just a thought William regarding cutting supply. Time is inelastic whereas miles driven is. Put simply, a network has a 30-minute slot to broadcast is. It buys (or commissions) programmes months and years in advance. Those programmes have for decades been made to run around 22 to 23 minutes. This leaves 7 to 8 minutes to be filled. In the main this time is filled by ads. It is also filled by station promos, idents and community service annoucements.

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.

William Hughes from Arnold Aerospace, February 5, 2009 at 8:41 a.m.

In the 1960s the average number of commercials and promos (including public service messages) aired during a program was 9-10 minutes per hour. Today it is 18 to 26 minutes per hour. Also the overall quality of todays programming continues to nosedive. As the Networks fill their programming with cheaply-produced "Reality", Game and News Shows viewers migrated to Cable and Satellite TV. Unfortunately many Cable/Satellite Networks have also replaced their shows with "Reality" Shows, and Infomercials. Not to mention the Economy. What else can I say about that which hasn't already been said? With money getting tighter and tighter, it's a matter of time before people begin questioning, "Why am I paying for this?" When that happens look out!

(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"!)

Sean Masterson from MIP, May 22, 2009 at 8:02 p.m.

John your logic is flawed.
In the fifties and sixties (and even into the seventies) TV shows ran twenty four minutes of programming to six minutes of commercials (per half hour). Somewhere along the line folks got a wee bit overzealous and started dialing back the programming in favor of more commercial time.
Networks must cut back on the amount of ads, they must offer more original programming. Original programming is the carrot that brings the viewers in. You can't keep offering viewers less and less of a shared experience and then expect them not to abandon ship.
I don't agree that it would cost 13% more to add a few more minutes. For a sitcom this certainly is not true.
Networks still command a healthy audience over the majority of cable, offering the audience more time with their favorite characters on their favorite shows is a smart and savvy way to turn the tide of viewer defection around.
I believe that one of the reasons hour longs do as well as they do is because the audience is hungry to spend time with the characters. You can't attract new and potentially lucrative new customers by offering less.