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Economies of Scale example: TV PROGRAM INCOME Audience size Advg revenue / year Profit 500,000 $ 8 million -$2 million

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Economies of Scale example: TV PROGRAM INCOME Audience size Advg revenue / year Profit 500,000 $ 8 million -$2 million 100,000,000 $ 15 million $5 million 200,000,000 $ 28 million $18 million 400,000,000 $ 45 million $35 million 800,000,000 $ 85 million $75 million

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Economies of Scale example:

TV PROGRAM INCOME

Audience size Advg revenue / year Profit 500,000 $ 8 million -$2 million

100,000,000 $ 15 million $5 million

200,000,000 $ 28 million $18 million

400,000,000 $ 45 million $35 million

800,000,000 $ 85 million $75 million

The TV show costs $10 million to make regardless of its audience size.So the larger the audience, the more efficient a show is to produce.

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Television Sandwich

Commercials

Programming

The audience’s sandwich

TV Executive’s sandwich

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What percentage of revenue comes from advertising and marketing?

100% TV

80% newspapers

60% magazines

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