Media Industry Jargon • TV buyers- work for marketing dept or ad agency • TV salesmen- work for TV networks (ABC, NBC, etc.) • Local Sales-Big networks like ABC, NBC, CBS, central office in NYC and local sales staff in each market. April 10, 2000 Higgins, Lane & Nowak
Media Industry Jargon • Nielsen Rating Points- 1 point = 1% of Households with TV • Targeted Rating Points- Points can be sold for specific • target audiences. • For ex. a 2.5 W35-64 rating = 2.5% of all U.S. women ages 35-64 • with television sets watched the show. • CPP (Cost per Point) - How TV air time is priced (:30 or :60) • For ex. if a buyer and seller agree that Seinfeld is • forecasted to earn 16 rating points and the price is $200/point, • the cost to run one commercial during the show is $3,200.
TV Media Sales- An honest living? “I sell air for a living!” Billy Crystal in City Slickers • TV air time salesmen are not unlike used car salesmen in business style, • mannerisms and scruples. • Sales prices are based on point forecasts that are very subjective. • Negotiations last for hours over the forecast and price for the • purchase of single 60 second time slot. • Rating points forecasts based on: • - historical rating trends • - quality of show • - available inventory of air time • A “post analysis” report can be conducted after each show.
Payoffs Clorox does not perform analysis/ Clorox does not perform analysis/ WCTY-TV does not updates WCTY-TV updates Clorox nets $500 Clorox nets $4,000 - Value of NHL advertising to Clorox $500 - Value of rescheduled advertising to Clorox $4,000 WCTY nets $3,000 WCTY nets $2,000 - Revenue from sale of Friends $3,000 - Revenue from sale of Friends $3,000 - Opportunity cost of time -$1,000
Payoffs Cloroxperforms post analysis/ Clorox performs post analysis/ WCTY-TV does not update WCTY-TV updates Clorox nets $3,000 Clorox nets $2,000 - Value of better, last minute advertising $5,000 - Value of Advertising $4,000 - Cost of post analysis -$2,000 - Cost of post analysis -$2,000 WCTY nets $0 WCTY nets $2,000 - Revenue from sale of Friends $3,000 - Revenue from sale of Friends $3,000 - Additional cost of last minute inventory -$2,000 - Opportunity cost of time -$1,000 - Opportunity cost of time -$1,000
Mixed Strategy for Media Sales • If we rule to update clients regularly, we will always earn $2,000. • If we believe less than one of every three clients conducts analysis regularly, we • should make a rule not to update and we will earn $3,000. • Mixed Strategy: If we do not change anything, we will average $2,000 over time. • If we believe clients will recognize our pattern of action, we should try to • negotiate to (4000,2000) square and split the profits so we would each get $3,000.