How the TV Advertising Industry Works



While TV advertising is not endangered, the TV advertising business model is at a major turning point. Yes, we’re still gathering to see ads during the Super Bowl, but one TV ad could change the world, or at least turn around the company’s sales show “Mad Men” The situation has definitely changed since the heyday of advertising depicted in.

While TV advertising remains one of the most effective ways to raise awareness about a product or brand, advertising spending is moving into the digital realm and media companies are working to find a solution. Here’s an overview of how TV advertising works and how it’s changing.

Important point

  • TV advertising is one of the most effective ways to raise awareness of your product or brand, but some advertising costs are digitized.
  • Over the years, the TV advertising model has changed with the advent of DVRs, TiVo, on-demand, and streaming services.
  • It is estimated that networks such as NBC, ABC, Fox, CBS and CW will generate $ 8 to $ 10 billion in advertising revenue from 2021 to 2022 Golden Time viewing.
  • Streaming and on-demand companies that offer little or no advertising, such as Netflix and Hulu, represent network competition.

Timing is (almost) everything

According to the US Bureau of Labor Statistics, in 2020 individuals over the age of 15 will watch television for about 3.1 hours a day.

In the United States, TV advertising consistently provides businesses with the highest investment rates of all media advertising. Each channel has specific time constraints on the length of ads that can be displayed and subjectual constraints. For example, at a kids show in the morning, viewers may not see beer ads.

Effective advertising

For companies with limited advertising budgets, it’s important to choose the right time and the right price to run your ad. Successful ad campaigns come from many factors, including how often your ad appears, how many people see your ad each time it’s aired, and the level of engagement your ad produces. For example, many TV advertisers are looking to second-screen ads to direct their viewers to their mobile device (or second screen) in order to interact with the company on their website during a live program.

Brands and media companies strive to match viewer demographics, such as age and gender, to each show and sell their products to these particular viewers. The popularity of the program and the number of times the advertiser agrees to run the ad all affect the total cost of running the ad.

Event advertising

This is one of the most watched events of the year in the United States, so in most cases the most expensive ads will appear during the Super Bowl. In 2020, Fox charged about $ 5.6 million for a 30-second spot.

With the move to online shows and streaming services such as Netflix Inc. (NFLX) and Hulu, the TV advertising model is fluid, but shows such as Super Bowl, Olympics and other live event shows, or Saturday Night Live’s 40th show. Advertising on-Anniversary celebrations are still solid. Also, streaming services like Netflix need to advertise on TV to direct customers to the service.

Real estate promotion is competitive if it’s a show that people want to see in real time. The term “prime time” meant the peak hours of the day when viewership peaked, but at first glance, DVR and streaming changed the definition of prime time.

Prepaid and sweep

If you’ve read about the television industry, you’ve probably heard everything about the previous season. Marketers can buy TV commercial airtime (and digital ads) months before the fall season begins during the spring pre-sale season. The first pre-presentation was made in 1962, and now every year, major networks want to publish upcoming shows and sell advertising space.

There is also a TV “sweep” period. This happens at certain times of the year when the show has special guests and must-see events (such as Cam and Mitchell’s wedding at ABC Sitcom, the “Modern Family”, and the fuss death). The main character of the drama “The Good Wife”). It then uses Nielsen Holdings NV (NLSN) data and ratings for that period to determine advertising rates for local stations.

TV Advertising Costs and Prices

For years, advertisers and networks have used Nielsen ratings and pricing metrics CPM. (Or a barometer of the cost per 1000 people, the cost to reach 1,000 viewers). Nowadays, technology is changing the way and when people watch programs, making that measurement less important. If your advertiser is focused on targeting a highly selected type of audience, you can stop focusing on the exact time the show will air. It’s about finding the right audience, rather than assuming that a particular time period is a golden ticket.

According to Variety, networks such as NBC, ABC, Fox, CBS, and CW are estimated to have secured $ 8 to $ 10 billion in advertising revenue for their golden-time viewings from 2021 to 2022. It shows that for decades, the main target was airing between 8 pm and 11 pm. It’s still a coveted time frame, but the push to digital makes it a bit undesirable.

digitalization

Over the years, the TV advertising model has changed with the advent of DVRs, TiVo, on-demand, and streaming services. Suddenly, the viewer can choose whether or not they want to see the ad. Meanwhile, millions of people fast-forward commercials and binge-watch their favorite shows without interrupting the commercials.

Digital influence

In favor of increasingly popular digital and streaming services, it can be difficult to determine how much of your advertising revenue has moved from your prime-time network. In addition, the 2020 coronavirus pandemic and the ongoing sequelae of 2021 forced the network to re-schedule, affecting advertising revenue at the time. For example, the Tokyo Olympics, scheduled for the summer of 2020, was extruded and broadcast in the summer of 2021.

Undoubtedly, the influx of ad-supported streaming services gives advertisers more options for investing their money and creates competition for prime-time networks. These streaming services include Peacock, Hulu, Paramount Plus, and HBO Max.

On-demand and streaming

Netflix is ​​a leader in on-demand streaming services that deliver TV shows, movies and original content. Netflix does not offer commercials for a monthly fee, depending on the package. Amazon Prime Video is another streaming service designed for customers with Amazon Prime accounts.

Hulu is Disney’s third leading on-demand streaming service, offering TV shows, movies, on-demand, and live TV. Many streaming services like Netflix don’t rely on advertising costs, so businesses and traditional networks are trying to find new and better ways to reach their target audience.

However, some networks are part of multimedia giants and also offer streaming services. For example, Disney owns the ABC network. In short, we’re making money from a streaming service with Disney’s movie business Hulu, and advertising revenue from ABC’s prime-time network. As a result of integration within the media industry, it is not always clear how the transfer of advertising revenue from a prime-time network will adversely affect the network if both are owned by the same media conglomerate.

Conclusion

Nowadays, TV advertising is no longer like the show “Mad Men,” which was a major real estate for brands trying to disseminate information about their products. Event shows like the Super Bowl are still profitable, but companies are fighting DVRs, on-demand, and streaming services.

Advertisers continue to look for ways to attract younger viewers who are increasingly watching entertainment online or online …


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