One Reason Why Broadcast TV's Ad Rates Are Higher Than Cable TV's

Categories: TV Advertising

Written By

May 18th, 2009

Here's the first thing I have read that explains why broadcast TV ad CPMs (cost per thousand viewers) have remained higher than cable TV CPMs. Cable viewers tend to be heavy TV viewers overall and are therefore cheaper/easier to reach. Broadcast TV has more light viewers who are harder (and therefore more expensive) to reach. That, plus the implication that cable viewers are less attractive demographically, but I'd figure that could be controlled for in program selection.

the analysts detailed why broadcast remains at the heart of many marketers' media plans even while CPM costs are twice that of cable. “Why does anyone spend on broadcast TV?” pondered Stabler, “The primary reason is because it is really critical to advertisers…The viewing dynamics on broadcast are fundamentally different to cable.”

The analysts found that broadcast delivers light TV viewers while heavy TV watchers tend to watch more cable. “A 100% cable plan, while yielding far more commercial airings and total impressions, concentrates too much exposure among the nation’s heaviest TV viewers, who by virtue of lower education and employment status are less attractive to many of the mediums largest spenders," according to the report.

via Broadcasting & Cable.

I just skimmed the Credit Suisse analyst report (that you can download here) and here's the text directly from the report:

Broadcast is Not Dead: No Such Thing as a Pure Flight to Efficiency


Conventional wisdom holds that with budgets under pressure and continued broadcast
audience erosion, most advertisers and their agencies will be seeking ways to increase
the efficiency of their television buys through a shift from broadcast to more efficiently
priced cable. We’d agree, and point out that the broadcast-to-cable share shift is a story
that has been playing out over the last two decades, as cable’s share of viewing continues
to climb.


With CPMs roughly half those of broadcast, pay TV penetration greater than 90%, and
aggregate viewing share that surpassed broadcast several years ago, cable should
logically take significant share in a market where it’s safe to say most budgets aren’t
growing. So why is it that in the face of these selling challenges (particularly price) that
broadcast can still maintain such significant share of ad revenue?


It comes down to audience composition and viewing dynamics. Broadcast delivers light
television viewers better than cable. Therefore, an advertiser driven solely by efficiency
may be able to buy more total points with cable, but will experience poor frequency of
message distribution against the lightest viewing fifth of viewers (known as viewing
quintile). This is due to the fact that viewers with higher education and incomes watch disproportionately more primetime broadcast as a percentage of total viewing hours than the average TV consumer.

 
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