For whatever reason, the closing of the gap between the advertising rates paid to broadcast networks versus the rates for cable networks is one of the most interesting issues on the television landscape to me, and I am not really surprised to see stories like this from The Hollywood Reporter:

NEW YORK — Turner exec David Levy is lobbying media buyers to join him in calling for a repeal of what he calls “TV’s legacy tax,” shorthand for the pricey cost-per-thousand rates that broadcasters command even as their audience delivery shrinks.

The president of Turner Entertainment ad sales and marketing and Turner Sports is prepping a campaign to eliminate the breach that separates the broadcast and cable upfront markets, and in so doing, narrow the CPM gap. (On average, primetime inventory on a cable network costs about one-third as much as on broadcast on a CPM basis.)

“Advertisers who buy broadcast TV have been paying too much for too long,” Levy said. “The networks keep getting rewarded for how well they did five, 10 years ago, and that doesn’t hold water anymore. Smart agencies already realize this.”

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Though the way Mr. Levy is going about it might seem a little strange,  don’t think so only because this type of crazy talk does actually put more attention on the actual gap in the rates.  And if he just said, “Cable rates should be higher,” everyone would think of course he’s going to say that.  But when he says the broadcast net’s rates are too high rather than the cable nets’ rates are too low, it is at least more of an attention grabber.

I believe the gap will close, but not completely.  One of the reason the gap existed in the first place is that though it’s hard to get anyone to come right out and admit it, advertisers like big honking scale and  reaching as many people at the same time, with the same message as possible.   They are willing to pay extra for that, and I expect will continue to be willing to do so.

But, the bar on scale continues to dwindle for broadcast TV, and while there are still some sporting events and things like American Idol that bring big time scale to the game, the notion of paying 1.66 times as much for a million adults 18-49 on a show like Life or Chuck on NBC, versus Burn Notice on USA Network does seem proposterous. In fact, it seems proposterous even if Burn Notice is at 50% or even 75% of the CPMs rates for shows on the NBC mother ship that just seems like something that’s ridiculous that can’t last.

It seems like with the television biz, sometimes things are very slow to change simply due to legacy thinking.  But the gaps between cable and broadcast rates don’t seem like a legacy that can hold up forever.  Though obviously this legacy is still holding up now to a large degree, or you wouldn’t be hearing anything from the likes of Turner’s David Levy.

Posted by:TV By The Numbers

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