Price of a 30-Second Spot Slumps 4.1%

Networks' Prime-Time Ratings Last Year Brought Ad Costs Down With Them

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NEW YORK ( -- Continued audience erosion, combined with the effects of the writers strike, helped drive the average cost for a 30-second commercial in prime time down 4.1% to $130,089 during the 2007-2008 season, according to an analysis performed by independent media agency TargetCast TCM. The drop marks the second consecutive seasonal decline in pricing for 30-second TV ads and represents a noticeable widening over last season's 0.7% drop.

Gary Carr

Gary Carr, senior VP-director of broadcast services at TargetCast tcm

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The analysis showed prime-time ratings for the four major broadcast networks fell 13% last season. TV-ad time pricing is based on the number of viewers a network can deliver for a marketer. When ratings go down, so do prices for the ads.

"The major reason average unit costs are down is because of audience erosion -- call it what you will, normal audience erosion. Because there's [media] fragmentation, fewer scripted shows and the cable networks in the summertime have ratings that shoot up because they run their good programs," said Gary Carr, senior VP-director of broadcast services at TargetCast tcm. Factor in the effects of the writers strike and issuance of "make-good" ads given after ratings guarantees fell short of what was stipulated in agreements, and "it is not surprising that broadcast pricing ebbed once again," he added.

Alternative programming
The results were likely significantly affected by the writers strike, which took original comedies and dramas off the networks' air for several months, resulting in ratings declines. Some media buyers and analysts also suspect that removal of those programs made audiences less reliable: Once you discover your favorite show is no longer on the air at 9 p.m. on Thursdays, the theory goes, you quickly discover there are other things to do.

The analysis uses syndicated research and tracking data from NetCosts, a service of Tarrytown, N.Y.-based Sqad. The service compiles confidential data from agencies and in-house buying systems to help advertisers understand the unit-price relationship with each network and to measure future costs.

According to TargetCast, the average price of a 30-second ad fell the most on CBS. It dropped about 10.8%, falling to $116,729 from $130,896. At NBC, the average cost fell about 6.2% to $102,928 from $109,764. At Fox, the average cost fell 2.3% to $194,969 from $199,637. Only ABC was able to muster a price increase. According to TargetCast, the average price of a 30-second spot on the Walt Disney network rose 1.1% to $133,774 from $132,368.

The analysis comes just as initial ratings estimates for the 2008-09 season indicate viewership among advertisers' favorite demographic -- people between the ages of 18 and 49 -- was off about 10% during the first big week of network program debuts. "From what I've seen, night by night seems to be down," said Mr. Carr. While ratings are not "heartbreakingly down" so far, he said, "they are down nevertheless."

Average costs for 30-second prime-time ads have ebbed steadily during the year, according to previous TargetCast analyses. The average cost for a prime-time spot on the four big broadcast networks in the first quarter of 2008 dropped 12% to $125,634. Meanwhile, the average cost per unit for a prime-time spot in the second quarter fell 11.1% to $139,728.

One analyst believes network TV could find it more difficult to sustain pricing. The broadcast networks continue to offer advertisers the opportunity to reach the biggest audiences, on a relative basis, said Bernstein Research analyst Michael Nathanson in a recent research note. With cable channels investing in more original programming, and putting it on when broadcasters tend to run repeats or less exciting fare, "the threat to broadcast's reach advantage is now evident," he said.
Source: Targetcast TCM
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