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While Network Television Audiences Shrink, Ad Costs Grow

May 10, 2012

By Bruce Goldman, Richmond Advertising Examiner

Network television has been giving advertisers less and less while charging more and more for it.

This is what Horizon Media researcher Brad Adgate demonstrated to the Advertising Research Foundation on May 9, 2012.

Using Nielsen audience research data and air time costs over the past two decades, he showed that audiences and costs for reaching them have been moving in opposite directions.

Specifically, he compared 18-to-49 audience ratings averages to the cost of buying 400 gross ratings points (GRP) -- 100 GRP each on ABC, CBS, NBC and Fox.

(GRP is an index of media weight. A 100-GRP buy means that everyone in the network's audience is exposed to your message an average of once. Because of the nature of averages, this means that at 100 GRP, some 18-49 viewers will have seen a message twice, some once and some not at all.)

Less for your money

In February of the 1991-92 season, ABC, CBS and NBC's ratings for 18-to-49-year-old viewers averaged above 7.0, while Fox trailed with about 6.0. The cost of 400 GRP on all four networks was $5.4 million. That works out to $13,586 per GRP.

Ten years later, in February, 2002, only NBC was above 5.0, while the others were well below 4.0. Yet, air time costs had more than doubled, to $10.9 million. That's $27,295 per GRP.

Ten years after that, in February of this year, all four broadcast networks' ratings averages had dropped below 2.5. Air time costs, in contrast, had just about doubled again -- to $20.5 million, or $51,304 per GRP.

Not just inflation

Inflation accounts for some of that near-quadrupling, but only some of it.

Owing to inflation alone, that $13,586 per GRP in 1992 would equate to $20,845 in 2010. That leaves $30,459 --  59% of the cost of this year's 400 GRP network buy -- attributable to something else. Let's call it, "what the market will bear."

A local problem, too

While local Richmond advertisers have neither the need nor the wherewithall for national network television buys, there's a law of gravity that makes the problem roll downhill.

Local affiliates' audience ratings follow their networks' ratings. If the CBS, ABC, NBC and Fox network ratings have fallen over the past 20 years, so have Channel 6, 8, 12 and 35's.

And if air time rates have soared at the network level, they've done so at the local level, too.

That doesn't necessarily mean that local advertisers should shun Richmond's nework affiliates. But it does mean they should explore all their television options, to see which gives them the most viewers at the lowest cost per GRP.

As seen here:


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