Sales Office by Jack Poor

The Truth: Spot Often Cheaper Than Network

TVB took a hard look at the the commonly accepted notion that network ad buys are always cheaper than spot buys on a per-point basis and found that it is not always so. In fact, in early morning and latenight, spot is actually more efficient. What's more, it's a tossup in primetime in the first and second quarters.
By
TVNewsCheck,

We in the media business have all been brought up with certain "truths" that have become accepted as part of the common fabric of our thinking. One of these is that network TV is less expensive than spot. Often this is expressed with a statement like “Why should I use spot when I can buy network for the same cost as the top 20 markets and get the rest of the country for free?”   

Since this is often the opening salvo and the starting point of a media allocation discussion, it tends to overwhelm most other considerations — market selection based on geotargeting considerations like high densities of in-market consumers (we know that they respond a lot better to advertising); various seasonal and weather related variations; and, certainly, in today’s economy, vastly differing housing, employment and retail sales environments. Not to mention exclusive local dayparts like early morning and late news, and creative multiplatform and promotional opportunities. All of these important strategic considerations, factors that really can make a difference in media effectiveness, tend to get thrown out of consideration in the name of media efficiency (read cheaper target rating points).

Story continues after the ad

A lot has changed in the past few years. It is no secret that local television has been particularly hard hit by the Great Recession on top of local economic sluggishness even prior to that. This has had a significant impact on rates and unit pricing as well as overall revenue. Conversely, network TV, with its relative scarcity of inventory and larger advertiser base, has fared somewhat better and, as this year’s upfront and scatter markets show, is sporting very strong rate and revenue growth.

It seemed to TVB that it was time to go back to square one and see just what the cost difference was between network and spot and what size efficiency gap we would have to overcome.

What TVB did

We contacted the industry’s top third-party source for both national and spot cost estimates: SQAD. We already subscribe to the Media Market Guide Local Edition. We subscribed to the Media Market Guide National Edition as well, giving us the basis to compare the two media across multiple quarters going back to 4Q 2008, across several dayparts and against different demographics. We understand that network is based on C3 ratings and that the local markets are program ratings. We also understand that the daypart definitions vary from the national network to the station reports. However, we believe that the data that we are using is the best independently available information  today.

What we learned   

We looked at nine quarters worth of cost data, 4Q 2008 through 4Q 2010. We looked at four dayparts, early morning, rarly news, primetime and latenight. We compared regular SQAD local estimates with network scatter.

We were surprised!  The  Truth on network efficiency was not only not true, in some cases it was the exact opposite.

In early morning, network was never more efficient than spot in any of the nine quarters. On average, the incremental cost of network was a whopping 37% based on A25-54 CPMs. When you remove the politically-influenced 4Q’s in 2008 and 2010, the network premium rose to 40%.

Early news showed a somewhat different pattern. Network and spot were pretty close. Across all nine quarters, spot was about 3.5% more expensive, but without the political quarters, spot was 3% more efficient.

Primetime showed the most volatility and the best comparison with network over the nine quarters. Network was 15.6% and 13.1% more efficient than spot on  a political included and excluded basis. However, there were significant quarterly variations. The two media get very close in first quarters and in second quarters. Network scatter can be more expensive than spot.

Laternight was similar to early morning, only more so. Network never was less expensive than spot and the average cost premium was more than 50%. Even comparing affiliate late news to network produced an 8% cost advantage for spot.

What’s the take-away?

When you start your media planning, start at the beginning. Don’t assume that the old adage is true, because it isn’t. The strategic and marketing-based reasons that spot TV should be the media of choice should be considered fully. Because quite often in some dayparts, and always in others, the "truth" about network being more efficient that spot is not true at all.

Jack Poor is VP, strategic planning, Television Bureau of Advertising. He can be reached at jack@tvb.org. All about sales and advertising, Sales Office appears once a month in TVNewsCheck through the cooperation of the TVB, which solicits the columns from its staff and members. To see all the columns in the series, click here.

Edit Article

Tags

Comments (2) -

Sheldon Senzon posted a year ago
|
I'd be curious to see where the "break even" point was. How many markets deep before cumulative CPP for Spot exceeds Network? I would imagine it varies by Daypart. Is it possible Spot's CPP is actually lower for say top 150 markets? Something is not right, I'd appreciate some clarification.
Jean Medd posted a year ago
|
Can you clarify the number and rank of spot markets used in this comparison?

Today's Top Stories

Classifieds

The Market

Symbol Last Change (%)
Nasdaq 2874.04 -19.72 (-0.68%)
NYSE 7592.82 -42.99 (-0.56%)
S&P 500 1324.80 -5.86 (-0.44%)
Updated 05/17 12:38a ET Quotes delayed at least 20 mins.
Source: Financial Content

Ratings

Overnights, adults 18-49 for May 15, 2012
  • 1.
    3.2/9
  • 2.
    2.8/8
  • 3.
    2.5/7
  • 4.
    1.7/5
  • 5.
    1.6/5
  • 6.
    0.4/1
Source: Nielsen
Reviews
Opinions
Features
  • David Wiegand

    Fans of Sex and the City have finally gotten their wish: Their beloved sex-focused sitcom is back on the air ... sort of. The four women have become four men, of course, and the writing isn't as good. Oh, and the laugh track so annoying, it's offensive. And did I mention that the costumes would be considered fashionable if you were holding a yard sale? Men at Work on TBS is almost quaint, it's so old fashioned. If it had any meat on its bones, you'd be tempted to say it's the sadly ignoble epitome of TV's long-festering emasculated-men syndrome. But it's so much of a big, forgettable, innocuous shrug, it's not even worth any actual vitriol.

  • Mike Hale

    The USA Network's motto is "Characters Welcome." Apparently they're especially welcome if they resemble Oscar Madison and Felix Unger. Already stocked with Odd Couple knockoffs in Psych and White Collar, USA adds to its inventory Common Law, another comic crime-fighting show about mismatched partners. But this latest entry exhibits very little of that kind of spark as it tries to wring laughs from the juxtaposition of counseling and police work. It looks too flat and schematically plotted to succeed as the type of lightweight summer fun we’ve come to expect from USA.

  • Joanne Ostrow

    Johnny Carson: Fantastic entertainer, miserable human being. That's the lasting message of Johnny Carson: King of Late Night, the new PBS American Masters film, a rich history of a rare product of television who dominated the small screen for decades. Unprecedented access to personal archives plus all existing episodes of The Tonight Show (1962-92), distinguishes this film by Peter Jones. Telling interviews with family and colleagues, including second wife Joanne Carson, former Tonight Show executive producer Peter Lassally and a number of biographers sharpen the picture. The clips are carefully selected to illustrate specific personality traits, the performance highlights are given context and meaning beyond funny lines and memorable moments.

  • Hank Stuever

    AMC's The Pitch is a sharply-made if slightly off-putting reality series that follows different advertising agencies each week as they compete for new accounts. The inspiration for the show — made clear by its own ad campaign — is to harness some of the verve generated by the network's acclaimed Mad Men. The Pitch has a way of making the ad world seem like a real downer — a repugnant exercise in egotism laced with depressing bouts of creative compromise.

  • Tim Goodman

    HBO's Veep stars Julia Louis-Dreyfus as former Sen. Selina Meyer, who accepts the vice presidential duty and regrets it almost immediately: She has no real power and gets muscled by the Senate, Congress and the (so-far-unseen) president, who delegates all the truly crappy jobs to her. Louis-Dreyfus has found perhaps her best post-Seinfeld role and takes to it with such fervor — the constant swearing, the barely veiled desire to become president, the unhappy give-and-take with other politicians and a delightful disdain for average citizens — that you can't help but applaud what is clearly an Emmy-worthy effort. Her work alone makes Veep a gem, but there's even more to like.

This advertisement will close automatically in  second(s). You will see this ad no more than once a day. Skip ad