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by David Goetzl, MediaPost
The national TV marketplace should be included in every Economics 101 textbook as the paradigm of supply and demand. It’s been noted before that for years, inventory (ratings) has been declining rather steadily and pricing (ad rates) have been increasing (save some recessionary bumps).
In an Advertising Research Foundation presentation Wednesday, Horizon Media’s top researcher Brad Adgate illustrated just how much ratings and costs have been moving in opposite directions, citing Nielsen data.
In February of the 1991-92 TV season, ABC, CBS and NBC all had 18-to-49 ratings averages above a 7.0, while Fox was close to a 6.0. The total cost for 400 gross ratings points (100 on each network) was $5.4 million.
Moving 10 years ahead, February ratings had declined to the point where only NBC was above a 5.0, while ABC and Fox were notably below a 4.0. Yet the total cost for 400 gross ratings points (100 on each network) had more than doubled to $10.9 million.
This season, none of the Big Four had an 18-to-49 average in February above a 2.5. Total cost for those 400 gross rating points (100 on each network) was $20.5 million -- not far from doubling again.
Over that span, the cost per rating point rose from $13,586 in 1991-92 to $27,295 in 2001-02 -- and to $51,304 this season.
In a separate realm, Adgate’s presentation offered a fascinating upfront history courtesy of information from Erwin Ephron’s Ephronmedia. Some highlights:
- The first time an advertiser received a guarantee based on a CPM was in 1967, and it was American Home Products.
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