The book Entertainment Industry Economics: A Guide for Financial Analysis by Harold L. Vogel provides great insight into how the entertainment industry works. Starting on page 292, the book gives an analysis of how pricing works when comes to advertising. When it comes to communicating with potential customers, perhaps the most efficient means is through advertisements. As one would expect, pricing for TV spots can vary depending on where a business is trying to receive airtime. While some prices can be found through research, many of the transactions between businesses and local stations have unpublished prices. The price for an ad spot can depend on multiple concepts. Broadcasters usually sell air time to businesses using the concepts of gross rating points (the sum of all the ratings figures), frequency (the number of times an ad is used), and reach (the number of households exposed to the message). Advertisers assess the expenses of delivering a message on the basis of cost per thousand households (CPM), which indicates how much half a minute will cost during a specific time of the day. The image above shows, the CPM trends for network TV compared to newspapers over the past 30 years.
I am shocked that the CPM of newspapers is higher than that of network TV from 1992 to 2003. I wonder what happened for the CPM of TV to rise after that.
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