DETERMINING TELEVISION ADVERTISING RATES
Commercial television stations are, for the most part, supported through the sale of a part of their broadcast schedule to advertisers. This time is sold primarily in the form of short spots interspersed among the stations' entertainment programming.As the supply of these spots is fairly constant, the rates which stations charge for these spots in their schedule are quite dependent upon the demand among advertisers for those spots. Since the aim of advertising is to convey a message to an audience effectively, and television is essentially a medium to reach an audience, the demand for advertising on a station will be dependent upon the audience that advertising message reaches.
That is, since advertisers are actually purchasing access to an audience, it is expected that the price that advertisers would be willing to pay for that spot will depend upon that audience. Therefore the price that stations are able to get for their spots will depend on the audience that stations can attract for those spots. In previous studies over the last fifteen years, a number of audience factors have been identified as contributing to the determination of prices for broadcast time on television.
In 1967, W. T. Kelley undertook a survey of broadcast managers in the Philadelphia area, and found that market size and quality, station coverage, and competition were all major factors which were considered in the rate-setting process.Kelley did not, however, provide any evidence or proposals as to the manner in which these factors contributed to the determination of rates. In an 1976 article, S. M. Besen attempted to fill this gap in part by deriving an empirical model for the value of television time.Using pure, or block, time rates as the dependent variable, Besen's model included measures of market size, competition, network affiliation, and
the station's broadcast frequency.While providing empirical evidence of effects, the work was limited in that the model did not directly consider advertising spot rates and was limited to the examination of a single year.French & McBrayer (1979), in a qualitative article looking at the factors which determine station spot rates, found local market rates to be strongly influenced by three major factors: demand, competition, and ratings. And demand, they stated, was largely determined by the size of the market and local economic conditions.
This study will involve the empirical verification and measurement of those factors cited in the previous studies, namely the size of the market, the quality of the market, local economic conditions, the direct competition from other commercial stations in the market, differences in station coverage, the network affiliation (if any) of the station, and the broadcast band in which the station operates. It will refine the cited factors 。。。
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