The Truth: Spot Often Cheaper Than Network

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).

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 [email protected]. 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.