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TV Ratings vs. Time Buy

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  • TV Ratings vs. Time Buy

    After seeing Indycool's post about the 0.1 rating for Oz, I got to wonder what effect this really has in the grand scheme of things. Let me see if I can connect some dots:

    1. CCWS pays Speed, NBC, and CBS to broadcast their races.
    2. I assume the rate paid to Speed is less than the rate paid to either NBC or CBS. (should be a safe assumption since not all races were on broadcast)
    3. CCWS (or its broadcast/marketing arm) sells adveritising air time to the sponsors at a given rate.
    4. As long as CCWS sells enough ad time to cover their time buy + expenses, it makes a viable business venture (notice I didn't say profitable, just viable in the sense its factored into the cost of doing business).
    5. If the rating is a 0, 0.1, 0.5, 1.0, or anything else, this rating would not generate more or less revenue for the race.


    1. Disney pays the IRL $X per year to broadcast the IRL races.
    2. Disney expects to sell advertising during the races at a certain rate based on the expected ratings.
    3. For it to be a viable business venture for ABC, the ad revenue needs to be greater than the $X paid to the IRL + expenses.
    4. I don't know what the price scale for selling ads are, but let's assume that sub-1.0 ratings = one rate; 1-2 ratings are an higher rate; 2-3 are higher rate than the 1-2 rating rate; and so on. (Note: I'm sure its not that simple, but you get my drift for this example)
    5. Therefore, for this deal to work for Disney, they are more sensitive to what the ratings are since it directly affects their ad revenue. (Ad revenue is directly related to the ratings)


    Have I covered both scenarios pretty close?
    If you break a vase and then glue it back together and the vase loses it's value, you do not get credit for fixing it. You get the blame for damaging it....

  • #2
    The other questions I have dealing with timebuy vs. rights fee are:

    -How many sports chose timebuys over rights fees? (was it more lucrative that a league/sport/federation chose not to pursue selling the rights)
    -How many timebuy properties were able to later switch to rights fees? How many that aren't network owned? (XGames, GravityGames, Arena Football) The World Cup is one.
    -Have any timebuy sports been hurt by a network no longer willing to sell it the airtime desired? (what was the history of the AVP tour and NBC 10 years ago? was that network or sponsor driven?)


    From my perspective, the rights fee arrangement is better (for broadcast rights or promotional rights). While there is less upside if everything goes right, it is far stabler is problems occur. More importantly, other companies willing to invest their money in your business is a sign of stability. It is easy to fund a business out of your own pocket, whether its a race series or a pizzeria, but it doesn't mean that the business is viable.

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    • #3
      Originally posted by Rommey
      After seeing Indycool's post about the 0.1 rating for Oz, I got to wonder what effect this really has in the grand scheme of things. Let me see if I can connect some dots:

      1. CCWS pays Speed, NBC, and CBS to broadcast their races.
      2. I assume the rate paid to Speed is less than the rate paid to either NBC or CBS. (should be a safe assumption since not all races were on broadcast)
      3. CCWS (or its broadcast/marketing arm) sells adveritising air time to the sponsors at a given rate.
      4. As long as CCWS sells enough ad time to cover their time buy + expenses, it makes a viable business venture (notice I didn't say profitable, just viable in the sense its factored into the cost of doing business).
      5. If the rating is a 0, 0.1, 0.5, 1.0, or anything else, this rating would not generate more or less revenue for the race.


      1. Disney pays the IRL $X per year to broadcast the IRL races.
      2. Disney expects to sell advertising during the races at a certain rate based on the expected ratings.
      3. For it to be a viable business venture for ABC, the ad revenue needs to be greater than the $X paid to the IRL + expenses.
      4. I don't know what the price scale for selling ads are, but let's assume that sub-1.0 ratings = one rate; 1-2 ratings are an higher rate; 2-3 are higher rate than the 1-2 rating rate; and so on. (Note: I'm sure its not that simple, but you get my drift for this example)
      5. Therefore, for this deal to work for Disney, they are more sensitive to what the ratings are since it directly affects their ad revenue. (Ad revenue is directly related to the ratings)


      Have I covered both scenarios pretty close?
      There's no free lunch. Ratings define the rates you can charge for the ads. A time buy should be the same as a network payment assuming both parties assume the same risk margin and net transaction expenses. This assumes a perfect pricing balance and everyone has a similar expectation as to the ultimate ratings and ad value. The ratings still are critical under either arrangement because that is the revenue driver for the value of ad sales. The value of ad revenue would dictate the amount of money one would pay for the TV time.
      “Jealousy is the tribute mediocrity pays to genius.” -- Archbishop Fulton J. Sheen

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      • #4
        How many "choose" time-buy? I would assume none.

        You settle for a time-buy, because you couldn't sell the program.

        The NFL could choose a time-buy, and sell their own ads for big $, but they don't.

        Networks fight over the NFL, and the winners sell the ads (to ad middlemen) for huge $.

        The networks are experts at turning a profit on programs. Sport/Entertainment companies are not.

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        • #5
          The only advantage I can see for a time buy is that is that you can run your broadcast as a non-profit enterprise. Simply charge for ads to cover the time and broadcast expenses. Ratings do not have to enter the picture, so it doesn't matter how low they get as they'll still be under market rates. But why would somebody charge less than market rates for ads? Well, if you need bargin basement priced ad rates to attract sponsors who otherwise wouldn't advertise on such a low rated show. Then you hope ratings are high enough so the sponsors are happy with the great bargin they got.

          Two points here.

          1) While a time-buy may be preferable in some situations, being in those situations is not. If you can get high enough ratings to make back the time buy fee from ads, then the network would broadcast and sell the ad time itself, as that's what they do. Nobody decides to get a time-buy if they can get somebody to broadcast them. It's one less financial risk they have to take, and one less responibility for the series.

          2) For an auto-racing series, who's teams are dependant on sponsor money, ratings are critically important. Even if they sanctioning body charges low-ball rates for ads, the teams do not have that option with their sponsors. Their sponsors are paying for people to see their name on the cars and no matter how many people show up, it's nothing compared to how many people can see it on TV. With the exception of Indy and some of the other larger tracks, the largest race crowd is dwarfed by the smallest TV audience. They're paying to get their cars on TV. Which brings me to the primary reason an auto-racing series would do a time buy in the first place. Nobody will spend the sort of money necessary to sponsor a team in a CCWS/IRL level series if it's not televised. In this case, the series would have buy time even if nobody will sponsor it at all. It would be money well spent if you're willing to run a race series at any expense.
          It's impossible, that's sure. So let's start working.- Phillipe Petit

          Talent borrows, Genius steals. - Pablo Picasso

          Ah, there's nothing more exciting than science. You get all the fun of sitting still, being quiet, writing down numbers, paying attention... Science has it all.

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          • #6
            You need to think more like a capitalist. Non-profit?
            “Jealousy is the tribute mediocrity pays to genius.” -- Archbishop Fulton J. Sheen

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            • #7
              I guess that if the CCWS had a product that the networks wanted, and that people watched, they wouldn't have to buy time, would they?

              A total lack of TV ratings means a total lack of any kind of real fan base.

              Perhaps the slight uptick in the IndyCar TV ratings this year is one of the first steps to building a new fan base, because I think that those who have been long time fans have already made their choice.

              It's time to bring in some new fans, real fans that follow the series all season long and don't just show up when the show is in their downtown. And then forget about it when it leaves.

              Comment


              • #8
                Originally posted by bigred
                The other questions I have dealing with timebuy vs. rights fee are:

                -How many sports chose timebuys over rights fees? (was it more lucrative that a league/sport/federation chose not to pursue selling the rights)
                -How many timebuy properties were able to later switch to rights fees? How many that aren't network owned? (XGames, GravityGames, Arena Football) The World Cup is one.
                -Have any timebuy sports been hurt by a network no longer willing to sell it the airtime desired? (what was the history of the AVP tour and NBC 10 years ago? was that network or sponsor driven?)


                From my perspective, the rights fee arrangement is better (for broadcast rights or promotional rights). While there is less upside if everything goes right, it is far stabler is problems occur. More importantly, other companies willing to invest their money in your business is a sign of stability. It is easy to fund a business out of your own pocket, whether its a race series or a pizzeria, but it doesn't mean that the business is viable.
                On a local level the Chicago Bulls of the NBA have taken their radio broadcasts 'in house' buying the time on WCKG FM and selling the commercial time themselves. They as all other sports teams had rights fee deals in the past which had stations paying them, the last one was a big money loser for the station so obviously the fee paid the team by a new contract would not have been as high an offer. I wouldn't put the Bulls in the marketing and broadcast failure category so this arrangement might become more common. That said the ability to sell the commercial time to make the broadcast deal profitable is what makes or breaks the idea.
                "You can't arrest those guys, they're folk heroes"
                "They're criminals"
                "Well most folk heroes started out as criminals"

                Comment


                • #9
                  Originally posted by WheelerDealer
                  You need to think more like a capitalist. Non-profit?
                  Well, the point is to run one aspect of the business as non-profit (although I guess it would be more accurate to call it not-for-profit, or break even) because it won't run as a for-profit enterprise, but is essential for the operation of the business as a whole. If you can't get a broadcast partner, or sell ad space to acceptable sponsors for your time buy, then you have charge as little as necessary to get sponsorship, even if you lose money. Remember, no TV, no team sponsors. No team sponsors, no teams. No teams, no series. Even if you lose money on the broadcast, you may make it up somewhere else, but you need TV to do that.
                  It's impossible, that's sure. So let's start working.- Phillipe Petit

                  Talent borrows, Genius steals. - Pablo Picasso

                  Ah, there's nothing more exciting than science. You get all the fun of sitting still, being quiet, writing down numbers, paying attention... Science has it all.

                  Comment


                  • #10
                    Your other series assumption #3 is simply wrong. The people who run TV networks are not stupid. If they thought they could make $5 by paying a rights fee to the other series, then selling ads, they would do so. They know they cannot, so they do not.

                    The other series buys time, and the sells ads, mostly to car sponsors, for less than the time buy fee. In a sense, the whole broadcast is a commercial.

                    Your IRL assumptions #4 & 5 are not how the TV business works. A network sells ads with a promised rating. Say 0.5. If the show gets a 0.5, all is well. If it gets less, then the ad buyer gets a free ad on something else as a "make good".

                    However, again the people who run the TV networks are not stupid. They have valued the IRL and paid rights fees as appropriate. They MAKE money from the deal, and the better the rating, the more they can promise for future races, and the more they can make.

                    Simply put, the other series is a time buy because, but for the time buy, it would not be on television because its TV rights are valueless.

                    Comment


                    • #11
                      So if I understand your theory, its that a business model that relies on time buying for a sport, then selling ads to defray costs is more stable than one that sells a sport, and leaves selling ads up to the buyer.

                      You might be right. However, one flaw I see is that if you like selling ads for time buys, you could do it just as well without a racing series. You could buy time on TV, put in infomercials, old Gilligan's Island reruns or whatever and sell ads. You don't need a racing series to do that.
                      Randy

                      "Danica has earned her equipment and her opportunity. It didn't just materialize out of the air. She earned it one piece at a time, starting at 10 years old." Mark Martin

                      "Life does not imitate art. It imitates bad television." Unidentified TV Talking Head.

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                      • #12
                        Originally posted by jdessar
                        I guess that if the CCWS had a product that the networks wanted, and that people watched, they wouldn't have to buy time, would they?

                        A total lack of TV ratings means a total lack of any kind of real fan base.

                        Perhaps the slight uptick in the IndyCar TV ratings this year is one of the first steps to building a new fan base, because I think that those who have been long time fans have already made their choice.

                        It's time to bring in some new fans, real fans that follow the series all season long and don't just show up when the show is in their downtown. And then forget about it when it leaves.
                        You totally missed the point here. It wasn't a question of "WHY" CCWS is a time-buy and the IRL is paid by Dinsey; it was a question of "HOW" the basic deals work in relation to the ratings.
                        If you break a vase and then glue it back together and the vase loses it's value, you do not get credit for fixing it. You get the blame for damaging it....

                        Comment


                        • #13
                          Originally posted by SamC
                          Your other series assumption #3 is simply wrong. The people who run TV networks are not stupid. If they thought they could make $5 by paying a rights fee to the other series, then selling ads, they would do so. They know they cannot, so they do not.
                          If I went to a network and said I wanted to buy an hour of time, that network is going to give me a price (whatever it might be) to allow me to air my show. Are you saying that the network would then sell ads in the timeslot that I bought? I stated that "CCWS (or its broadcast/marketing arm) sells adveritising air time to the sponsors at a given rate." is the entity that does the selling of ads, not the network. So how is my statement wrong?

                          The other series buys time, and the sells ads, mostly to car sponsors, for less than the time buy fee. In a sense, the whole broadcast is a commercial.
                          If my assumption (#3) is wrong (as you stated above), you just countered what you said.

                          Your IRL assumptions #4 & 5 are not how the TV business works. A network sells ads with a promised rating. Say 0.5. If the show gets a 0.5, all is well. If it gets less, then the ad buyer gets a free ad on something else as a "make good".

                          However, again the people who run the TV networks are not stupid. They have valued the IRL and paid rights fees as appropriate. They MAKE money from the deal, and the better the rating, the more they can promise for future races, and the more they can make.

                          Simply put, the other series is a time buy because, but for the time buy, it would not be on television because its TV rights are valueless.
                          "4. I don't know what the price scale for selling ads are, but let's assume that sub-1.0 ratings = one rate; 1-2 ratings are an higher rate; 2-3 are higher rate than the 1-2 rating rate; and so on. (Note: I'm sure its not that simple, but you get my drift for this example)
                          5. Therefore, for this deal to work for Disney, they are more sensitive to what the ratings are since it directly affects their ad revenue. (Ad revenue is directly related to the ratings)."
                          Let's see, I basically said that the higher the rating, the higher the rate that can be charged. Whether the rate charged is based on expected ratings or actual rating is just how the $ rate is determined. Therefore, my statement #5 is dead on since ad revenue is directly related to the ratings.

                          You state "If it gets less, then the ad buyer gets a free ad on something else as a "make good" is saying, for example, that on an IRL broadcast, when the broadcast deal was first made, that Disney expected a certain rating out of the IRL races, and paid a fee based on those expectations. Let's say that expected rating was a 1.0. Some races get above that and some don't. If I catch what you are saying, Disney makes out when the rating is higher than expected, but has to "make good" to a sponsor when the rating is lower than expected? And by "make good" I assume you mean free/reduced-rate air time for a sponsor in the future? If so, then I see ad revenue directly tied to ratings.

                          Again, this was a question of how the deals work, not why to do a time buy or not.
                          If you break a vase and then glue it back together and the vase loses it's value, you do not get credit for fixing it. You get the blame for damaging it....

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                          • #14
                            Originally posted by Rommey
                            it was a question of "HOW" the basic deals work in relation to the ratings.
                            Simple! The higher the ratings, the higher the ad rates. And as someone who has sold ad spots for a living, I can tell you that’s it’s far easier to sell ads for programming that gets 3.0’s and 4.0’s than it is for 0.5’s and 1.0’s. So typically, you don’t put too much time or effort into 0.5-1.0 programming.

                            Comment


                            • #15
                              The networks are experts at turning a profit on programs.
                              Re News and Sports programming, that could be arguable....

                              I guess that if the CCWS had a product that the networks wanted, and that people watched, they wouldn't have to buy time, would they?
                              Rather an oversimplification. There are some properties (sports primarily) that networks want, but are not willing to take the risk on. There are some properties that prefer the time buy, believing they can profit more from ad sales than from a payment from the network. I believe you'll find a number of college football broadcasts are actually time buys.

                              However, again the people who run the TV networks are not stupid. They have valued the IRL and paid rights fees as appropriate. They MAKE money from the deal, and the better the rating, the more they can promise for future races, and the more they can make.
                              Not necessarily....are the networks making money on their NASCAR deal?
                              BAN SHREDDED CHEESE! MAKE AMERICA GRATE AGAIN!

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