How is the cost of advertising on TV: the example of the United States

“If a point of view is widespread, it does not mean that it is not absurd” (c) Bertrand Russell

When I begin to criticize television, I usually object to the fact that, they say, everyone is satisfied with the state of affairs. Both management, and spectators, and, that is especially important, advertisers. With the first category, everything is clear. From the second - extremely controversial. But the third is not at all the way many people imagine.

Over the past 10 years, the number of TV users has decreased by almost 17% and this immediately affected the ratings . There would be an invisible hand of the market to send advertising prices down, but no - the prices of TV channels continue to grow. How so?
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The thing is that the largest channels (in particular: ABC, CBS, NBC, Fox), together with the largest advertisers, gather once a year for the preliminary sale of airtime. Advertisers say "Pay now or then good air time will not be at all!". At this point, studio bosses are most reminiscent of the character Jason Statham at the beginning of the film “Cards, money, two trunks” :

“Those who believe, fly, those who are greedy, run away.
We separate flies from cutlets, and those who believe me from those who do not.
For you straight from the tin merchandiser, and for us - a solid navvarchik.
A product without a flaw, a product without deception, reliable, like a spring from the sofa.
This is for his wife, this is for a stranger, it will be good if you are not caught with another.
Do not stand like a schoolboy in a brothel.
Who does not have time today, tomorrow will deeply regret.
Who does not have cash, it will be indecent to sob ”

Like the masonic ceremonies, the meeting takes place away from the public eye . Just think about it - multibillion-dollar contracts are concluded in advance within a few days on the basis of forecasts provided by the television channels themselves (customers are encouraged to believe in their objectivity) and under the cover of secrecy. Personally, I do not know examples of industries where transactions with such amounts would take place in an atmosphere of such secrecy. And here deals for hundreds of millions of dollars are made during the lunch break, and often the only thing that holds them together is a handshake .

The situation is aggravated by the fact that the buyer himself often does not know the true value of the airing slot he bought. Well, tell me, where the 30-second advertising insert should be more expensive: in the middle of "Two and a half people" or "The Big Bang Theory"? A separate problem is customer inequality: giants like McDonalds have been working with television channels for a long time and get serious discounts, while smaller companies pay more (and they never know how much the companies neighboring them pay on the air). Levi's once got the courage and tried to find out who pays a lot for airtime and this caused a real scandal .

As you can see, the pricing mechanism is not at all transparent. And what should a big TV channel do if demand from advertisers falls? That's right, we need to raise prices by another 8-9%, as it was done by the guys with CBS a year and a half ago.

Television networks have been very successful in resisting any reforms: for example, in 2012, the Google project to create an airtime sales exchange was discontinued . NBC gave Google an experiment to suck their channels - Sleuth and Chiller. Cable networks opposed the creation of Wal-mart (together with eBay) of a similar stock exchange for online TV. The company Spot Runner was closed after all the major television networks refused to cooperate with it out of principle. Even Microsoft could not defeat the system.

The situation with advertising on TV today is reminiscent of a luxurious casino: high stakes, and the institution always remains the winner. Someday, the patience of customers will come to an end, and this vicious system built on cartel agreements is simply overturned. Television networks, of course, will not give up without a fight - but the increasing onslaught of the Internet and the outflow of the audience will force them to make concessions.