The cost of television airtime is determined by two factors: revenue – the demand on advertising minutage – and commercial audience (impact) delivery – the supply.
As with all market forces, extreme movements in one or both factors causes a large swing in costs.
The TV industry measures the performance of commercial TV companies, in terms of audience delivery, in two ways.
Firstly, total viewing of programmes, which is important in assessing the success of new or existing series, and whether they are worth recommissioning for the following year.
The second point is an issue of more concern to the trade – that of the delivery of audience for the viewing of ads, known as commercial impacts.
From the perspective of the commercial TV stations, one of their principal business missions is to produce programming that prompts the audience to watch the ads in between.
The importance of commercial impacts is clear. In basic terms, the higher the delivery, the lower the cost of TV airtime becomes.
So if programmes were being made that attracted increasingly high audiences, but viewing of commercials within those programmes dropped, the industry would face a dilemma. Fortunately this is not the case.
While total viewing of all TV has fallen, in terms of commercial audience delivery, 1994 has been a very steady year. The total number of individual impacts (measured as a 30-second equivalent – the industry standard) has remained exactly static year-on-year, across all commercial channels. More impressively, the quality of audience delivered is improving, with ABC1 adults rising by two per cent, although the young adult total was down four per cent.
The cost of advertising on TV, however, rose sharply last year (about ten per cent). As the figures show, this has not been brought about by declining viewing of commercials, but demand in the market. TV revenue rose by nine per cent in 1994.
This year there is likely to be an even greater increase, as business confidence grows and certain sectors dramatically build their investment in TV – bringing the kind of year-on-year inflation figures last seen in the Eighties.
It is essential, therefore, that the TV companies attempt to reduce inflation figures that are so far ahead of the national averages, and ensure that there is sufficient audience delivery to accommodate the increasing investment.