Madison Avenue frets over the cost of TV ads
More and more advertising professionals and media experts are concerned over the skyrocketing costs of television commercial time - especially advertisers and their agencies that rely on the three major networks to carry their selling messages to nationwide audiences.
The stakes are high and expected to go even higher next year. Advertisers spent about $15 billion last year for commercial time on local and national TV.
The time cost for running the standard 30-second spot this season during network prime time (8 to 11 p.m.) starts around $70,000 and shoots on up, depending on the program and the time of year. For a 30-second spot during a special mass-audience-appeal program, the cost is much higher. During the Super Bowl in January, the asking price was $400,000.
For a popular new ''miniseries'' in prime time, such as ''The Winds of War'' or ''The Thorn Birds,'' commercial costs vary by demand. For ''Winds of War'' the cost of a 30-second spot was $175,000. A 30-second spot on the final episode of ''M*A*S*H,'' estimated to have the largest all-time audience ever, cost $350, 000.
John O'Toole, chairman of Foote, Cone & Belding, one of the country's top 10 ad shops, is one of those advertising executives concerned about the rising cost of commercials on network TV. Speaking to a group of advertising agency media directors and buyers in a recent workshop session sponsored by the American Association of Advertising Agencies, he likened the three networks to ''the OPEC of media.''
''The product is similar from one supplier to the next,'' he said. ''The demand has grown enormously, and a limited group of suppliers has driven the price up beyond the increase posted by alternative products; beyond the rate of inflation; beyond - many contend - the bounds of reason.''
''My particular concerns about media right now center squarely on network television. The crux of the problem is we're paying more, lots more. Talk about the inflated price of oil - look at network spots. Last year the increases were in the 13 percent to 16 percent increase range.''
What's more, Mr. O'Toole indicated, advertisers were getting less while paying more. ''While the prices are soaring, audiences are diminishing,'' he reported. ''The three-network prime-time rating has shrunk considerably in the past two years.'' From the 1980-81 season to the 1982-83 season, the combined rating has gone from 56.6 to 52.3 (for percentage share of overall potential audience).
Mr. O'Toole went on to point out that not only is network commercial time costing more and delivering less, it is also less effective. He notes research studies showing that television audiences were less and less able to remember or recall commercial messages. ''The reason is obvious and its name is clutter,'' he said. He cited the 1970-71 switch from the one-minute commercial to the 30 -second spot as standard as the chief cause of today's advertising clutter in commercial broadcast.
A spokesman for the Television Advertising Bureau indicated that Mr. O'Toole did not have all his facts straight. The number of television households has continued to increase and the number of hours of viewing per household has similarly increased. So while the networks' share of audience may have declined, the actual audience size has if anything increased, according to this spokesman.
''The three television networks have lost a fairly significant portion of their massive prime-time audience and the culprit is cable television,'' reports Marcella Rosen, media director of N. W. Ayer Advertising. ''Network TV has been for years advertising's sacred cow, delivering mass audiences at an efficient rate with all the glamour and glitter of show business. This has not changed, but cracks have appeared.''
''At present the so-called 'network erosion' problem caused by cable is limited to prime time only,'' Ms. Rosen points out. But for advertisers depending on prime time to reach their desired audiences, the loss of cable viewers is significant - exceeding 10 percent on average and nearly 20 percent in the summer season, according to an N. W. Ayer study.
If audiences are switching to cable, what about advertisers? Basic cable has picked up some ad dollars but only a small fraction of what is expended on network television. One reason for this is that the biggest audiences are being attracted by pay cable programming, which has pledged to its customers to remain free of advertising. Ms. Rosen puts it bluntly: ''Network TV offers advertisers the only mass medium.''
For their part, the networks defend their pricing as being the natural result of a supply-and-demand marketplace and point to a recent retreat on price increases, caused by soft demand for commercial time currently. ''If you want to talk about prices being up, I don't consider 6 percent per thousand viewers unreasonable,'' says Jim Rosenfield, executive vice-president of the CBS Broadcast Group. ''TV network prices are up no more than, and in some cases less than, the other media - particularly newspapers and magazines.''
What is the significance of all this for the viewer and the general public? A loss of advertising support could ultimately adversely affect TV programming, while the higher cost of network spots could act as a damper on an economy trying to bounce back.
''The fact remains that a good number of my clients who have been traditional network advertisers will not be able to afford it soon,'' says Mr. O'Toole.
''We have clients reevaluating new product introductions because the projected cost of network television dilutes the payout too much,'' he adds.