The sharks, the TV, advertising, and money.

This is a response to Jzap that took on a life of its own. Apologies for the length, and for the marginal sharks content…

On 10/20/01 9:40 AM, “John LastMinute Zapisek 209/17” wrote:

>> [Chuq] The Monday Night Football game on 10/15 was between two
>> teams with a combined zero wins. . . . And it had a larger TV
>> audience than a key game in the baseball playoffs.
>
> I think it’s easy to read too much into this.

Yeah, but its only one of all sorts of indications, from reduced viewership numbers to the significant drop in kids playing little league…

> Football is played once a week. In the regular season, a baseball
> team plays TEN TIMES as many games as a football team.

But that kind of ignores that this was a key playoff game and the worst MNF game in years. And baseball still couldn’t beat football’s numbers.

If it was typical game to typical game, sure. But that much difference in quality?

>> There are large numbers of unsold tickets to playoff games as
>> well.
>
> That’s more telling — unless those empty seats are due to FOX
> forcing a weekday afternoon start on a game which the fans and
> teams would much rather have played at night.

It never used to stop people. It’s more a case of cost than time.

>> But if advertising revenue goes down, the only way to prop it up
>> is to cut supply, making each commercial worth more because there
>> is less competition for the dollars.
>
> Perhaps I don’t understand the context, but that sounds VERY
> counter-intuitive.

> It’s hard to cut the supply of minutes in a day 🙂 And cutting the
> supply of eyeballs is hard, too

> Any TV executive who thinks he’s being smart by driving
> eyeballs away from TV to some other medium is shooting himself in
> the foot,

> If you’re talking about cutting the number of advertising minutes in
> a TV hour by replacing them with programming…

But that assumes that all programming is the same, that all advertising rates are the same, and that audiences are the same. None of which is true.

> Guess I’m having trouble imagining a scenario where cutting back the
> supply of minutes available to advertisers really works. –jzap

This gets complicated really fast. I apologize in advance if I confuse the hell out of you, or oversimplify things too much…

Take a station like Fox Sports Bay Area (please! ba-dump). It’s on the air 24 x 7. The number of minutes it broadcasts is fixed, it doesn’t change.

But what it broadcasts in those minutes differs over time. At one end, you have locally produced sports broadcasts (sharks, warriors). At the other end, you have those 2AM paid infomercials. In between you have locally produced programming (the regional news programs, for instance (which actually come out of chicago. Go figure), syndicated sports (the Pac 10 game of the week), syndicated programs (Bass Fishing weekly). That kind of stuff.

The problem, of course, is that the money you charge for a 30 minute infomercial is a lot less than what you charge for commercials during 30 minutes of a Sharks game (or you better HOPE it is…).

So — just show more sharks games, right? Not necessarily.

Each game has a certain number of commercials sold for it. The more games you broadcast, the more commercials you have to sell. That’s fine, as long as you have sponsors to buy the commercials and eyeballs (that’s us, the fans) to sell them. If the viewing audience shrinks, if there are fewer eyeballs, the sponsors aren’t as interested, so you have to drop the cost of the commercial to keep them buying. Drop it too low, you start losing money. And that’s not what you want…

Or — if, say, you hit a recession, or all your sponsors (hello, webvan!) go out of business, you find yourself with more commercials to sell than sponsors have money to buy.

In a sellers market, the price of something goes up. In a buyers market, it goes down. Or perhaps you don’t ‘sell out’ at all (we noticed watching football over the weekend that there were a few instances where they *should* have gone to commercial, and didn’t. It looks like the NFL had unsold inventory.

Even worse (for football) is the rumor that the networks are planning to go to the NFL after the season and demand concessions on the TV contracts. The advertising market has imploded, even for football, and the networks are losing their shirts. ABC pays $600-650 million a year for Monday Night Football. The estimate this year is they’re going to lose $200 million (and that number is somewhat futzed — the networks also use sports to promote their other shows, so there are off-book ‘internal’ commercials that add value to the broadcast, but not to $200 million, folks. You can only promote Friends so many times….

One of the things pro sports has found out (the hard way) is that there IS a limit to how many games people will go to, and watch. For every hard core fan that watches every game, buys full season tickets, knows every player on the taem and most on the farm, there are a dozen who scan the sports page, go to 5 or fewer games a year, and watch it on TV when they have time.

You keep adding more games to TV, and eventually, you saturate the market. The eyeballs stop growing. Worse, the eyeballs spread out across the broadcasts. But it costs the same to produce them — you just can’t charge as much because there are fewer eyeballs attached.

That’s why places like Tampa show fewer broadcasts. There are only so many eyeballs. The cost to broadcast a game is fairly fixed — you can’t save a lot of money. But by not broadcasting a game, you save the costs of that broadcast, and the reality is, most of those eyeballs will switch to other games. You’ll lose some, but not nearly to the level of the reduced production costs.

Fewer games equal reduced costs, more eyeballs attached to the games left to broadcast, which means higher ratings, and higher advertising rates. And since you’ve cut games, you’ve also cut the NUMBER of commercials you run, so advertisers have fewer chances to buy, so you start moving the market from a buyers (more commercials than advertisers) to sellers (more advertising than available commmercials). That also encourages higher ad rates.

All within reason, of course. It’d be a very complex spreadsheet (and a lot of educated guessing) to figure out how to maximize revenue here. If you cut too many games, you cut a lot of cost, but you piss off the fans and risk alienating them. You also have fixed costs (staff salaries, for instance) that don’t change as you change the # of broadcasts. And even if you cut games to 1, that doesn’t mean you can raise your ad rates infinitely; raise them too high, and the advertisers will go spend their money on NASCAR instead.

So you have a half dozen high-wires to walk simultaneously. Guess wrong on one of them, and things go blammo in your face. Set rates too low, and you lose money. Too high, the advertisers don’t buy (and you lose money). Too few games, you piss everyone off and you can’t make money because you have too few adds to sell. Too many games, and your rates drop because you can’t sell all your ad inventory at profitable prices.

All of this is coming to a head because we’re coming out of many years of economic prosperity and growth, which meant there was money to throw around, and lots of advertising. The economy is faltering (at best), and so companies are digging the foxholes. One of the first things to get cut is advertising. So demand weakens, so you have to cut prices to keep selling ads, and…

(I won’t even get into things like mass buys, Run of Schedule, PSAs, cross-promotions, and package deals (that include things like board and magazine purchases as part of a package). Suffice it to say, even if the ad card says $500 per 30 second commercial, not everyone pays that).

One thing you have to remember is that the fan is NOT the customer. The advertiser is the customer. You are the product sold to the advertiser; your eyeballs collectively is what the advertiser buys. And the sports program is what is created to convince you to watch, so they can throw ads in your face. So when you complain about what a network does, that it doesn’t care what the fans think, you’re RIGHT. As long as the eyeballs show up, you, the fan, can be ignored, in the name of (a) keeping the advertisers happy, and (b) maximizing how much money they make on selling those eyeballs to the advertiser. And they know, and you know, and they know you know, that they can jerk you around, and you’ll still watch.

Hockey, since it is less dependent on media dollars, is going to suffer less as those numbers decline (and they will; sports is at its peak at generating income; it’s downhill from here. But that’s another article). But as we move forward, I expect you’ll see more teams cut the number of games broadcast. For a while, we were headed towards “every game, except in chicago”, but the finite number of eyeballs meant that at some point, aggregate viewer numbers was going to max out. There is a tradeoff here: attracting fans and building audiences on one side, money on the other. The pendulum is swinging back towards the money. So expect somewhat fewer games, but not huge changes; you won’t see it cut to 20 or 30 games (except in chicago, of course), but you won’t see 80, either.

And don’t expect to see loosening of the Fox Sports blackouts. Fox knows that Joe Casual Fan only tunes in for a certain number of games a year. They certainly don’t plan on him wasting a set of those eyeballs on a broadcast they aren’t selling to advertisers if they can help it….

Remember, they don’t care what you think. You’re the product. And you’ll show up anyway. And they know it. Unless they do something amazingly stupid, like cancel the world series. And even if they do — 95% of you will be back in a year. That’s why we’re fans… We complain, but we keep showing up.