R & L Media Systems


What Will I Make?   Updated 11/30/2022

   The other day a station owner asked me why he was having trouble selling 30 second commercials for $30 each. That is the reason for this article on LPTV Economics, THE TRUTH!

   As I said on the home page, a Super Bowl spot, the most expensive TV spot, sells for $5,500,000 for a 30 seconds commercial. Expensive? Not really. 96,400,000 people watch the Super Bowl, so that comers to $5,500,000 / 96,400,000 = $0.057 per person. And you know 100% of those people are watching.

   I also talked about the U.S. Small Business Administration stating, "A small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing." This percentage is based on companies that have margins in the 10-12 percent profit range (after expenses).

   So for every dollar they give a station, they expect $1.00 / 7.5% = $13.33 dollars in business. If you sell you spots for $30.00, can you promise them $30 x 13.33 = $400 in new business each time a spot airs? I don't know if a full power can promse that.

    So what is realistic? As a starting point, the normal rate when a network leases an SD channel on a station is $2,000 per million in the 80 dBu contour, minimum of $500, per month. That comes to $0.002 per person per month. And you are probably, at best, in the 1% of the viewers and not the 100% of the Super Bowl.

   Now let's crunch numbers. Since most LPTV stations that are going to sell advertising are going to have less than 250,000 in their 80 dBu contour we will stick with the minimum $500 per stream per month, or $4,000 for 100% sales. If a Real Estate Company, Auto Dealership, or Ad Agency wants to do all the work to program a channel, and hand you a check for $500 each month, make a deal. No work and a constant paycheck.

   As for folks that want you buy spots in shows, you can use a network and get 2 breaks an hour, (5) 30 seconds spots per break, 24 hours a day, 30.4 days a month = 7,296 30 seconds spots a month. The max you can sell a single advertiser is 2 spots a break, one at the beginning and one at the end. 2 spots / 5 spots per break is 40% of your inventory. Since we are having to do more work, it is worth double what it would be if they bought a 24/7 stream. So our top package is $500 per stream x 2 (double) x 40% = $400 per month for 7,296 x 40% = 2,918 spots at a price of $400 / 2,918 spots = $0.14 each.
   (A good salesman would point out for $100 more they could own all of the breaks on a stream but who are we to judge.) From this level, we are going to increase the price 25% for each level up or 1.33 times. So the next package is 1 spot per break, 1,459 spots at a cost of $400 / 2 (half the spots of your max package) x 1.33 (price increase) = $266.00 / 1,459 = $0.18 per spot.

   If they only want one spot per break, they pay more. I like to go in steps of 25% increase. Not too much to scare them off yet it might make them think of a larger package. So we multiply everything times 1 / .75 = 1.33. One spot a break would be $0.14 from above x 1.33 = $0.19 per spot or $277.00 for the package. Now we get to the bulk package or Run On Schedule (ROS) spots. These are the spots that fill in the holes in the schedule that the more expensive spots have not takes up. Again, we increase the one-spot-per-break rate of $0.19 x 1.33 = $0.25 per spot for the max ROS package of $200. If they want smaller packages, we increase the cost by 10% for every $50 decrease, thus:

$200 = 800 spots ($0.25 each)
$150 = 536 spots ($0.25 x 1.1111 = $0.28 each)
$100 = 323 spots ($0.28 x 1.1111 = $0.31 each)
$50 = 147 spots ($0.31 x 1.1111 = $0.34 each)

   Next are the Non-Primetime Daypart spots. These are spots that run in specific time periods during the day. Times shown are Eastern Time Zone. Early Morning 6:00am - 10:00am when folks are getting ready for work, Daytime 10:00am - 4:30 pm which is normally housewife TV watching, and Early Fringe 4:30pm-8:00pm
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