Cable News Ratings; How it Works and How They Make Money!

You hear it all the time; so-and-so network ratings are up, or down - if it's your competition - or beating the competition by this much! It never ends.  What does it all mean? And how does that make them money? We'll explain it in simple terms. This will be a short episode as I didn't want to put you to sleep with all the minutiae of media advertising. The basic concept is all you need, so join me and let's look at media advertising!

Transcript

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Hey y'all, it's time for the I Just Wanna Understand podcast. I'm your host, Phil Hawkins, and we talk about all kinds of different stuff here, so let's get to it. Hi everybody, thanks for joining me on the podcast. Today we're going to talk about the ratings of the various cable news networks and how they make money. And we'll take a look at that here in just a moment. But first I want to do a little bit of shop talk. I've had a lot of emails from people wanting to know what this brown thing is over my microphone. Well, this is a Neumann condenser microphone. It's not cheap, and I want to protect it. So I went down and I bought these little footies, these little women's hosiery footies, just like this. This is the mate to it, and you can get them in any drugstore, seven bucks, something like that, for a set of four or whatever it is. And you roll this up just like you're getting ready to put it on, and then you simply put it over the microphone, and it works to keep the moisture out, the dust, and any other particulate matter that might be floating around. And man, rather than get one of those great big $75 foam uh windscreens, which do affect the sound, despite what anybody will tell you, that does mess up the sound. So I thought about this and it works perfect. I've been using it a long time, and it just great. So now let's talk about the news networks, the cable news networks. Now everybody knows that the various news networks compete against each other for audience. Now they continuously remind us of each other's successes or failures in that regard. But exactly how do the ratings translate into revenue for the networks? We're going to take a look at it. Now, the first thing you should know is that all advertising rates are negotiated. The final cost of an advertising package, of course, varies with the product, the demographic they're looking to reach, the frequency of the commercial, the time of day it runs, and many other variables. Now, so that both the client and the media outlet can start the process with a common frame of reference, there's a phrase that's used called cost per thousand. And that's exactly the way it sounds. How much does it cost the advertiser to reach a thousand viewers of whatever network you want to choose? And this term is used to establish a measure of cost or as it is expressed as an acronym, CPM. Don't ask me why it's CPM instead of CPT. Nobody seems to know. I've asked the question a million times. It just is what it is. Now let's take a look at some numbers. Keep in mind the audience levels we're getting ready to look at are from an actual recent survey. Now these numbers change all the time. They're never the same from one survey to the next. So this is simply a snapshot of the status of the audience with the various news networks at a particular time. Not going to discuss when it is because it's not relevant. Let's just look at the numbers. Now, these resulting incomes discussed as a result of the ratings are only examples of the theory of CPM and how buying advertising actually works. Plus, this will be a vastly oversimplified example of how the ratings impact profit or more specifically gross income. Now, Fox News, the ratings kingpin, has about 3.93 million prime prime viewers versus CNN with about 1.08 million prime time viewers. So given a client knows that the cost per thousand for cable news advertising is $25, and I have no idea if that's a real number or not, I just pulled the figure out of the sky. Now the client can then begin to negotiate the various minutiae of the agreement. So in order to reach the almost 4 million viewers on Fox News, the client's advertising cost would be $98,000 per commercial in prime time. Now CNN, by comparison, in order to reach just over a million viewers, the client would pay $25,000 for each commercial, $25 per thousand. So the rate would be obviously lower. Now you can extrapolate this with a full ad schedule, and we can see immediately that Fox News makes far more money than CNN. So for Fox News, 20 minutes an hour in commercials times $98,000 is $1.96 million per hour times four hours in prime time. That's $7.84 roughly million each night in prime time. That's five nights a week because the weekends are different. Now CNN, on the other hand, might make $2 million a night in prime time. Now these trends in audience levels also affect ad pricing in that CNN is in a protracted downward spiral, which forces it to offer free extra spots or extra website exposure, et cetera, to attract advertisers, basically begging for advertisers and giving away the store in the process. Now the other issue to consider in examining these audience levels is that they also act as an opinion poll of TV viewers. Clearly, news consumers prefer Fox News to CNN, CNBC, MS Now, or whatever they're calling it these days, and PBS. Now you'll notice we excluded Newsmax from this discussion. And although they are growing rapidly as a conservative news outlet, they still do not command anywhere near the ratings as the more established networks. So, in a nutshell, that's how it works. Basically, uh the more people watching or listening uh or reading, the more money you can make, which begs the question. I mean, you really gotta ask this question why do the left wing networks continue to pursue a left wing agenda when clearly the audience prefers a conservative point of view?