The Economics of Free TV Shows

You caught up and got carried with the story right away. You followed the hero to a dark place, an abandoned room where someone was brutally murdered by an unknown assailant.

Suddenly, there was an unmistakable sound of hurried footsteps from somewhere. Both you and the hero looked at where they came from. And you winced, and you groaned.

On the TV screen, two Chihuahuas are seen dancing a lively cha-cha while singing the tasty goodness of delicious nachos and fajitas of Tito Pancho's, a local Mexican deli.

You did not expect a commercial at that moment of extreme anxiety. You shrugged, and knowing that there will be others coming after that, you thought you'd want to take a bite at your snacks.

You then discover that what you have are nachos, and looking at the wrapper, you suddenly remember you ordered them all from Tito Pancho's.

Commercials

Since the first TV commercial (a Bulova watch) debuted in July 1, 1941 during a game between the Brooklyn Dodgers and the Philadelphia Phillies, television advertising has come a long way to becoming a 50-billion-dollar-plus industry that it is today in the U.S. alone.

The flowering of the television industry began in the 50s when affordable TV sets made it to American homes. At that time, free TV shows are usually paid for by one sponsor, just like how they did it on radio before. Philip Morris solely sponsored I Love Lucy. Most of the sponsors incorporated their company's name into the shows (Colgate Comedy Hour, The Firestone Hour).

Later, the costs of producing these free shows grew. In turn, the advertising costs became more expensive. Single sponsors couldn't shoulder these costs alone and these free shows took in multiple sponsors. Commercials also became shorter and shorter.

One thing was obvious, though.

Television networks (who own the stations) derived their main income from the sale of airtime to advertisers. These are the time slots allotted to commercials within the free TV programs shown to the public.

Today, with nearly a third of television airtime allotted to commercials and station plugs, free TV shows only look that way. In truth, they are all underwritten by advertising.

Advertising Costs

From the outset, the costs for sponsorship kept on escalating as these free TV shows kept attracting more viewers. This is also caused in part by the ever-increasing reach of these shows, made known in real numbers in the weekly surveys of the programs.

For an idea how much these ad expenditures are, last year's placement cost of a 30-second commercial on the top-rating show "American Idol" is $780,000. In 2007, the going price for a 30-seconder in the Super Bowl is a whopping $2,600,000. And all these rates are only good for a one-shot run of your commercial.

Some Advertising Developments

Nowadays, advertisers invest in "product placements", with their products actually seen on the shows, aside from the exposure in their own commercials.

In sports shows, product or company logos are placed where it is prominently seen by the viewers (boxing mats in boxing bouts, fences in football matches, etc.). In story situations, the actors drink their soda with the brand names prominently displayed. In Starsky and Hutch, Ford Motors reportedly paid a fortune to have the main actors drive a Grand Torino.

Criticisms

Critics voice out their concerns on the "deteriorating qualities" of the production values of free TV shows. It is said that television networks were not really concerned whether their shows are good or bad, but caring only on one aspect: whether these shows are highly-rated or not.

In more of their own words, "...the viewer is reduced to a different but equally precise number - the exact price the station or network will charge the sponsor, that is, how much the sponsor is willing to pay to reach any single viewer."

As a viewer, do you enjoy the free TV shows you watch? Do you have complaints on the advertising played during the show you're watching?