With snacks and drinks in hand, you settle down on your favorite sofa opposite your TV set. You click the remote, and your favorite free TV show begins.
You get engrossed in the storyline immediately. You follow the protagonist into a dark, abandoned room where a brutal murder has taken place. Suddenly, you hear hurried footsteps. Both you and the hero look towards the sound, and then you wince and groan.
On the TV screen, two Chihuahuas are dancing a lively cha-cha while singing about the tasty goodness of nachos and fajitas from Tito Pancho's, a local Mexican deli. You didn't expect a commercial at such a tense moment. You shrug, knowing more ads will follow, and decide to take a bite of your snacks. You then realize you have nachos, and looking at the wrapper, you remember you ordered them from Tito Pancho's.
Since the first TV commercial for Bulova watches aired on July 1, 1941, during a game between the Brooklyn Dodgers and the Philadelphia Phillies, television advertising has evolved into a $70 billion industry in the U.S. alone (Statista).
The 1950s marked the flowering of the television industry as affordable TV sets became common in American homes. Initially, free TV shows were usually sponsored by a single company, similar to radio. For instance, Philip Morris solely sponsored "I Love Lucy," and many sponsors incorporated their names into the shows, such as "Colgate Comedy Hour" and "The Firestone Hour."
As production costs soared, single sponsors could no longer bear the financial burden alone. This led to multiple sponsors for each show, and commercials became shorter. Today, nearly a third of television airtime is dedicated to commercials and station plugs, making it clear that free TV shows are heavily underwritten by advertising.
The cost of sponsorship has escalated as free TV shows attract more viewers. For example, a 30-second commercial on the top-rated show "American Idol" cost $780,000 in 2022 (Ad Age). In 2023, a 30-second spot during the Super Bowl cost a staggering $7 million (CNBC). These rates are for a single airing of the commercial.
Advertisers now invest in "product placements," where their products are seen within the shows. In sports broadcasts, logos are prominently displayed on boxing mats, football fences, and more. In scripted shows, actors might drink soda with the brand name clearly visible. For example, Ford Motors paid a significant amount to have the main characters in "Starsky and Hutch" drive a Grand Torino.
Critics argue that the quality of free TV shows has deteriorated. They claim that networks prioritize high ratings over production values. As one critic put it, "...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 about the advertising played during the show? The economics of free TV shows are complex, driven by advertising revenue and viewer ratings. While commercials can be intrusive, they are the lifeblood that keeps free TV accessible to the public.
By understanding the economics behind free TV shows, viewers can better appreciate the intricate balance between entertainment and advertising that keeps their favorite shows on the air.
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