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The Anatomy of a Rate Card: How TV Advertising Pricing Is Shared with Buyers

Posted by Ashley J. Swartz on Feb 23, 2021 10:00:00 AM

The Anatomy of a Rate Card_ How TV Advertising Pricing Is Shared with Buyers

Used to share pricing with buyers, TV rate cards contain a complete list of ad rates for specific time slots, stations or networks. In most seller organizations, they’re only updated annually or quarterly at most, and new rates are calculated using Excel. Often analysts apply across-the-board percentage increases rather than analyzing historical sales data to optimize pricing; the latter is simply too difficult with Excel as their only tool.

What a Furious Rate Card Looks Like

Below is a sample rate card created by Furious for a local broadcaster. We’ll explain how to understand it one section at a time. 

Pricing Playbook-rate-card-image on Tablet

1. In any local TV market, a media company could own multiple stations. Rates may vary between an Albany NBC station and Albany FOX station, for example.

2. In local TV, ads are typically sold on a spot or cost per point (CPP) basis. In organizations that determine pricing through Excel, spot prices tend to be solely based on historical sold inventory, while CPPs are closely tied to Nielsen ratings. Some CPM-based selling occurs but on a limited basis because there’s still a limited supply of linear addressable TV inventory.

3. Typical spot lengths are 15, 30 and 60 seconds. With marketers now accustomed to creating short video ads for social platforms, 10-second spots are increasingly common. :60 spots usually cost twice what :30 spots do—and sometimes a bit more. :15 spots usually cost 60% to 80% what :30 spots in similar programming sell for, while :10 spots are in the 50% to 60% range.

4. Most broadcasters and operators redo their rate cards annually or quarterly at best, though monthly or weekly updates are now recommended. (Given how dynamic the market has become, TV ad inventory’s value is constantly changing, which isn’t reflected in the standard, sporadic approach to pricing updates.) More frequent publication of rate cards requires automation of the ingestion and processing of data, as well as the use of data science to calculate rates.

5. The majority of TV programming is sold by daypart (e.g., morning, mid-morning and daytime). Advertisers who buy dayparts are trying to reach certain audiences, such as stay-at-home moms who do most of the household shopping.

6. A program-driven rate card, as pictured here, is the most granular a seller can get. Rates are set for specific shows, though the seller should employ packaging strategies to optimize yield. Buyers are usually only interested in buying primetime and other high-value content on a program-specific basis.

7. Furious rate cards leverage data science to provide an “optimized” rate that gauges the inventory’s true value based on historical sales and future demand. They also provide guidance on floor and ceiling prices, based on “low-sellout” and “high-sellout” scenarios. This enables TV salespeople to assign the right value to inventory based on real-time demand patterns. 

Other Rate Card Components

Broadly, rate cards might include a single “submit” or floor rate—or multiple rates to account for priority, or likelihood of clearance. “Priority” is a construct in TV advertising whereby codes in trafficking systems are assigned based on whether a buy is “preemptible” or not. Priority Code 1 could mean that the buyer paid a premium to ensure that its ad will run at the desired time, no matter what, while Priority Code 2 means clearance is likely—but not guaranteed. Finally, Priority Code 3 means the spot will go into a broad rotator and run whenever there’s availability, which could be overnight. 

As a final note, demo targeting (e.g., women from 25–54) isn’t factored into rate cards. Instead, demos are applied as multipliers or handled in a packaging tool. For example, a seller might create a package of programs or networks to help advertisers reach their target demo and then offer a blended rate based on the allocation of spots across that programming.

 

To learn why pricing is uniquely challenging in the TV and video advertising business and how automating rate cards can help sellers optimize TV ad prices in 2021, download our playbook, “How Automating Rate Cards and Pricing Helps Linear TV Sellers Increase Revenue."Pricing Playbook

Topics: Advertising Pricing & Planning, TV Advertising Sales