February 14, 2018
The basics of media-buying
If you are new to TV advertising, learning the ropes of media-buying can be intimidating. In this article, we explain the basics of TV inventory and describe how media-buying works in today’s market. This summary will equip every novice marketer with the vocabulary to start navigating the world of TV advertising.
Buying approaches to TV
There are three main approaches to buying TV inventory: remnant, non-preemptible (NPE), and upfronts. The basics of each are summarized in the table below:
In the remnant market, advertisers buy spots from TV stations the week before airing, but purchases can sometimes be made the same week. Targeting is limited to purchasing a specific network-rotation (e.g. CNN Weekday 3-9pm). A small exception to this are syndicated shows, like Judge Judy, that were not made for a specific network. Remnant buys are very flexible because networks are trying to fill spots that haven’t been purchased through NPEs or upfronts.
However, because advertisers can outbid each other when purchasing remnant spots, there are no guarantees in this market—if another advertiser outbids your rate, the networks may not run your ad. In other words, there will be no “clearance.” Clearance, a widely used term in remnant markets, is the percentage of purchased TV ads that effectively airs (and advertisers only pay for cleared ads).
Non-preemptible buys are less flexible and have to be purchased one quarter before airing. Like remnant, NPE buys target networks-rotations, but can also be used to purchase syndicated shows. The difference is that non-preemptible buys offer guaranteed airings (or “100% clearance”), and therefore tend to be more expensive than remnant buys.
Finally, upfronts are the least flexible type of buys because advertisers have to commit to them in the spring, six to twelve months before airing. They are also the most expensive, but allow advertisers to purchase specific programs (e.g. Will & Grace) and offer guaranteed impressions. Furthermore, if the network fails to deliver the guaranteed impressions, they will offer make-goods on other programs (also referred to as Audience Deficiency Units).
Types of TV inventory
TV inventory types are best explained through the following table:
National cable consists of cable networks that air nationally (like CNN and National Geographic), while local cable denotes insertions on national cable networks by regional MSOs (e.g. Comcast insertion on CNN). An hour of cable programming (e.g. House Hunters on HGTV) typically consists of: 40 minutes of content, 18 minutes of national inventory (sold by the national cable network), and 2 minutes local inventory (sold by the MSO). National broadcast consists of five centralized networks (ABC, CBS, NBC, FOX, and The CW), while local broadcast denotes affiliates of these five networks (for example, an affiliate of ABC in San Francisco, ABC7-KGO).
These types of inventory are part of the “linear TV” market, in which the program and ads are simulcast to everybody (unless the viewer DVRs the show). There are some other types of linear TV ad inventory that don’t necessarily fit any of the boxes in the table above such as airings via satellite (e.g. DISH or DirecTV), syndicated shows, addressable TV (targeting of specific households via the set-top box) and national-locals (unsold local buys rolled up in pseudo-national buys). All together, linear TV constitutes the majority of the TV advertising market and is easily worth $70 billion per year in the US.
With the rise of OTT (over-the-top, e.g. Netflix), VOD (video-on-demand), and Connected TV (e.g. Roku), new types of inventory are opening up. They take up a small fraction of the TV market but are growing very fast.
It is worth briefly discussing the state of TV media-buying today. While digital platforms already use automation and real-time bidding to buy and sell online ads (also known as programmatic advertising), the TV industry is slow to adapt to this process. TV media buys are still sold over phone and email. This works with the current way of purchasing inventory, in which TV advertisers are often obliged to make 6- to 12-month commitments in advance. The TV industry will eventually need to embrace programmatic, and when that happens, one should expect fundamental changes in media-buying (e.g. ability to target by program or specific day/time, shorter purchase timelines, etc.). With that, many of the idiosyncrasies that we are experiencing in today’s market will disappear as well.