Monday, February 7, 2011

What happened to network compensation, commercial time limits per hour and The National Anthem?

TV stations are still familiar with the term network compensation, but fewer and fewer radio stations are getting this source of income anymore.

There are several ways stations (TV and radio) enjoy affiliation with a particular network and how the money may flow one way or the other.  For the rest of this discussion, I'll stick to radio, since that's what I'm most familiar with.

1) Straight barter.  In the world of "just" barter, the programming a radio station gets from a network is given in exchange for the network commercials sold by the network and aired on the network and the station with the programming.  The local station gets the programming, along with some local "avail" slots that can be sold locally by the station. In a typical hour of entertainment programming, the network may get 6 minutes or more, and the local station gets about 6 minutes, sometimes more.  That keeps the programming to commercial mix at somewhere around 12 minutes of commercials and 48 minutes of program per hour. And 12 minutes of commercial time per hour is keeping with the programming philosophy of most stations these days. But there are exceptions, local stations can usually insert more commercials, especially if the programming is pre-recorded, which will then cause some hours of programming to run longer - a 2 hour program may run 2 hours and 20 minutes, a 3 hour program may run 3 and a half hours.  This is at the expense of the listener since commercial breaks are longer than intended, but make the station owners more money.

2) Barter and compensation.  In this arrangement, the compensation can work two ways - the station gets avails and some form of monetary compensation from the network (the most common way), or the station gets local avails and has to pay the network a fee for the programming content.  If the programming is in high demand by local stations - this may be the arrangement - where the station pays for the programming.

3) Straight compensation.  In rare situations, a network may pay to get a program aired by a station, if the station has demos (demographics=listeners) the network desires and the network can't get to the listener any other way.  Or a station may pay the network or program supplier for the programming, if the local station believes the programming is worth paying for to present to their listeners.

Prior to the 1980s, it was common for networks to pay compensation to stations - because the networks believed the local listener was a valuable commodity.  Which network aired on a particular station was tied to how much money a given network was willing to pay the local station.  This was the basis of network provided programming on radio for many decades - until the the networks got "wise".

In the 1980s the networks started finding out that their programming was valuable enough to stations (keep in mind stations had local avails to sell even back when the networks were paying compensation) that stations would keep the network programming even if network compensation was taken out of the picture.

As time progressed, fewer and fewer small and medium market broadcasters were receiving network compensation.

In the days of network compensation - even in fairly small markets, network compensation could have been $30-70,000 per year (if not more). 

Small market stations that were able to hang on to network compensation until recent years were very lucky and very few.  This is a cash cow that has dried up for the most part at the small and medium market level.

Most stations get their network provided programming on a straight barter basis - rarely does any compensation take place one way or the other in the 21st century.  But the barter way of doing it, has allowed stations to continue to receive high quality programming - far beyond the capabilities of their local staffs - and that's worked out well for the networks, the stations and the listeners.

Stations that have a 12 minute limit on commercials per hour should stick to that limit - regardless of the time of year or the demand for ad time (eg. political season).




There have never been laws or regulations regarding how many minutes of commercials a station could air in any given hour - most broadcasters used to abide by the NAB Seal of Good Practice - no more than 18 minutes per hour for radio and no more than 16 minutes per hour for television.  A code that was adopted specifically with the idea to keep the government out of setting any national standard rule or regulation.

As radio stations became more competitive for listeners ears - they took it upon themselves to decrease the minutes per hour "guarantee" of no more than X minutes of commercials, or always an X minutes of music or programming per hour.  This has worked well for advertisers - fewer overall commercials that your commercial has to compete against in the hour and for the listener - a basic code of ethics to give the listener the best ratio of programming versus commercials.

Now its common for station group owners at the national level (eg. Cumulus, Emmis) or regional level (eg. Zimmer, GoodRadio), to have a code of no more than 12 commercial minutes per hour as a guarantee to advertisers and listeners.



For stations that don't stick to X minutes of commercials per hour - that works against the advertiser and the listener.  For the advertiser it means more ads per hour where your one commercial can get lost in an ocean of commercials.  For the listener it means a higher price is paid in time spent listening to commercials versus time spent listening to programming - which also hurts the advertiser.


Oh, and The National Anthem:  Not too many years ago radio and TV stations shut down at some late hour every night, and then powered back up by 5 or 6 AM as most Americans were waking up. And most stations aired our National Anthem at sign off and sign on time as a daily tribute to our country and its people.  But then came satellite and cable television stations and networks running 24 hours a day and that led to the local station broadcasting 24 hours a day as well, which in turn pushed the National Anthem out of daily programming on radio and TV.  Most of the nation still slept overnight after working day shifts, but stations found late night to be new territory for airing commercials - whether anyone was seeing or hearing those commercials or not.

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