CHAPTER 6
Commercial Operations
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LEARNING OBJECTIVES
After reading this chapter students should be able to understand the following concepts:
Commercial broadcast stations: Outline the organizational structure of commercial radio and television
broadcast stations and understand the influence of group-ownership
Commercial broadcast networks: Describe a network’s management structure and its relationship with
affiliates and how independent stations fit into such a design
Cable: Delineate cable’s basic structural composition, and describe the program services available via
cable
Vertical integration: Understand what vertical integration is, and explain how the concept applies to
media
Advertising on electronic media: Describe advantages and disadvantages of broadcast and cable
advertising for advertisers at the local, regional, and national levels
Commercials, promos, PSAs, and IDs: Differentiate among regular commercial announcements and
promotional, public-service, and station identification announcements
CHAPTER FOCUS
This chapter, as the title indicates, explores the operations of electronic mass media from a basic
economic perspective. It begins with a discussion of traditional commercial broadcast stations and their
four basic functions: general/administrative, technical, program, and sales. It explains the concept of
“economies of scale” as applied to group ownership of stations.
The chapter explains commercial broadcast networks and contractual agreements between a network and
its affiliates. Many students have a difficult time grasping the relationship between a network and an
affiliate, so don’t assume that these concepts are clearly or readily understood.
This would be a good time to bring in a general manager (GM) of a local television station to explain that
station’s organization and how contractual arrangements with a network are made. Suggest that the GM
explain his/her views on clearance and preemption, how network/affiliate relationships have changed over
the past five years (especially network compensation and possible network switches), and his/her vision
for the future of commercial broadcasting. Have independents and cable reduced penetration and hurt the
size of their audience and, hence, advertising revenue?
Emphasize the basic differences between cable systems and broadcast stations. If you have time, you may
wish to bring in a local cable company’s representative to describe how that system operates. Discuss the
various program services found on your local cable system. Differentiate between retransmission of local
over-the-air signals, superstations, and cable networks (basic and pay). How many of the available basic
cable networks does your local cable system carry? Why does it carry some and not the others? Who
decides which cable services your local system carries?
Vertical integration has particular relevance to a discussion of cable television, since it flourishes there. In
fact, vertical integration can also be found, to a lesser extent, in the motion picture industry and in
commercial television. Emphasize that the limited amount of vertical integration in commercial television
The value of the “cost per thousand” (CPM) formula should be emphasized, especially for comparison
purposes both between two similar media outlets or two different media (such as TV and newspapers).
This formula takes much of the mystery out of electronic media advertising. We have all heard stories of
the millions of dollars spent by advertisers for a 30-second spot in the Super Bowl, for example, which
always seems an astronomical figure. However, if you compute the CPM for that spot, the cost doesn’t
appear quite so outlandish. Ask local sales managers for copies of their rate cards (typically works
salesmanship in their own right), and have your students figure the CPM for some specific time periods.
Discuss advertising standards with your class. If you have a copy of the old NAB Television (or Radio)
Code, you will find page after page of specific guidelines detailing acceptable advertising practices. What
is important to emphasize is that advertising standards are changing, and that few limitations are placed
TERMS, CONCEPTS, AND EXERCISES
The Basics
Terms: local station, local cable system, direct broadcast satellite (DBS)
oExplain commercial and noncommercial broadcasting as well as cable industries in relation to
Broadcast Stations
Terms: “over the air,” general and administrative functions, technical functions, programming functions,
promotion, news, sales, traffic, duopoly, program pre-log or log, group-owned stations, network owned
and operated stations (O&O)
oReview the definition of a traditional commercial broadcast station that begins this section.
oEmphasize that regardless of the size of the radio or television station, the responsibilities of basic
oDiscuss the role of the traffic department and why traffic usually falls under the supervision of the
sales department. What are program logs?
oReview ownership patterns and concentration, and discuss how removing virtually all national
limits under the Telecommunications Act of 1996 has affected the flurry of activity as group
Broadcast TV Networks
Terms: network, ABC, CBS, NBC, Fox, Warner Brothers (WB), United Paramount Network (UPN),
CW, PAX TV, ION Television, Big Three, Big Four, primary affiliate, secondary affiliate, market
exclusivity, clear, delayed broadcast (DB), affiliation contract, station compensation, network comp,
clearance, preemption, “reverse compensation,” multicasting, repurposing, cross-promotion, independents
oDiscuss the relationship between a network and its affiliates. Point out that the relationship must
provide a mutually beneficial arrangement for both parties, since the networks need their
affiliates’ cooperation in carrying their network programming, and the affiliates rely on the
networks as their major program source. Stress that changes in network affiliation in major
markets in the 1990s brought renewed appreciation for the relationship on the part of both
networks and affiliates.
oDiscuss how clearance works. What does the word “pre-empt” mean? Discuss the reasons why a
station would choose to pre-empt a network program: to increase the amount of commercial time
available for local sales, especially during the holiday season when advertiser demand is great; to
replace a low-rated network program to offer a higher-rated syndicated program; to protect its
audience from a morally offensive program; and to offer a sports program of local interest, such
as a college sporting event.
oRemind students that, while this section emphasizes traditional networks or full-service networks,
ad hoc networks also develop to carry programming to events. An example with which they are
familiar is a college sports network.
oEmphasize that network affiliation is not the same as network ownership. Note that each network
has about the same number of affiliate stations, although that was not always the case. Discuss the
control, and sales representation. Note that these rules evolved from the chain broadcasting
regulations discussed earlier in the text. Stress the effects of these rules.
Cable
Terms: cable system, inside-and outside-plant personnel, headend, sales and marketing, interconnect,
hard (true) interconnections, soft interconnections, multiple system operators (MSOs), vertical
integration, telcos, Telecommunications Act of 1996, “bundling”
oCompare cable system organization to television organization. Use Exhibits 6.a and 6.b to show
similarities and differences.
oWhat are the two types of system interconnections?
oWhy has cable ownership become dominated by multiple system operators (MSOs)? Referring
briefly to Section 11.10, note limitations on MSOs. How does this compare to broadcasting?
Cable Program Services
Terms: access channels, basic service tier, PEG channels, lifeline service, cable networks, advertiser
supported cable, expanded basic tier, superstations, radio superstations, syndicated exclusivity rule
(syndex), blackout proof schedule, pay-cable or premium networks, pay per view (PPV)
oDistinguish between advertiser-supported networks such as ESPN or MTV and premium, or pay,
cable networks such as HBO. Discuss the target audiences and programming strategies of various
cable networks.
oNote also that a cable system usually pays a monthly per-subscriber fee to each network for the
right to carry that network’s programs. How does this concept differ from traditional network
compensation for over-the-air networks and their affiliates? How might this compensation
Advertising Basics
Terms: local advertising, cooperative advertising, network advertising, national spot advertising,
commercial inventory, avails, spots, yield management, station breaks, adjacencies, promotional
announcements (promos), public service announcements (PSAs), commercial clutter, local cable ad
insertion, cold calls, national sales representatives or reps, separation guidelines, proof of performance,
oTalk about why newspapers lead in local advertising dollars while television leads in national
(behind direct mail). What revenue sources exist for cable and broadcast?
oDiscuss what comprises local advertising. What are the primary rivals for local advertising
dollars? It is interesting to note that newspapers surpass television in total advertising volume.
Advantages Disadvantages
Broadcast Advertising Generally
access to audience
time messages for relevant audience
Broadcast Advertising Generally
rigidity of defined coverage area
pay for superfluous audience
Network Advertising
broad reach
central control
central billing
National Spot Advertising
can target reach
oExplain barter syndication advertising: commercials national advertisers place inside syndicated
programs airing on local TV stations around the country. What some limitations of barter
syndication advertising? There is no guarantee that a specific program will air at the same time of
day in every market also specific programs may not air in every market.
oWhy do stations air promos and PSAs? Note that most stations consider program promotions so
important they set aside spots for promos that might otherwise be sold.
oDiscuss the problem of commercial clutter on broadcast television and cable. Do students think
that commercials sandwiched between others get less attention than those at the beginning or end
of the block of commercials? How has this problem continued to worsen?
oDiscuss the role of the national sales representative, or rep. Many students have a difficult time
with this concept. It is helpful to describe the national sales rep as an extension of a station’s sales
staff. The rep works for the station. His/her job is to sell the local station’s time to national
advertisers. Another way to view the rep is as a parallel to the ad agency. The latter “represents”
the advertising client, just as the rep represents the station.
oWhy is proof of performance important? How do stations and cable systems verify that ads ran?
What service does Competitive Media Reporting provide?
oHave students go through the steps in a buyer seller transaction (they can role play this
transaction). Emphasize the goal of the broadcaster to sell a limited and perishable inventory at
the highest price possible and the goal of the advertiser to obtain maximum exposure at the lowest
possible price.
oWhat are the factors that influence advertising rates? How important are the medium, demand for
a target audience, and the ability to deliver that audience in determining commercial pricing?
oDiscuss the significance of CPM. (Why isn’t “cost per thousand” abbreviated CPT? “M” is the
Roman numeral for 1,000.) Note that CPM is valuable for comparing costs between two elements
of the same medium (two television stations) or two different media (a radio station and a
television station).
oShow students how to calculate and to use CPM. Here’s a simple example: If a show has 25,000
viewers and a spot costs $600, the CPM ($600 divided by [25,000 divided by 1,000]) is $24. If an
ad in a local newspaper costs $1,000 to reach the same 25,000 persons, what is the CPM ($1,000
Advertising Standards
Terms: Section 317 or sponsor identification rule, editorial advertising (advertorials), program length
commercials, infomercials, self-regulation, plugola, payola, double billing, clipping
oWhat is a “program-length commercial”? Ask students if they agree with the FCC decision to
reverse its previous ban on such commercials? Why or why not? What program-length
commercials have they seen on either TV or cable?
oDiscuss how standards for television commercials have changed over time. Examples include
advertising women’s undergarments or contraceptives. It would be interesting to try to predict
future standards for television commercials. You may also wish to point out differences between
European countries and ours.
Subscription-Fee Revenue
Terms: tiers, basic service, extended or expanded basic, broadcast basic, lifeline, PEG channels, a la carte
options, bundling, pay-cable or premium channels, anti-buythrough, addressable converters, pay per view
(PPV), standalones, video-on-demand (VOD), local into local
oWhat is the concept of tiering? Does your locale have both “basic” and “expanded basic” tiers?
Have they been restructured to conform to the 1992 Cable Act? Explain how packaging of some
of the more popular advertising-supported cable networks gives the cable industry added revenue.
Personnel
Terms: American Women in Radio and Television (AWRT), National Association of Black Journalists
(NABJ), National Association of Hispanic Journalists (NAHJ) Asian American Journalist Association
(AAJA), Native American Journalist Association (NAJA), labor union (or guilds, associations,
federations), American Federation of Television and Radio Artists (AFTRA), Writers Guild of America
(WGA), the American Guild of Variety Artists (AGVA), Screen Actors Guild (SAG), National
Association of Broadcast Employees and Technicians (NABET), International Alliance of Theatrical
Stage Employees and Moving Picture Machine Operators of the United States and Canada (IATSE),
corporate video
oNow is a good time to discuss career opportunities in broadcasting. Students are usually naive
about employment in broadcasting and cable. You would not want to squelch someone’s dream,
and who’s to say where the next Peter Jennings or Jane Pauley will come from? It is best,
however, to present a realistic picture of employment opportunities. Point out that many related
jobs exist in ad agencies, sales rep firms, news agencies, etc.
oWhy are salaries of broadcasting and cable employees comparatively low? (Refer to Exhibit 6.c.)
At the local level, employees of which department earn the highest incomes? Compare and note
Creative/Performing:
xAmerican Federation of Television and Radio Artists (AFTRA)
xWriters Guild of America (WGA)
Technical/Craft Unions:
xInternational Brotherhood of Electrical Workers (IBEW)
xNational Association of Broadcast Employees and Technicians (NABET)
oThe text mentions related career opportunities outside cable and broadcasting in a growing field
called corporate video. Most students have had little exposure to this potential job market, so you
may want to bring in a guest speaker who is employed in corporate video in your area to discuss
his or her job. In fact, the field of corporate (or industrial) video can lead to a very challenging
The Cost of Doing Business
Terms: start-up costs, upgrade, satellite news gathering (SNG) vans, HDTV (high definition TV),
deregulation, economy of scale
oMake sure students know what is meant by “capital investment.” Why must a cable system spend
more on capital investment than a broadcasting station?
oWhat are the implications for stations when digital equipment replaces most broadcast and cable
Bottom-Line Mentality
Terms: bottom line mentality, antitrust laws, profit-and-loss statements
oThe question “Should the ‘bottom line’ or ‘public service’ rule a station’s operation?” should
provoke lively in-class discussion and may be a good debate topic for two groups of students.
PEARSON MYCOMMUNICATIONKIT RESOURCES
Each chapter of the MyCommKit for Head’s Broadcasting in America, 10th Edition includes chapter
learning objectives, practice quizzes, key terms flash card, and select media.
Media available for this chapter:
OUTSIDE AUDIO/VISUAL RESOURCES
Secrets of Effective Radio Advertising (VHS/Beta, 75 min., 1990)
Tony Schwartz believes one cannot fully understand electronic communications without fully
understanding the use of radio. Because it is less glamorous than television, its potential for persuasion is
often overlooked. Schwartz believes radio can be the medium of choice for advertising, politics, and
public interest groups, particularly those with specific messages and lean budgets. In this three-part
program, Schwartz compiles a veritable encyclopedia of radio messages that work—commercials and
Classic Television Commercials (3/4” or 1/2” cas., 120 min., b/w, 1958)
Unusual collection from the Celia Nachatovitz Diamant Memorial Library. Contains commercials from
From Scooters to Fryers (VHS, 62 min., 1994)
Award-winning ads for Peugeot scooters, Mazda batteries, cheese, chocolate drink, face cream, chickens,
Sneakers, Laptops, and the Homeless (VHS, 76 min., 1994)
Nike and Apple, Pepsi, McDonald’s, fast cars, fast food, dog food, and some public service award
winners for the Red Cross, anti-drinking/driving, and the Coalition for the Homeless. Seventy-five
Sparkling: Clean, Gems, and Water (VHS, 58 min., 1992)
Ads for diamonds, designer water, frozen food, Spanish fashions, trains, cars, toothpaste, yogurt, political
Consumer Seduction: From Romance to Reality (VHS, 23 min., 1992)
Documentary exploring the impact of tobacco and alcohol advertising on people’s lives. Distributor: Scott
Newman Center/Center for Media and Values, 1962 S. Shenandoah St., Los Angeles, CA 90034, (310)
559-2944.
I’ll Buy That (VHS, 26 min., 1989)
This program looks at the growing role of psychological testing and behavioral analysis in marketing and
advertising. It examines the testing of commercials, the psychological classifications into which marketers
Buy Me That! (VHS, 28 min., 1990)
Exposes tricks advertisers use to make products seem better than they are. Distributor: Films, Inc. 5547
N. Ravenswood Ave., Chicago, IL 60640-1199, (312) 878-2600.
Buy Me That, Too! (VHS, length not given, 1992)
More tricks and techniques to sell to children. Distributor: Ambrose Video Publishing, 1290 Avenue of
the Americas, Suite 2245, New York, NY 10104, (800) 526-4663.
Advertising: Information, Persuasion, or Deception? (VHS, 11 min., 1988)
Helps viewers understand various advertising appeals and distinguishes between manipulating and
Calling the Shots: The Advertising of Alcohol (VHS, no length given, 1982)
Documentary on advertising of alcoholic beverages. Distributor: Cambridge Documentary Films
Production Notes: Fast Food for Thought (VHS, 28 min., 1986)
The director of a candy bar commercial later made this documentary exposing the crafted manipulation of
Consuming Images (VHS, 60 min., 1994)
Part of “The Public Mind” series with Bill Moyers. This program looks at a society inundated with visual
images. From billboards to bus stops, from rock videos to newsstands, mass produced images have
Exploring Broadcast Television (VHS, 27 min., 1995)
This video explores career opportunities in broadcast television, including producers, directors, news
A View from Behind the Viewfinder: A Day in the
Life of an ENG Cameraperson (VHS, 45 min., 1995)
Viewers spend a day with three photojournalists from a Phoenix station, following them from the
morning staff meeting to the rush to edit the day’s stories for broadcast. Distributor: Insight Media.
Radio Industry (VHS, 28 min., 1998)
Many pundits have predicted the demise of radio, but radio’s mystique and extraordinary ability to adapt
have repeatedly proved them wrong. In this program, the business side of public and commercial radio
broadcasting is explored in depth by industry insiders. Host Ray Suarez and others from NPR’s “Talk of
is the immediacy, accessibility, and local feeling of radio—even when prerecorded and beamed by
satellite from remote locations—that keep people tuning in. Distributor: Films for the Humanities and
Sciences.
Segmenting, Targeting, and Positioning (VHS, 13 min., 2000)
In this program, the principles of carving up a market are addressed. Topics under investigation include
market characteristics such as demographics, lifestyle, usage level, geographic area, and benefits sought;
New Suits: Profile of an Ad Campaign (VHS, 13 min., 1998)
This program is a real-life case study of how advertising campaigns are developed. In this case, a clothier
hires a young, hip ad agency to redefine his company’s image. Feedback from focus groups is used to
formulate different campaign strategies. Then, in a series of brainstorming sessions, the creative team
Business Ethics: Truth in Advertising (VHS, 28 min., 1999)
In today’s high-tech, multimedia business environment, ads must be slick, sensational, and sophisticated
if they hope to stand out from the competition. This program examines how truth in advertising has gotten
lost in this competitive frenzy, and how consumers can learn to separate fact from fiction in the confusing
Windows on Asia-Pacific: Asian Television Commercials (VHS, 47 min., 1998)
Media visionary Marshall McLuhan once observed that advertising provides the richest and most faithful
reflection of a society’s culture. What, then, do television commercials reveal about the non-Western
world? This documentary examines how sensibilities differ between East and West as seen through the
Sneakers, Laptops, and the Homeless (VHS, 76 min., 1997)
Nike and Apple, Pepsi, McDonald’s, fast cars, fast food, dog food, and some public service award
winners for the Red Cross, anti-drinking/driving, and the Coalition for the Homeless. Seventy-five
Web Entrepreneurs (VHS, 30 min., 2000)
Traditional craftspeople fashioned their goods and then sold them to the public through a conventional
distribution system. Today, many craftspeople, such as jeweler Wendi Hebb from Sheffield, England, are
Behind-the-Scenes Careers in TV and Motion Pictures (VHS, 26 min., 1996)
This video explores careers in TV and film, profiling the positions of producer and assistant producer,
AD: Organizing the Film Set (VHS, 50 min., 1993)
This video documents the production of the short feature Second Story Man in Minneapolis. The low
budget, tight schedule, and setbacks ranging from the arrest of the caterer on day one to scheduling
Creating and Producing Effective Television Commercials (VHS, 55 min., 1994)
This video reviews the steps in producing television commercials. It considers the importance of location
The Technique of Television Commercials (VHS, 23 min., 1989)
Surveying 14 categories of commercials, this video explores how TV advertisements differ. It shows
The Nike TV Commercial (VHS, 33 min., 1991)
This video dissects a Nike ad to reveal the myriad of complex processes involved in the making of a
television commercial. It describes the original brief, analyzes the creative strategy, discusses the desired
The Making of the MMM Commercial (VHS, 40 min., 1991)
The MMM commercial is one of the most interesting and technically sophisticated pieces of visual
advertising ever to come out of Australia. Analyzing the concept development and detailing the technical
The Television Industry (VHS, 40 min., 1997)
This program provides a fast-paced, comprehensive look at the process of creating television sitcoms and
dramatic series. Producers, writers, and craftspeople discuss the industry and share insights on the
How a Television Station Works (VHS, 24 min., 1989)
This video takes viewers through a TV station, explaining the responsibilities of the programming, studio
The Broadcast Television Industry (VHS, 30 min., 1997)
This program describes the early days of broadcast television and considers such topics as public
The Television Industry (VHS, 40 min., 1997)
This program provides a fast-paced, comprehensive look at the process of creating television sitcoms and
dramatic series. Producers, writers, and craftspeople discuss the industry and share insights on the
The Making of a Live Television Show (VHS, 22 min., 1989)
In this video, viewers go behind the scenes of a live local television show. They follow the host from the
dressing room to the set and meet the people involved in production. The program highlights the roles of
The Clios 2000 (VHS, 104 min., 2000)
J. Walter Thompson, McCann Erickson, Saatchi & Saatchi, Young & Rubicam: every year, the
competition for the coveted Clio attracts entries from some of the hottest ad agencies and marketing
departments in the world. This program brings together all of the gold, silver, and bronze winners for