The Truth About TV Markets

As I mentioned in my last piece about UAB dropping football, there is going to be a mad dash of schools trying to get into Conference USA. One other thing is certain in that process. You are going to hear the words “TV markets” mentioned frequently.

The experts prattling on about TV markets are generally as competent to get involved in a television negotiation as you are to take off and land a Boeing 777 after playing a flight simulator for a few hours on your iPad.

While TV markets aren’t meaningless, they are far less significant than many writers and message board posters would have you believe.

For the most part the fascination with markets is a holdover from a remote time in measuring television ratings.

The Nielsen TV ratings you see published today are gathered electronically by devices in homes in the 25 largest television markets. Data for the remaining TV markets is generally gathered by use of diaries sent across the nation four times per year. TV stations outside the 25 largest markets use that diary data to set their advertising rates.

Before the advent of the electronic monitoring (the people meter) viewership data was obtained by written diaries and telephone surveys. Both relied on people remembering what they had viewed and in the case of the diary, remembering to record what they watched. Now real-time data flows to the ratings company from the meters.

The concept of the local market does not exist for the purposes of national cable networks. Local markets matter to over-the-air stations and networks that broadcast by using those stations. National cable nets are more concerned about access to people through providers and how many of those viewers watch their programming.

The market boundaries are rather arbitrary. For example 11 miles from Centennial Bank Stadium you are in the Memphis rather than the Jonesboro TV market. Four miles from the KAIT transmitter you are in the Little Rock market. There are some counties in the Dallas/Fort Worth TV market that are so far from any market transmitter that a large antenna atop a very tall mast with a strong amplifier would be required to have any possibility of a signal and in some areas that would not even work. In today’s digital environment the range for stations is greatly reduced so many places that are “in” a market cannot receive television programming from the market absent the use of cable, satellite or an extraordinary home antenna system.

Markets are really only relevant to local television and networks using those local stations to distribute their content nationally or regionally.

ESPN or CNN want the most possible viewers. If they sell a program with the expectation of 7 million viewers, it does not matter if any of the seven million are in Los Angeles. They just need 7 million viewers to back up what they charged advertisers.

National networks have two concerns. Total number of viewers and the demographics of those viewers. They want to be able to tell advertisers how many of the viewers are in a certain age category, income category, and gender because how much an advertiser will pay depends on the demographics of the viewers.

Outside the top 25 markets there simply is little real time data about viewing that is used in calculating ratings. In local markets you can subscribe to a service that will provide you with real-time data about what channel is being tuned to by satellite and cable boxes but this data is used more to make local programming decisions than to set ad rates.

This matters to national programming only in that market size is used to estimate how many of the estimated national viewers were watching within a specific market. That data is irrelevant to ESPN because the national number is their concern, they don’t sell local advertising. It matters greatly to local affiliates of CBS in Tulsa or Mobile or the ABC affiliates in Little Rock and Jackson, Mississippi. They don’t have real-time access to their local viewership but can make assumptions based on the national numbers and the data from the four times per year use of diaries.

A conference could potentially “game” the system by selecting schools that are in top 25 markets. Put together a group of schools in top 25 markets then local viewership on ESPN or Fox or whatever shows up on the data boxes located in those markets and can skew your national viewership numbers. Outside of the 25 largest markets, you cannot game the system. Boise State for example is far removed from being in a top 25 market but their viewership is so strong it shows up nationally.

Being in large markets does not always produce expected results.

In 2012 ESPN2 showed North Texas vs Louisiana Lafayette. The game drew a measured audience of 366,000. Dallas is a top 25 market so enhanced viewership there should have been detected by the local ratings boxes and skewed the national numbers. A week later AState played Louisiana Lafayette and the game drew 778,000 viewers when neither was in a metered market. Louisville playing top 25 market FIU drew 119,000 viewers on FS1. Non-metered markets AState vs. Texas State drew 187,000 on ESPNU.

If you are buying advertising from a local television station or on a syndicated television package, markets are relevant to you because you need the local data to know how much is fair charge for advertising.

Even then simple information like market size can create a confusing picture. For example CUSA has a nice over-the-air syndication package but the number of homes that can reached is overstated. For example KATV carries the games which should mean games are available in more than 555,000 homes in the Little Rock market (ranked 56). The reality is only a small fraction of the market can actually see the games. KATV places the games on 7.2. No one receiving television by satellite or ATT UVerse receives 7.2 from their provider. Only a few cable systems in the market carry 7.2. The games mainly reach people who use an antenna and many of the people in the market live too far from the transmitter to receive KATV over the air without an expensive antenna set-up on a tall mast. An advertiser paying to reach 555k Little Rock market homes on the network is actually reaching a small fraction of those homes, but advertisers have that data so they take it into account. The Blake Anderson Show on KTHV is carried by satellite and cable so would reach nearly all of the 555,000 homes in the market.

There is a place in the sports world where markets matter greatly. If you have a product that is in such great demand that a cable or satellite subscriber will change providers then a network can demand that the provider pay a significant fee to carry the network. This how ESPN is able to charge around $5.50 per month for the right to carry their programming.

The SEC Network charges a reported $1.30 per month to be carried in states with an SEC team. In other states the fee is reportedly 37 cents per month. If your school can bring many millions of new dollars to the SEC Network or Big Ten Network your membership chances look very good. For a conference like the American, market size isn’t going to drive up carriage fee dollars. The American makes great money for a G5 conference not because of market size but because they have a number of games that draw large national viewership.

The problem for the non-power conferences is their games are not in such demand that a large number of people will change providers to get the programming. Since those conferences lack that sort of clout they do not reap the benefit of the networks being able to extract high fees based on the market size.

You are going to hear a lot about markets, but the truth is most of the talk is based on the way television value was calculated before technology allowed regular monitoring of viewership.