Local TV: Kool-Aid or a bad pint?

In response to Raymond Snoddy’s local TV solution, Robert Kenny, MD at Human Capital, talks numbers: “Perhaps I’ve just had a bad pint, but local TV economics still give me a headache”…

“Raymond Snoddy thinks he may have found the local TV solution over a beer at the Railway Telegraph pub, but I fear he was in fact drinking the Kool-Aid.

The proposed solution is to broadcast local TV over satellite, at a transmission cost of (say) £400 per hour. Let’s add in a conservative £100,000 a year to produce the programming and cover all other costs. At an hour of local TV per day, that works out at an additional £275 per hour, for a total of £675 cost per hour.

Assuming 9 ad minutes and 18 ads per hour, we get £37.50 per ad shown as the required revenue. Typical cost per thousand individual impacts (CII) on multi-channels is around £2.50. This means each ad needs to be seen by 15,000 people.

That’s about the same average audience that Nickelodeon and Discovery get, and more than Good Food, the History Channel and ESPN manage. And these blue-chip channels are of interest to national audiences, not just the niche audiences of local TV. In reality, local TV broadcasters are going to get nowhere near an average audience of 15,000. Audiences at the level of the Travel Channel, Fox News or Euronews (about 500-750 individuals) are probably more likely.

The only way to make ends meet therefore is to charge vastly higher cost per thousand CII to those interested in specific local audiences. But what local business is going to go to the expense of making a TV ad that will only be seen by a few hundred individuals on each showing? And why if Tesco pays £2.50 to reach 1000 of its (national) customers, would the local shop be willing to pay many times that to reach 1000 of its (local) customers?

Perhaps I’ve just had a bad pint, but local TV economics still give me a headache.”