What are Rate Cards in TV & Radio Advertising & How to Read Them

11/07/2014

In the advertising world stations/networks price their spots using rate cards. “Rate card” was a term created by the agencies and stations back in the 70’s. It was supposed to list all of the rates for one station on an easy to read card. Simple enough, in theory.

In the U.S there are approximately:
10,000 Broadcast Radio Stations,
1200 Broadcast TV stations,
225 Cable systems/grids,
80 National Cable Channels
2 Satellite Television Providers
2 Satellite Radio Providers

Every single one of those companies listed sell advertising and every single one of them have a least three rate cards. Today I am going to talk about rate cards for broadcast radio and broadcast television. The three most commonly used are:
#1 The Local Rate Card-average pricing is $10-$12 CPM (cost per thousand)
#2 The Agency Rate Card– average pricing is $8-$10 CPM (cost per thousand)
#3 The Direct Response Advertising Rate Card (D/R card)-average pricing is $5-7 CPM

The CPM levels listed above are based on our analysis of station spot pricing over the last ten years. Obviously, stations do not list rates based on CPM. Stations sell to people based on price per spot.

The Local Rate Card was initially designed for local businesses located in the market/DMA that the station is located in. Every station in every market has certain time periods priced much higher than $10-$12CPM. Usually it is the timeframes that are in the highest demand. The timeframes that they label as “prime”. (another clever marketing term) However, some radio stations in smaller markets are notorious for pricing there run of the mill “non-prime” spots for $20 CPM. I cannot even begin to elaborate how much of a rip-off that is. We consider the standard $10 CPM rate to be very overpriced. However, $20 CPM, is absolute high-way robbery. If your small business has one or two locations (like say a pizza shop, or car dealership) you will be thrown into the “Local Rate Card box”. Unfortunately, it is almost impossible to run a profitable campaign at $10 CPM or higher.

The Agency Rate Card was designed for advertising agencies, or media buying firm. Stations allow advertising agencies to place spots for their clients at approximately 10% less than the typical Local Rate Card. On top of that the advertising agency then receives a 15% sales commission from the station for booking the spots. (in the advertising world then call it an “agency discount” instead of a sales commission) The average CPM level for the agency rate card is usually between $8-$10 CPM. It is important to remember that the agency rate card is not set by the agency. It is set by the station and given to the agency. The higher the rate you pay the more commission the agency makes.

Just like the Local Rate Card, the agency rate card is grossly overpriced. Big Companies that sell products that can be purchased repeatedly like: Pepsi, Doritos, Coors Light, etc… can usually make agency rates work. However, Zero small businesses can run a profitable campaign paying agency rates of $8-$10 CPM. It just won’t work long-term.

The Direct Response advertising Rate Card was invented by stations for Direct Response Advertisers. I would say that 75% of stations in the U.S. have a D/R Rate Card. The premise behind the D/R rate card was that stations knew people selling phone order products on TV (like the greatest love CD, Time Life books etc…) could not make local, or agency rate cards work. So they offered a lower price per spot for these types of clients. The CPM range is usually between $5-$7. Back in 1996 one out of five direct response advertisers could make these rates work. In 2008 only one out of ten businesses can run a profitable campaign paying $5-$7CPM.

In the end the type of rate card does not matter at all. They are just clever marketing terms. There is an old saying that goes like this: You can take an old worn out shoe with a hole in the sole, wrap it up in pretty paper, put a bow around it and give it to someone. However, in the end it is still a worthless old shoe.

When purchasing TV & Radio advertising we try to keep it simple. The only thing you should be concerned with is; the number of impressions you are receiving per spot and how much are you paying for those impressions. (CPM cost per thousand)

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