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Is Ceiling For Super Bowl Ads Cost Reached?

Jan 30 2014, 3:31am CST | by

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Is Ceiling For Super Bowl Ads Cost Reached?
 
 

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Is Ceiling For Super Bowl Ads Cost Reached?

Two years ago I made the argument that Super Bowl commercials could double in cost from $3.5 million to $7 million within the decade. My case rested on two key pillars. Firstly, thanks to a massive TV audience, the networks had room to increase ad rates while maintaining a bargain price level in terms of costs per viewer. The typical hit show commands a CPM (cost per thousand viewers) of around $35, whereas Super Bowl ad spots had maintained a CPM of under $30.

And secondly, the networks had signed new rights agreements with the NFL that raised the average annual payments of CBS, Fox and NBC from $1.9 billion to $3.3 billion. For Super Bowl advertising revenue to continue covering a significant portion of those costs, the networks would need to utilize the pricing power described above.

Sure enough, the networks wasted no time in maxing out that pricing power. In 2012, a 30-second spot cost $3.5 million, up 17% year-over-year and resulting in a CPM of $31 (it was $27 the previous year). Then for last year’s game, CBS raised the cost to $4 million. Coupled with a slight dip in viewership to 108.7 million, that price hike resulted in advertisers paying just under $37 per thousand viewers.

In other words, the Super Bowl was no longer a great bargain to advertisers. That’s not really a bad thing; as I noted earlier, the networks had room to raise their prices, and a CPM of $37 puts the game on the same level as other popular shows like the Academy Awards.

But for that ad rate to keep rising, so must the game’s viewership numbers. Considering recent viewership trends, however, that may not be likely. The Super Bowl’s TV audience had consistently grown for a decade, expanding by nearly 30% between 2002 and 2012, but that climb has begun to taper off:

Should viewership continue to level off, then networks may have hit the ceiling of what they can charge for a 30-second spot during the Super Bowl.

That’s probably a big reason why Fox kept this year’s ad rate static at $4 million. Though the showdown between the Denver Broncos and Seattle Seahawks is expected to set the viewership record, it would still take an audience of more than 114 million viewers to get the game’s CPM down to $35. The current all-time viewership record, set in 2012, is 111.3 million. So while $4 million for a 30-second spot, or more than $130,000 per second of ad time, remains a fair price for a Super Bowl ad spot, the potential for future growth could be far more limited than once thought.

Follow @ChrisSmith813

 

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