Why 'American Idol' Still Commands TV's Biggest Bucks

Imagine a widget company that has suffered some setbacks: Production is down and its star designer has defected for a rival. Under such circumstances, you might suppose that the manufacturer might lower prices to maintain an edge and lure its customers back. But in the television world, where the widget makers create prime-time entertainment, pricing doesn't always follow the logic of other businesses.

Take, for instance, American Idol. The juggernaut from News Corp.'s (NWS) Fox has been looking a little creaky, with viewership in the 18- to 49-year-old demographics dipping 9% last season and the departure of acid-tongued judge Simon Cowell. Yet despite these setbacks, the show is hanging onto its crown as the most expensive show on television for advertisers, according to Advertising Age's annual survey of broadcast television pricing. A 30-second spot on the show's Tuesday broadcast costs almost $468,000, while on a Wednesday evening "results" shows, a spot commands just over $400,000, the story says.

That's because despite its woes, the show remains the most-watched program on television, points out Brad Adgate, director of research for Horizon Media. But perhaps more importantly than audience size, at least to advertisers, is that the median age of an Idol viewer is 44 years old, he points out. "If you look at Dancing with the Stars, which is probably the closest in terms of viewing, its median age is nearly 10 years older" than Idol, Adgate says. "When more than half of your viewers are under 44, advertisers pay for that."

A Harmonic Convergence for Glee

Advertising Age's survey, which compiled data from six media buying agencies and other sources, found that Fox is dominating this season's priciest shows, with five of the top 10 most expensive programs. The network has been helped by the sophomore program Glee, which is receiving an average of $272,694 for a 30-second ad in the fall. That price will jump to a whopping $373,014 when it appears in the spring after Idol on Wednesdays, according to the survey.

That's no coincidence, Adgate says. "At the end of [Idol], they'll say stay tuned for Glee," which could help draw additional viewers to the musical drama, which last week drew 11.2 million viewers to its Tuesday night broadcast. By contrast, American Idol ended its ninth season in May with an average viewership of 24.3 million viewers, according to Nielsen. "Until another show comes along that rivals Idol for audience size, it's still going to be the most expensive regularly scheduled show on television because it's the only one that can deliver close to 25 million viewers per show," Adgate notes.

While a show such as Glee that has proved itself in its first season gets rewarded by advertisers the following year, new shows are rarely awarded big bucks. That's because new shows have a high failure rate, and this year is no exception: Already, three of the season's freshman series have been canceled, while several more shows are on the verge of meeting an early end. According to TVbytheNumbers.com, few of this season's new programs are meeting their own networks' averages when it comes to young viewers.

Numbers Games for Hawaii Five-O, 60 Minutes

Hawaii Five-O, which is considered one of the few new hits of the season and is the most DVR'd show of all time, is drawing just $133,900 per 30-second advertisement this season. Such purchases may eventually prove to be bargains for advertisers, assuming a show can grow its audience and pick up steam. Commercial spots during Fox's critically lauded series Lonestar, for example, cost more than those during Hawaii Five-0 at $143,326 per 30-seconds, but the drama was the first victim of low viewership this season.

But in the end, advertising prices rely largely on age and a show's audience size in relation to what else is on TV. Fox, with young-skewing shows like Idol and relatively large audiences, manages to score on both counts. Adgate points to Sunday evening as an example of how this formula plays out: CBS' 60 Minutes last week drew an average of 15 million viewers, while Fox's The Simpsons attracted just 6.7 million viewers. But The Simpsons, according to Advertising Age, draws prices of about $253,000 per 30 seconds, while 60 Minutes earns just $98,000. Why?

"60 Minutes has a median age of 60 and The Simpsons is almost half that, in low 30s," Adgate points out. "They've both been on Sunday nights for years and years but because the audience profile is so different, The Simpsons can command a higher advertising rate."