Friday, June 6, 2008, 7:54 AM ET|Posted by Will Richmond
Two-and-a-half weeks ago, in "Fox's 'Remote-Free TV': Broadband's First Adverse Impact on Networks" I asserted that Fox's decision to cut in half the number of ads it will include in two new programs was influenced by the limited ads shown in networks' broadband initiatives.
By giving "RFTV" a try, Fox was catching on to the idea that fewer commercial interruptions improves the viewer experience. I pointed out that the challenge RFTV posed is that cutting ad time in half means that Fox would have to double the CPMs it charged just to remain whole. Could Fox do that?
Yesterday's piece in Adweek provided at least a preliminary answer: No. Adweek, quoting unnamed media agency sources, reported that Fox is getting only a 35-40% premium for the "RFTV" ad inventory. If my math is right that would imply that Fox is grossing 30-33% less total ad revenue than it would have under its traditional ad model.
Broadcast networks, having moved much of their programming online, have engendered new viewer expectations for fewer ads. The early results from Fox's "RFTV" initiative may indeed be evidence that these new expectations are at odds with sustaining broadcasters' traditional margins and profits.