Cost–benefit analysis of advertiser-funded program productions : Case MTV Oy
Takatalo, Henriikka (2017-12-13)
Cost–benefit analysis of advertiser-funded program productions : Case MTV Oy
Takatalo, Henriikka
(13.12.2017)
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Turun yliopisto
Tiivistelmä
The emergence of new technologies such as digital video recorders and later online video platforms has led to decreasing interest of advertisers towards television advertising and consequently to decreasing revenue for advertisement-based television businesses (Bellman, Schweda & Varan 2010; Cha 2013). To combat this change, advertiser-funded program (AFP) productions have gained popularity. AFPs are television programs funded fully or partly by one or several advertisers. They are the most profound mode of brand placement (Hudson & Hudson 2006, 489). For commercial television companies AFP productions are a way to generate revenue to make up for the decreasing interest in traditional television advertising. Although a lucrative sounding opportunity to generate revenue, it has still remained unclear what would be the best way to carry out these productions, how the profitability of an intended production should be evaluated and whether these kinds of productions actually are profitable. Thus, the purpose of this thesis is to study how the broadly defined profitability of various advertiser-funded program productions can be defined.
The study was conducted as a case study in a Finnish commercial television company, MTV Oy. The profitability of various AFP productions was assessed through a cost–benefit analysis (CBA). First, experts of the case company were interviewed to set the basis for the numerical analysis and to collect opinions on the indirect and intangible benefits and costs of AFP productions. For the final analysis, the numerical cost and revenue data of three different television programs were analyzed and all the relevant costs, benefits and risks were listed based on interviews and the numerical analysis.
Although CBA is mainly connected to the evaluation of public projects (see Pitkänen, 1974; Nas 1996; Brent 2006; Asplund & Eliasson 2016), in this thesis it was found to be a very useful tool also for assessing private projects. Especially the emphasis of CBA on listing the indirect and intangible costs and benefits as well as its emphasis on evaluating the risks related to projects was found to be of help in this study. The opinions of the interviewees on the profitability of AFP productions were also surprisingly contradictory to the results of the profitability evaluations based on the actual figures of the company. Based on the results of this study, AFP productions can be considered a trend that could be worthwhile to keep up to. At least it is a way to decrease the revenue generation pressure on commercial break advertising sales.
The study was conducted as a case study in a Finnish commercial television company, MTV Oy. The profitability of various AFP productions was assessed through a cost–benefit analysis (CBA). First, experts of the case company were interviewed to set the basis for the numerical analysis and to collect opinions on the indirect and intangible benefits and costs of AFP productions. For the final analysis, the numerical cost and revenue data of three different television programs were analyzed and all the relevant costs, benefits and risks were listed based on interviews and the numerical analysis.
Although CBA is mainly connected to the evaluation of public projects (see Pitkänen, 1974; Nas 1996; Brent 2006; Asplund & Eliasson 2016), in this thesis it was found to be a very useful tool also for assessing private projects. Especially the emphasis of CBA on listing the indirect and intangible costs and benefits as well as its emphasis on evaluating the risks related to projects was found to be of help in this study. The opinions of the interviewees on the profitability of AFP productions were also surprisingly contradictory to the results of the profitability evaluations based on the actual figures of the company. Based on the results of this study, AFP productions can be considered a trend that could be worthwhile to keep up to. At least it is a way to decrease the revenue generation pressure on commercial break advertising sales.