You read that right. $4 million will get you a thirty second commercial on this Sunday's NFL Football Super Bowl broadcast. Despite the fact that advertising prices have risen faster than inflation or viewership.
The reason is that this 'show'(ok, game, if you will) annually attracts the largest national TV audience. And not because football's popularity is increasing so dramatically, but because all of the other venues, channels, platforms and time slots are so fragmented.
The benefits of paying that kind of money for thirty seconds of questionably focused attention are debatable. The basic economics suggest that for the reach of such an ad, you get a vast viewership. But, skeptics will counter, few of them are likely to be your target demographic, many are distracted or drunk or both and research has shown that only repetitive exposure creates sufficient familiarity and favorability to reliably drive potential purchases.
However, the tradition of bold advertising, Apple's 1984 Macintosh ad of a woman throwing a sledge hammer through a large screen as arguably the most iconic, has raised awareness of the ads as art and social commentary. Is such attention worth the price? The data are contradictory. Suffice it to say that the fact some perfectly good companies continue to pony up astounding sums for access suggests that hope endures even if knowledge and experience do not confirm it. JL
Matthew Yglesias reports in Slate:
The most-expensive 30-second slot during this weekend’s Super Bowl cost a shocking $4 million. That’s a hundred-fold increase in the inflation-adjusted average price of a spot since Super Bowl I in 1967. Even at the recent 2010 low point, ads sold for $2.65 million, up more than 20 percent from where they stood in 2000. What drives increases of this scale, and how can it possibly make sense for companies to pay such sky-high prices?
The main answer has less to do with the popularity of the NFL than the declining popularity of everything else.
The most-watched Super Bowl of all time was Super Bowl XLV last February, with 163 million total viewers and 111 million average viewers in 53.3 million households. It’s followed in viewership by Super Bowl XLIV, Super Bowl XLIII, and Super Bowl XLII. That’s not so surprising. As the population of the United States grows, our most-watched sporting event is watched by slightly more people. Still, the actual growth in the number of football watchers can’t possibly explain the surging ad rates. According to Nielsen, 35.3 million households tuned in to watch the Steelers play the Rams in 1980. In three decades, then, the Super Bowl had a very nice 50 percent increase in viewership. But advertising prices increased tenfold during the same period.
The interesting action has happened off the gridiron.
The past four Super Bowls haven’t just been the most-watched TV programs in history—they’re also four of the five most-watched broadcasts in American history. Even more interesting is to note the fifth—the M*A*S*H finale that ran in 1983. Measuring by households, the top 10 list includes the M*A*S*H finale, Nancy Kerrigan vs. Tonya Harding in figure skating in 1994, the 1993 Cheers finale, and seven Super Bowls, all of which aired more recently than any of the nonfootball content. The next 10 give us another Kerrigan/Harding matchup, the 1980 “Who Shot J.R.?” episode of Dallas, and eight more Super Bowls. And, again, all eight football games aired more recently than the Dallas episode.
In other words, nonfootball mass entertainment has been in a decades-long spiral of decline that was only temporarily halted by an ice-world knee-clubbing. The Super Bowls of the late-1970s were among the highest-rated shows of their era, but not necessarily higher rated than contemporaneous “special” television events like the Roots mini-series or The Thorn Birds. Today’s contests have seen their popularity grow in pace with the size of the population, but no better. The competition, however, has completely collapsed in the face of the successful innovations of cable, the VCR, the DVR, and now Internet streaming.
A typical household simply has far too many entertainment options at its disposal for any program to be as dominant as M*A*S*H once was. No program except the Super Bowl, that is.
The genius of the Super Bowl is that no matter how many channels Comcast or Time Warner shoves into your television, there’s only one National Football League and it has only one championship game. Opportunities to make a big splash by reaching a broad cross-section of the American population simultaneously have become rarer and rarer. The Super Bowl has emerged as the last man standing, and reaps disproportionate rewards as a consequence.
But are the ads really worth it? I’ll admit to being skeptical. The sale of Super Bowl ad time is essentially a kind of auction, a scenario plagued by what economists call the “winner’s curse.” We start with the basic assumption that people know more or less what they’re doing with their money, but aren’t quite infallible. If that’s right, then auctions should be won by whoever most overestimates the value of whatever’s up for bid. This is one reason why the annals of free-agent signings in most sports appear to be filled with blunders. In reality, most GMs are probably doing a good job of not offering players more money than they’re worth. The problem is that each player ends up signing with the team that most overestimates his value. The Super Bowl could be a similar story. Whichever firms’ executives happen to guess worst about the value of a Super Bowl ad are the ones most likely to buy them.
That said, academic research does appear to confirm some real benefits to Super Bowl advertising. Perhaps the most interesting study of the issue was published last year by a team of researchers from the University of Wisconsin’s Eau Claire campus. In a paper titled “Super Bowl Ads Linked to Firm Value Enhancement,” the authors bypassed traditional measures of marketing efficacy in favor of directly measuring stock market outcomes. Companies that buy Super Bowl ads, they report, end up outperforming the S&P 500 during the subsequent week. It could just be that high-performing firms feel flush and tend to splurge on ads, but they find that Super Bowl advertisers don’t do any better in a pre-game control period. The ads themselves really do appear to boost share prices, either by melting investors’ minds or by rationally increasing their expectations of sales. Earlier research by some of the same scholars also found that films advertised during the Super Bowl see as much as a 40 percent boost at the box office.
This still leaves us wondering about the long term. The Wisconsin research shows that Super Bowl ads boost firms’ share prices, but is this a sugar high that presages a later collapse or does it add real value? This question is now at the cutting edge of Super Bowl research. But even if the effect is only short-term, the ads can provide real benefit. Movies live and die in the short term, and a short-term kick in sales and visibility is exactly what a new product needs if it’s going to succeed. And until the next major figure skating scandal, the Super Bowl offers an unparalleled opportunity to get one.
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