Last week’s announcement of the partnership between eBay and Bid4Spots and the impending full launch of Google’s service to sell online radio spots beg for FCC action to clarify how these services will be treated for lowest unit rate purposes. We have written about this issue before (see our note here), and the increasing number of online sales tools for broadcast advertising inventory highlights the issue. If advertisers can buy spots using these online systems on a single station, or if stations offer their spots to a particular advertiser at a set price for a specific class of spot, it would seem that these spots could have an effect on the station’s lowest unit rate if the spots sold through the online systems run during lowest unit rate periods (45 days before a primary or 60 days before a general election.). For the peace of mind for all broadcasters, it would be worth the FCC clarifying the status of these services as we hurtle toward what will probably be the busiest political year ever.
In looking at some of these systems, it appears that some of these systems are premised on specific stations offering spots to advertisers on a cost-per-point basis, for specific dayparts as designated by the advertiser and agreed to by the station. For instance Bid4Spots system advertises that it holds an auction to sell the spots on Thursday for the following week. And it appears that spots must be sold by a station in specific dayparts on a non-preemeptible basis. For the week in which the spots are offered, the sale of such spots would appear to set a lowest unit rate for non-preemptible spots that run in the same time period.
Before broadcasters panic, however, they need to remember that the Commission has always recognized that where spots are sold as a “network” – packaged together and sold as at a single price for multiple stations, the sale of the spots does not have a lowest unit rate impact on any of the stations in the network. If the spots are packaged and sold so that no advertiser is buying any particular station, and no station is selling to any particular advertiser, it would as if these online systems would operate as networks and not affect the lowest unit rates for any station using the service. It is our understanding that some of the on-line auction systems work this way with spots from one station being packaged with spots from other stations so that the advertiser merely gets a certain audience delivery from the package of different stations that the on-line system puts together.
Even where there is a specific deal for one station to sell ads to one advertiser, the rates would not carry through the entire election cycle. In its 1992 revision of its political policies, the FCC recognized that lowest unit rates could vary throughout an election cycle. Stations could have “fire sales,” selling spots at a very low price during a few days where there was excess inventory, and those rates would only apply during that period of time (and as necessary to respond to any requests for equal opportunities that may flow from the sales of the spots that during these fire sale periods). In fact, as many stations adopt more sophisticated inventory control systems, rates can vary on a daily basis, with the lowest unit rte being set by the cheapest spot running during a particular time period. Thus, stations may be willing to use even the online systems that allow specific matching of stations and advertisers if they recognize that, for the periods during which they offer spots through the on-line system, the spots sold could affect lowest unit rates during that limited period.
But these concerns are all speculative, given the lack of specific guidance from the FCC. We understand that the FCC has considered these systems and some guidance may be in the works. Hopefully, that guidance will come soon, so that broadcasters and advertisers may recognize, if these choose, the benefits of this new technology without the fear of unforeseen implications on their political rates and practices.