Abstract

http://ssrn.com/abstract=1151507
 
 

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Effects of Advertising and Product Placement on Television Audiences


Kenneth C. Wilbur


University of California, San Diego (UCSD) - Rady School of Management

Michelle Sovinsky Goeree


University of Southern California - Department of Economics

Geert Ridder


University of Southern California

June 25, 2008


Abstract:     
Digital video recorder proliferation and new commercial audience metrics are making television networks' revenues more sensitive to audience losses from advertising. There is currently limited understanding of how traditional advertising and product placement affect television audiences. We estimate a random coefficients logit model of viewing demand for television programs, wherein time given to traditional advertising and product placement plays a role akin to the "price" of consuming a program. Our data include audience, advertising, and program characteristics from more than 10,000 network-hours of prime-time broadcast television from 2004 to 2007. We find that the median effect of a 10% rise in traditional advertising time is a 15% reduction in audience size. We find evidence that creative strategy and product category factors are important determinants of viewer response to traditional advertising. When we control for program episode quality, we find that product placement time decreases viewer utility. In sum, our results imply that networks should give price discounts to those advertisers whose ads are most likely to retain viewers' interest throughout the commercial break.

Number of Pages in PDF File: 39

Keywords: Advertising, Advertisement Avoidance, Branded Entertainment, Choice Modeling, Endogeneity, Industrial Organization, Media, Product Placement, Television

JEL Classification: L52, L82, L86, M30, M31, M37

working papers series


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Date posted: June 26, 2008 ; Last revised: October 3, 2012

Suggested Citation

Wilbur, Kenneth C. and Goeree, Michelle Sovinsky and Ridder, Geert, Effects of Advertising and Product Placement on Television Audiences (June 25, 2008). Available at SSRN: http://ssrn.com/abstract=1151507 or http://dx.doi.org/10.2139/ssrn.1151507

Contact Information

Kenneth C. Wilbur (Contact Author)
University of California, San Diego (UCSD) - Rady School of Management ( email )
9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
HOME PAGE: http://kennethcwilbur.com
Michelle Sovinsky Goeree
University of Southern California - Department of Economics ( email )
3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States
HOME PAGE: http://www-rcf.usc.edu/~goeree/
Geert Ridder
University of Southern California ( email )
Kaprielian Hall
Los Angeles, CA 90089
United States
213-740-2110 (Phone)
213-740-8543 (Fax)
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