Are election ads cheap?

In a recent post James Joyner of Outside the Beltway notes the projected cost of the next presidential election to the winner as topping $400 million in the next cycle, does a little back of the envelope calculation, and determines that the cost of the election to the winner will be roughly $1.34 per American (obviously since there are fewer voters than Americans the cost per voter is higher). He asks:

Given the stakes, the real question seems clear: Why are we doing our politics on the cheap?

Since roughly half of the total amount is spent on television advertising my take on James’s question is “Why is television advertising so cheap?” and I proposed an explanation in the comments. One commenter took strong exception to my guess and stated more or less that the market determined the cost of advertising (and, consequently, disagreed with James that the advertising was cheap).

To which I respond: “Hooey”. For a market to operate as suggested by James’s commenter there must be enough buyers and sellers for it to be that way. I won’t attempt to address the buyers question but the number of sellers of television advertising, particularly in major markets and with viewership of large and important demographic segments is actually quite small. In Chicago, for example, there’s one NBC affiliate, one CBS affiliate, one ABC affiliate, and a Fox affiliate. There are also various cable providers (although many are owned by the big networks) which, while they have lower viewership, may have better demographics. That’s not enough sellers. It’s a cartel not a “free market”.

Further, the barriers to entry are formidable in terms of financial commitment, regulatory restrictions, and time constraints. I can’t walk across the street and open a new television station with a 25% market position.

So, why don’t the sellers ask more? I agree with James: I think the presidential campaigns are getting off cheap. If true,that would mean that it is ipso facto not due to factors of supply and demand. Are managers of television networks philanthropists?

My own view is that the television networks are keeping the prices they ask for advertising time during the peak election seasons as high as they dare without risking additional regulation. There’s a long history in the entertainment industry of doing all sorts of things that aren’t obviously in their best interests for just this reason.

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