How Your TV Gets Paid For
In some parts of the world, like the U.K., television is paid for by the government and the license fees people pay for the right to watch it. In America, broadcast TV is paid for by advertising. In fact, the term "soap opera" derives from the first advertising model, way back in the days of radio, when radio dramas were paid for by detergent companies, dishwashing liquid companies and others. This was because the people most likely to be listening to daytime dramas were stay-at-home mothers and homemakers: The advertising was targeted to the audience.
That's why ratings are so important decades later. Advertisers pay for the TV we watch for free and take special care to make sure they're getting the kind of viewers they want for the products they're advertising. These measurements are called ratings, and the Nielsen Company has developed several different ways to figure out who's watching, every minute.
But one of the most powerful aspects of time-shifting technology is the fact that we can skip those advertisements when we're watching our favorite programs. Suddenly, the audience for a show has become completely different from the one the advertisers have always paid for.
While there are still plenty of live viewers -- especially for event programming and reality competitions like "American Idol" -- the advertising industry is scrambling to figure out ways to reach, and measure, their time-shifted audience. Popularity is no longer the only key to a show's success, because if the viewers aren't watching the ads during a show, there's no reason for companies to pay for them.
Right now, we're in a transitional period. The Nielsen Company has diversified its measurements to include categories like "live" viewers, "same day" viewers who watch the show within 24 hours, and even "same day + 7" audiences who watch the show within a week.
But advertisers aren't as interested in time-shifted audiences because of the likelihood that they'll skip the advertisements. To account for these changes, broadcast television has evolved plenty of new strategies to pay for programming that don't involve the old ratings and advertising model, and they're central to the future developments in paying for and producing television programs. We'll look more closely at this in the next section.