Yup these are my readers

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Sep 12·edited Sep 12

MAILBAG 2.0 QUESTION: I'm an academic economist who studies the media industry. I want to ask about something Ethan said: The price of TV ads increases "nonlinearly" with the number of viewers. The nonlinear pricing is absolutely true. This is why the NBA and other league have command high rights fees (because they can be monetized through ads).

But what's interesting is *why* it's true. Here's what's going on (reactions welcome).

What drives the nonlinearity is (ultimately) laziness by ad buyers, which is itself a byproduct of the difficulty of measuring TV ad effectiveness.

I'll spell out why below, but here's the bottom line: If a sports league is banking on nonlinearity to fund operations, they're making a bet that the TV ad effectiveness will continue to be unmeasurable. Big Tech will have a say in that.

Each time a company buys a TV ad, there is a fixed/setup cost (effort) of setting up the buy. If effectiveness were measurable, it would be worthwhile to pay lots of setup costs for all of the outlets that drive return for the advertiser.

But it's not measurable. The classic line is still true: "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

If it's all the same, most ad buyers would rather just pay the fixed costs as few times as possible (fewer outlets). Fewer tedious price negotiations. Few broadcaster pitch decks. Buyers are human beings, and they'd rather finish their jobs early.

These incentives draw ad buyers towards big outlets like the NBA -- *not because NBA eyeballs are actually more valuable per capita*. Instead, it's because advertising in a few big spots lets you reach lots of people without as much effort. That's why the NBA enjoys an ad premium that supports players salaries.

Is this sustainable? Here's why I'm skeptical. Tech companies are trying to undermine both pillars of the NBA's ad rents. First, they are trying to make TV ad effectiveness more measurable (as they have done for online ads). Google and Amazon will link TV ads to users browsing and buying history.

Second, Google/Amazon are trying to lower setup costs for a new ad buy. In tech, the dominant model for ad buying is automated auctions, NOT in-person negotiations with pitch decks. If you want to advertiser for a particular outlet, you just open your browser and bid.

If the Tech Companies win, advertisers will have a greater ability spread out their ad spend across all the media their customers actually watch -- from TNT to House of Strauss. The nonlinearity dies, and with it the NBA's ability to command a premium.

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According to Spotify, the song is called La Plage, and Colo Colo is the artist. Thanks, though, good to finally find.

I was reading about the film version of you, peripherally picked up a Z and B below the line I was reading, thought someone was about to propose Zach Braff. Zazie Beetz is much better.

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I would pay money for you two write about this https://www.espn.com/college-football/story/_/id/38380947/tucker-denies-harassment-claims-calls-msu-hearing-ridiculously-flawed, specifically in the context of Laura Kipnis’s book “Unwanted Advances”

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Question for the next mailbag:

1) Who influenced your writing style

2) Who were your favorite sports writers growing up

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The problem with doing a podcast with John Podhoretz is the he does 80% of the talking. I mean I love the guy and I've been listening to the Commentary podcast since 2016 but it's hard for his co-hosts and guests to get a word in.

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Get John Podhoretz on the cast!

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Love the bag! Would be fun to do a podcast form where listeners/readers can leave a voicemail, a la Light Years

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New favorite song! Thanks!

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Thanks for answering my question Ethan. I just subscribed to Commentary and requested they invite you to guest host. Hopefully you'll be hearing from them soon!

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OK but what about the drops during the song's intro? I obviously get the Cowherd one, but what about "Do it Again" 2x and unintelligible mumbling? Where are those from?

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