Media Revenue Management With Audience Uncertainty

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Executive Summary

An important challenge faced by media broadcasting companies is how to allocate limited advertising space between upfront contracts and the spot market (referred to in advertising as the scatter market), in order to maximize profits and meet contractual commitments. The authors develop stylized optimization models of airtime capacity planning and allocation across multiple clients under audience uncertainty. In a short term profit maximizing setting, the results suggest that broadcasting companies should prioritize upfront clients according to marginal revenue per audience unit, also known as CPM (cost per thousand viewers). For capacity planning purposes, accepted upfront market contracts can be aggregated across clients.

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