In 1949, S. L. “Pat” Weaver joined the National Broadcasting Company as vice-president of television. In addition to innovating a broad range of programming, including Today and the Tonight show, strips which continue to anchor morning and late night dayparts at the network today, he created broadcast television's business model.
When television began in the US, experimental prices for TV time were set in reference to what national radio shows could command, but rapidly became more expensive as television audiences mushroomed.
In fact, early television rapidly threatened to become a victim of its own success. A 1941 pilot of NBC's Truth or Consequences was priced at $120 for an hour of evening prime time. By 1948, a comparable hour sold for around $11,000, by 1951 it was $35,000, by 1956 almost $70,000. By 1954, television broadcaster revenues had gone from negligible to overtaking all of radio, in little more than a decade.
The combination of ever-escalating programming costs (higher production values, more expensive talent, etc.), increased audience expectations, and advertisers' rush to the new medium, all rapidly drove up the price of television airtime. This meant fewer national advertisers could afford the single-sponsor programming model. More ominously for the still-emerging TV business, the more dependent broadcasters became on a small handful of big-spending sponsors, the more the entire programming and broadcasting business model could be controlled by a few powerful advertisers, not the new industry itself.
The Google of its day, in the sense of innovating the industry model for advertising in the new medium, was the National Broadcasting Corporation, partial predecessor of today's NBC Universal unit at General Electric. NBC, specifically Weaver, figured out as early as 1949 how to break the logjam by replacing full sponsorships with alternate arrangements by which companies shared costs from week to week. For example, Philco and Goodyear shared Sunday nights between 1951 and 1955.
From there – and this was the strategic insight – Weaver moved to what he called “participative advertising” in a “magazine format.” This is the structure we know today in which broadcasters or independent producers offer up programming into which a broad array of advertisers insert short commercials. This new structure had several important advantages: it further enlarged an already-growing market by enabling many more sponsors to bid for more affordable slices of advertising, and it shifted the balance of power away from single sponsors and ad agencies back to the broadcaster.
Weaver was also alert to the consequences of a transformational shift away from radio to television. In his memoirs he described it this way:
“Though NBC Television was now operating at a profit, the revenue wasn’t even remotely sufficient to carry the entire network. We were sharply aware of the danger that radio might die before television became big enough to replace it…
“We stressed the fact that radio and television were complementary media. They needed each other. You could advertise on a TV hit that millions of radio listeners would never see. To reach a complete audience, you had to advertise on both.”
Weaver's creativity and growing fame led to increasing conflicts with David Sarnoff, Chairman of NBC parent RCA. Weaver was ultimately ousted in 1956, but not before he had established broadcast television's programming and business model as we still know it today.
Well, it seemed like a good idea at the time.
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