Net Present Value, IRR, and the Payback Period
Infomercial Entertainment, Inc.
In the good of days—before cable TV, fax machines, and multimedia personal computers—the phrase,"…and now a word from our sponsor…”usually meant just that, Television commercials were continued to thirty-and sixty—second messages, grouped together to occupy only two or three minutes of viewing time. Occasionally, if you stayed up late enough sitting in front of the tube, you'd see thirty minute segments on riveting topics like “How to Turn $10 Into$10 Million by Investing in Real Estate That Nobody Wants.” Since few people—except for a few former savings and loan executives--managed to stay awake through these half-hour programs, the shows attracted little interest.
The era of the infomercial, those thirty-minute paid video advertisements devoted to selling a particular idea or product, didn't really begin until after the 1992 presidential campaign. Following Ross Perot's unsuccessful bid for public office, however, things started looking up for this new marketing venue. If Perot could use the half-hour segments on late night TV to capture l 9 percent of the popular vote, surely other advertisers could use the infomercial as a way to communicate their message to a sleepy, yet receptive, audience.
Indeed, in the wake of the election, many Fortune-500 corporations selling consumer products were eager to take the plunge and go head-to-head with Letterman on late-night TV. Unfortunately, obtaining exclusive airtime and marketing rights in multiple television markets on the same night was a distribution nightmare. Traditional advertising agencies that purchased large blocks of television time bought it during prime viewing hours. In contrast, 1ate-night time was sold by individual stations to local advertisers on a spot basis. Consequently, nationwide distribution of corporate infomercials could be almost impossible. Fortunately, the free enterprise system specializes in impossible...
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