Same advertising revenues from a viewer

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Reference no: EM132073567

Hooloo is an online platform to watch premium TV content. For the audience, Hooloo is better than watching regular broadcast networks because it shows less commercials, at a rate of 4 minutes every hour, versus 16 minutes per hour in regular TV. For the advertisers, it is also a very interesting proposition, because they are able to target those ads much better.

However, Hooloo, being a relatively recent platform, is only capable of filling 60% of the slots, showing public service messages for charities and NGOs whenever it has no commercials to show. TV networks, on the contrary, have excess demand for their slots.

In addition to that, Hooloo charges a platform fee of 30% of the advertising revenues, with the rest of it going to the owner of the content.

FAX Networks, a major broadcast network, owns all the rights, broadcast and streaming, of a new hit series featuring the adventures of canine detectives in a desert island, "Lost and Hound", and is considering showing it both on Hooloo and through all its stations.

What should be the CPM on Hooloo so that FAX earns the same advertising revenues from a viewer consuming 1 hour of content on Hooloo as that from a viewer consuming 1 hour of content on the broadcast network?

In addition to everything that has been stated above, you can assume the following:

1. All advertisements are 30-seconds long

2. The CPM of a major broadcast network is, on average, $30 (per ad)

Reference no: EM132073567

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