Bill O'Reilly nailed it a few weeks ago.
Ranting about a new teen drama on MTV, O'Reilly pronounced the show to be doomed. How'd he know? Simple, it had no sponsors. Explaining TV Economics 101, O'Reilly noted a television show "won't stay on the air if nobody would sponsor it."
Turns out O'Reilly could have been talking about his soon-to-be former fellow Fox News host, Glenn Beck, whose program has been bedeviled by a laundry list of advertisers that won't touch his show.
Neither Fox News nor Beck are saying exactly why the two decided to break up this week. But if Glenn Beck enjoyed the ratings that it currently posts and was able to secure big-time advertisers, I suspect the messy breakup would have been averted. (Fat profits tend to help paper over differences.)
Instead, Beck may have learned a painful, supply-and-demand lesson: Revenues rule television, not just ratings. And as Fox News likely discovered, having a show like Glenn Beck that attracts two million viewers is great. Having a show with two million viewers that advertisers actually want to be on is even better.
It's true that throughout the boycott, the official word from Fox News has been that the advertising exodus wasn't a big deal and that they were just moving advertisers around to other programs and that everything was just fine on the sales side at Glenn Beck. All of which made no sense.
The television industry is built around supply and demand. Glenn Beck has supply in the form of roughly 20 minutes of advertising time sold each episode. And it wants to build demand. Usually, healthy ratings drive that demand since advertisers want to reach the masses. But if suddenly hundreds of advertisers raise their hand and announce they'd be happy to spend money with Fox News, but not on Glenn Beck, then the show's demand plummets, but the supply -- the 20 minutes of advertising inventory--remains the same.
Bottom line? The ad rates go down, even if Glenn Beck remains the third highest rated show in cable news.
Read the full Media Matters column, here.