How Super Bowl Commercials Work

To understand the cost of a Super Bowl commercial, we need to figure out all the factors that affect that cost. The first is the advertising inventory that's available. That simply means the amount of time during a Super Bowl broadcast that can be filled with commercials instead of football. The NFL typically allows one minute and 30 seconds per commercial break. Over the course of the game, that adds up to roughly 45 total minutes of commercials [source: Schy]. Not all of that time is available for sale to advertisers. The network broadcasting the Super Bowl will use up to a quarter of the ad spots to promote its own shows.

Of course, acquiring that inventory isn't free. Its cost is rolled into the overall contracts that CBS, NBC, and FOX negotiate with the NFL (ABC ended its contract with the league and handed broadcast rights to "Monday Night Football" to sister network ESPN in 2006). The three networks rotate Super Bowl coverage over the years of the contract. In 2011, those networks signed a nine-year contract that costs each network about $1 billion per year [source: Deitsch]. With the rotating schedule, each network gets three Super Bowls over the length of the contract. Networks make back most of that money (and eventually, profit) by selling ads during regular season games. This is no surprise; after all, NFL games are among the highest-rated programs on television each fall.

A single Super Bowl broadcast will bring in around $250 million in advertising fees to the network. Remember, however, that they only get to do that once every three years. So, while the Super Bowl brings in a ton of revenue for a single game, it's still just a piece of a very large pie.

That still doesn't really answer the question of why Super Bowl commercials cost as much as they do. In truth, the cost of that contract signed between the networks and the NFL was driven by the value of the advertising, not the other way around. That brings us back to our original question: Why are Super Bowl ads worth $3 million per 30 seconds? We'll explain that next.

Advertisers want to expose an audience to a message that should get people to buy something. Super Bowl ads cost so much because they offer an unparalleled opportunity to do so.

We've already talked about the raw numbers -- 111 million Americans watched the big game in 2011. On top of that, it's a culturally pervasive phenomenon. Even people who have no interest in football and steadfastly refuse to watch the game can't escape hearing about it (and the commercials) from friends and co-workers in the weeks following Super Bowl Sunday. Super Bowl advertising also benefits from being a live event. If it were simply an enormously popular scripted show, people could just record it on their DVRs, watch it later and fast-forward through the commercials. Most people don't like recording a live event to watch later, since it robs it of some of its immediacy.

Super Bowl commercials are also a big deal just because they're such a big deal. It's one of those weird pop culture situations where companies put a lot of money and marketing hype into a commercial, so people get excited to watch it, and people get excited to watch the commercials because companies put so much money and hype into them. Over the years, they've become highly anticipated events themselves. Not only do people not fast-forward through the commercials, they go out of their way to watch them, even if they're not really watching the game. Next time you're at a Super Bowl party, notice how a lot of the chatter in the room quiets when a commercial comes on (often ushered in by someone shushing everyone with the phrase "Commercials!").

It doesn't stop there, though. The advent of online video sharing sites like YouTube has given commercials a long life after the Super Bowl, and even more reason for ad agencies to make them funny, exciting and "buzzworthy." A typical Super Bowl ad will receive a few hundred million views online in the weeks after the big game [source: Bharwani].

Now let's break down just how much that $3 million commercial actually costs (and what it used to cost).

A Super Bowl commercial starts with a decision by company executives. They will have a general idea of the type of campaign they want to run and the product or feature they want to emphasize. This helps them select who will design the actual ad campaign and the commercial itself. For example, the ad agency Crispin Porter + Bogusky is known for creating humorous, edgy campaigns that attract a lot of attention -- including a trio of controversial ads for Groupon poking fun at the idea of charity that aired during the 2011 Super Bowl. Wieden+Kennedy is known for creating emotionally resonant ads for global megabrands like Coca-Cola and Nike. Some companies, like Hyundai and GoDaddy, have their own in-house advertising teams that handle these projects [source: Steinberg].

From there, the ad agency's creative team will work on concepts and pitches for the ad itself. Then they have to be reviewed by the company running the ads. The exact cost of the ad agency's efforts are tough to pin down. If the agency is in-house, it's just part of the overall ad budget. Even if it's an outside agency, the Super Bowl project might be part of a larger contract that covers multiple ad campaigns. Plus, rates vary widely from agency to agency. It's safe to say that most big-name agencies bring in at least six figures for a project as big as a Super Bowl commercial, and some might bring in $1 million or more.

Once the commercial itself has been created, it gets handed off to a production team. They have to assemble actors, computer programmers and effects specialists, all the various technical personnel required for lighting and sound, plus a director. Here again, costs vary tremendously. Does your commercial use no-name actors, or A-list movie stars? Are you using a huge Hollywood director like Ridley Scott (who famously directed Apple's "1984" commercial)? Is it a simple setup with people talking or a car driving around, or do you need hundreds of extras and elaborate computer effects?

Once you've shot your ad, how does it end up on the air? We'll discuss that on the next page.

Once you've shot the ad and paid the actors, there's still one more step to take. The final cost is the purchase of the 30-second ad spot itself. Even at this point, costs can vary. Super Bowl ad costs fluctuate with economic conditions. While they tend to increase 5 percent per year, prices were flat in 1992, dipped in 2001, and fell one more time in 2010. Prior to the 2012 Super Bowl, NBC was predicting an average price of $3.5 million per spot, a huge increase over the previous year -- a prediction that turned out to be true [sources: Steinberg and Horovitz].

However, that average price isn't what everyone pays for their 30 seconds in the spotlight. Ads in the fourth quarter of the game tend to be less expensive than those in the first quarter. Anheuser-Busch likely pays less due to a volume discount -- after all, they buy as many as 10 commercials in a single Super Bowl. Sometimes, Super Bowl ads are tied into other advertising purchases with the network, which may bring a discount as well. Finally, not all commercials are 30 seconds long. A lot of the most famous ones are a full minute or more. In 2011, Chrysler ran a two-minute ad about the resurgence of the Detroit auto industry, featuring the music of rapper Eminem. It was the longest Super Bowl commercial ever run, and required special permission from the NFL, because it exceeded the usual 1:30 time allotted for a commercial break [source: Steinberg].

The total cost for a single 30-second Super Bowl ad? Some are probably made for $4 to $5 million. Others are probably closer to $10 million.

With all that money being spent, some of these ads must have resonated with the public. Which Super Bowl commercials have transcended cool to become legendary? Find out in the next section.

When people insist on shushing their friends when the big game heads to commercial break, here are a few reasons why.

Apple – 1984 (1984)

This ad spotlighting Apple's upcoming Macintosh computer is widely considered the first of the blockbuster Super Bowl commercials, the one that set the standard and made the commercials an event unto themselves. Directed by Ridley Scott (director of "Alien," "Blade Runner," and "Gladiator"), it depicts a dystopian future where people march in lockstep to the orders of their fascist overlords. A woman runs through them and hurls a hammer into a giant video screen in protest.

Coca-Cola – Mean Joe Greene (1980)

Injured Pittsburgh Steelers defensive tackle Mean Joe Greene staggers up the tunnel, leaving the game. A young fan tells him he's the greatest, but discouraged by his injury, Greene blows him off. Then the kid offers Joe his bottle of Coke. The iconic image of the football player in profile chugging the cola is topped only by the final scene, the saddened boy walking away, only to have his favorite player throw him his game-worn jersey. The commercial has been parodied countless times, recently in a promo for the TV drama "House," in which the acerbic Dr. House chucks his wooden cane at the kid, bonking him on the head.

McDonald's – The Showdown (1993)

Basketball players Michael Jordan and Larry Bird square off for a game of HORSE, in which a player makes a trick shot which his opponent must then duplicate. The challenges get increasingly ludicrous: "Through the window, off the wall, nothin' but net." "Off the expressway, over the river..."

EDS – Herding Cats (2000)

This is a perfect example of a brilliant commercial that everyone remembers, but no one has any idea what it was supposed to sell. A company name like Electronic Data Services is no match for images of cowboys driving cats across the open range, winding giant balls of yarn and comparing scratches.

Reebok – Terry Tate, Office Linebacker (2003)

The indelible, hilarious image of a massive football player crushing office workers with violent tackles is a Super Bowl classic. All the while, a CEO extolls the increases in productivity derived from Tate delivering thundering hits and chastising people for not putting cover sheets on their TPS reports. Did you remember that this ad was selling sneakers?

Volkswagen – The Force (2011)

This commercial is famous for the cute, funny depiction of a young boy dressed as Darth Vader trying futilely to use his Force powers, only to be validated by his dad, playing along using the car's remote starter. It's also a sign of change in the Super Bowl ad industry. For years, the commercials were kept under wraps until the game. The VW Force ad debuted online a few weeks before the Super Bowl, driving hype before it ever aired on TV.