Power Ratio


DEFINITION of 'Power Ratio'

A measure of a media company's revenue performance (i.e., advertising income) in comparison to the audience share it controls, calculated as follows:

Company Revenue / (Audience Share * Total Market Revenue)

The power ratio shows how much revenue a media company earns compared to how much it would be expected to earn given its market share. Companies want to have a power ratio of at least 1.0, which indicates expected revenue levels, but a higher power ratio is better because it indicates a greater amount of revenue received from the company's audience share. Power ratios show how well a media company converts ratings to revenue.


Power ratios help media firms evaluate their own performance and, in the case of a possible acquisition, evaluate the performance of a target media company. Power ratios can also be used to compare the revenue performance of one category of media (e.g., the Internet) to another category (e.g., newspapers).

An academic study of power ratios published in the Journal of Media Business Studies in 2005 found that as a radio station's audience share grows, its market revenue share grows disproportionately and as its audience share shrinks, its market revenue share decreases disproportionately.

  1. Revenue

    The amount of money that a company actually receives during a ...
  2. Market Share

    The percentage of an industry or market's total sales that is ...
  3. Revenue Per Employee

    An important ratio that looks at a company's sales in relation ...
  4. Cost Per Thousand - CPM

    The price of 1,000 advertisement impressions on one webpage. ...
  5. Revenue Per User - RPU

    A ratio used to express the profitability of a company on a per-user ...
  6. Market Saturation

    When the amount of product provided in a market has been maximized ...
Related Articles
  1. Professionals

    Advertising, Crocodiles And Moats

    Memorable advertising is a brick in the fortress that keeps competitors at bay.
  2. Professionals

    How To Target Ideal Customers

    Expand your definition of a lucrative client and uncover a new realm of possibilities.
  3. Investing

    A Case Study: Earnings Manipulation And The Role Of The Media

    Here we explore why the media focuses on certain earnings manipulation cases in post-Enron Wall Street.
  4. Professionals

    5 Career-Killing Facebook Mistakes

    Facebook might be a great way to show off those cute pics from your vacation -- but your page isn’t so great if it hurts your career.
  5. Term

    What's a Sector?

    The term sector has several applications in economics and finance.
  6. Economics

    What are Acquisition Costs?

    A company can recognize acquisition costs as those costs used to buy property and equipment.
  7. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  8. Economics

    Understanding Production Efficiency

    Production efficiency is the point at which an economy cannot increase output of a good or service without lowering the production of another product.
  9. Economics

    Explaining Silo Mentality

    A silo mentality occurs when certain departments in an organization do not share information or knowledge with other departments.
  10. Economics

    Understanding Bad Debt

    Bad debt is money a company or lender is owed, but is unable to collect.
  1. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  2. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  3. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  4. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  5. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  6. How difficult is it to understand business analytics?

    In the abstract, business analytics is the study of financial, economic, consumer and production data through statistical ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!