What is 'Power Ratio'

Power ratio shows how much revenue a broadcast media company earns compared to how much it would be expected to earn given its market share. It is calculated as follows:

Company Revenue / (Audience Share * Total Market Revenue)


Companies want to have a power ratio of at least 1.0, which indicates expected revenue levels. A higher power ratio indicates a greater amount of revenue received from the company's audience share. Power ratios show how well media companies convert their ratings into advertising revenue. Values greater than one indicate a company that is outperforming its industry.

Power ratios help media firms evaluate their own performance and, in the case of a possible acquisition or merger, evaluate the performance of a target media company. Analysts and investors also pay close attention to power ratios because they provide insight into how efficient companies are at converting ratings into revenue. 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).

While power ratios measure efficiency at generating revenue relative to audience, they do not measure a broadcaster’s profitability. In other words, a broadcaster might have a high power ratio yet be unprofitable, for instance, due to high programming costs.

Which Factors impact Power Ratios?

A 2005 academic study of power ratios for broadcast radio stations in the United States that was published in the Journal of Media Business Studies found that as a radio station's audience share grows, its market revenue share grows disproportionately. Conversely, its audience share shrinks, a company’s market revenue share decreases disproportionately. When looking at the 100 largest U.S. broadcasters, that same study, as well as others, also found that power ratios for a given broadcaster can be lower than expected due to a relative lack of demand for its audience relative to other audience segments. Station format can positively (news/talk) or negatively (e.g. Easy Listening and those targeting ethnic minorities) influence the power ratio. In general AM stations generate lower power ratios than FM ones do.

When analysts and management teams evaluate power ratios, they also look at ratios for specific day parts and demographic groups, for instance, the covered 18 to 49-year-old segment. They also assess the trend over time periods. Management teams’ evaluation of power ratio impacts programming investments, talent recruitment and compensation, and station purchase decisions as well as long-term corporate planning decisions. 

  1. Ratio Analysis

    A ratio analysis is a quantitative analysis of information contained ...
  2. Accounting Ratio

    Accounting ratios, also known as financial ratios, are used to ...
  3. Liquidity Ratios

    Liquidity ratios are a class of financial metrics used to determine ...
  4. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ...
  5. Funds From Operations (FFO) To ...

    Funds from operations (FFO) to total debt ratio is a leverage ...
  6. Bond Ratio

    A bond ratio is a financial ratio that expresses the leverage ...
Related Articles
  1. Investing

    Ratio Analysis

    Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ...
  2. Investing

    Financial Ratios to Spot Companies Headed for Bankruptcy

    Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy.
  3. Investing

    Sysco and Other Big Movers In Services

    The market has been slipping so far today. The Nasdaq has fallen 0.3%; the S&P 500 has fallen 0.4%; and the Dow has declined 0.5%. The Services sector (IYC) is currently lagging behind the overall ...
  4. Investing

    SXC Health Solutions Corp. (USA) Among the Nasdaq's Biggest Movers

    The market is having a bad day so far: the Nasdaq is trading down 0.3%; the S&P 500 has declined 0.4%; and the Dow has slipped 0.5%. The Nasdaq Composite Index is a capitalization-weighted index, ...
  5. Investing

    Liquidity Measurement Ratios

    Learn about the current ratio, quick ratio, cash ratio and cash conversion cycle.
  6. Investing

    Key Financial Ratios to Analyze Tech Companies

    Understand the technology industry and the companies that operate in it. Learn about the key financial ratios used to analyze tech companies.
  7. Investing

    Payout Ratio vs. Retention Ratio: When to Use Which

    The payback ratio and retention ratio collect different information and are useful in different situations.
  8. Investing

    Useful Balance Sheet Metrics

    These metrics can help you better understand the information found on balance sheets.
  9. Investing

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  1. What is a power ratio?

    A power ratio is a method used by media companies to measure revenue performance compared to the audience share it controls. ... Read Answer >>
  2. Why do shareholders need financial statements?

    Discover the importance of a company's financial statements for stock shareholders in evaluating their equity investment ... Read Answer >>
  3. What is the difference between efficiency ratios and profitability ratios?

    Learn about efficiency and profitability ratios, what these ratios measure and the main difference between efficiency and ... Read Answer >>
  4. How does ratio analysis make it easier to compare different companies?

    Learn what ratio analysis is, how investors can compare companies within the same sector using ratio analysis and how ratios ... Read Answer >>
Trading Center