Ratings and programming decisions in Japan

I've been wondering about ratings for shows and how networks respond. Since episodes for a dorama are already "in the can," it must be rare to cancel just for poor ratings. Some of my favorite shows seem to have had poor domestic ratings -- Katagoshi no Koibito I think of.
Do music CDs associated with shows affect economics? Are advertising contracts firmly set so that they can't back out even if the show flops? And, are those DVDs of series important revenue sources?
Also, how do networks make their programming decisions? Do they rely on a production studio's reputation, do they try to appeal to a particular demographic that advertisers may want to target -- "narrowcasting"?
I know that's a lot of questions... I became curious after spotting Daisuki which so obviously couldn't be shown on American networks.