Here’s the good news for station owners and networks in an analysis of this year’s political media spending out today from ad forecasting firm Borrell Associates: Cash will continue to flood most markets, with broadcasters seeing $4.6B, an 11.5% increase over 2010, the previous midterm election year. The problem? Broadcast TV’s take represents 55.4% of the $8.3B to be spent for ads in all races and ballot issues — down from its 57.5% share of the $7.2B spent in 2010. Cable and online are “the only media choices projected to gain share” this year, the report says. Cable, with $719.3M, will account for 8.7%, up from 6.9% four years ago. And online’s $271.2M is up 1,825.2% vs its $14.1M in 2010. Although online will just account for three cents of every ad dollar spent on all of this year’s contests, “current forecasts call for explosive growth to continue, nearing the billion-dollar level by 2016′s Presidential election.”
Two years ago TV broadcasters kicked up a fuss when the FCC made a simple decision: It ordered them to put online info about the political ads that they air — info they already were required to make available on paper to anyone who visits the station. Broadcasters lost that fight. But it seems that many, possibly most, simply refused to comply with the rules according to complaints against 11 stations filed at the FCC today by two public interest groups: The Campaign Legal Center and the Sunlight Foundation. They say that broadcasters they checked failed to identify on an FCC site what candidate was being referred to in political ads, the issue the ads addressed, and who sponsored the ads. The lapses mean “the public does not have the information it needs to understand who is speaking on the public airwaves and attempting to influence their views on political issues,” says Campaign Legal Center Policy Director Meredith McGehee. Sunlight Foundation Managing Editor Kathy Kiely says the public filings “are often the only way we can track political activities and spending by dark money groups that aren’t required to disclose those activities with the Federal Election Commission.” They filed complaints against WDIV (NBC/Detroit), KNXV (ABC/Phoenix), WTVJ (NBC/Miami), WMUR (ABC/Manchester-Boston), WFLA (NBC/Tampa), WTVT (Fox/Tampa), WWJ (CBS/Detroit), KMGH (ABC/Denver), WCNC (NBC/Charlotte), KMSP (Fox/Minneapolis), and WTVD (ABC/Durham). The FCC’s order initially applied to large stations, but all …
Broadcast companies spent about $10B last year for TV stations — and the acquisition spree will continue in 2014 with help from the two big rivers of cash, Moody’s Investors Service says in a report out this morning. “Larger broadcasters will make selective acquisitions or station swaps in 2014 to expand their footprints in key markets” while small and mid-sized players “will combine to further build scale and keep up with their larger peers,” writes Senior Credit Officer Carl Salas. The debt rating service predicts that political ad spending could hit $2.6B this year. Those spots plus ones tied to the Winter Olympics will boost revenues as much as 16% while the underlying market for TV station commercials will increase as much as 3% with strength in automotive and retail. Insurance companies, health care providers, and state and local governments could spend as much as $700M on messages related to the new Affordable Care Act. Meanwhile, revenue from retransmission consent deals with cable and satellite companies will increase 20% this year. All told, revenues for pure-play TV broadcasters could hit nearly $133B, including $90.5B from core ad sales and $22.2B from retrans agreements. “Broadcasters will issue new debt to finance acquisitions in 2014 and beyond, but their stronger balance sheets will help offset the higher debt burden,” Salas says.
EL SEGUNDO, Calif. And ENGLEWOOD, Colo., Jan. 27, 2014 – DIRECTV (NASDAQ: DTV) and DISH Network L.L.C., a wholly owned subsidiary of DISH Network Corporation (NASDAQ: DISH), have joined forces to offer an addressable advertising platform of unprecedented scale and reach for political campaigns. The strategic relationship will allow participating statewide political campaigns to target their TV ads at the household level within 20+ million DIRECTV and DISH homes.
The DIRECTV-DISH arrangement will focus on political TV advertisements only, while the companies’ other media sales efforts will continue to operate independently.
Wells Fargo Securities’ Marci Ryvicker tracks political ad spending more closely than anyone on Wall Street, so I was pleased to see her weigh in this morning on what’s ahead for 2014. She agrees with the consensus view that spending will be down vs 2012, which included the presidential race, but up from 2010, the last mid-term election campaign. Her take: Fundraisers will collect about $6B (-7% vs 2012) with $4.8B (-7%) going to ads including $3B (-11%) for television. Within the medium, local TV stations will see $2.4B (-14%), with cable collecting $480M (+3%), and national networks winning $96M (-8%). Ryvicker’s estimate for local TV is a little lower than Moody’s forecast this week for as much as $2.6B, but she says that her prediction is “likely conservative.” She expects about $1.5B to be spent on public policy and issue ads, up from $1B in 2010. That will be “the big positive swing factor here, especially since this is the second full election cycle post the significant Citizens United case,” the U.S. Supreme Court’s 2010 decision that took limits off the amounts that corporations and unions can spend to support or oppose candidates. She expects lots of spending on ballot measures involving economic reforms, same-sex marriage, and marijuana legalization. But about a third of the issue spending likely will be used to debate the Affordable Care Act, likely to be an issue in at least 15 states. Opponents of Obamacare have so far spent five times as much as supporters. Total spending on ACA-related ads could go as high as $1B: Insurers may spend an additional $500M, but it would be seen as healthcare advertising, not issue advertising.
Doesn’t that violate a Newtonian law that compels spending on political ads to grow into infinity? You might think so considering that the total has increased every two years since 2002, and only fell in three years since 1980 (that would be 1990, 1998, and 2002). But 2014 will change the recent trajectory, with the total for local market U.S. TV broadcasters probably topping out at $2.6B, down 10% from the record $2.9B set in 2012, Moody’s Investors Service says this morning. There’s no presidential campaign this year; that accounted for about 31% of the spending in 2012. And, unlike in recent off-years, issue ads, and local and state races, won’t make up the difference. “We will see fewer heated political races in 2014 than in 2012,” the report says. That could be a problem for broadcasters because political ads offer them “premium pricing, especially as election day approaches and inventory grows scarce,” the debt rating firm says. The decline “will cut into the odd-year/even-year average EBITDA [cash flow] levels, which we use to assess credit metrics.” Station groups most affected could include E.W. Scripps (where 22% of TV revenues came from political ads in 2012) and Gray TV (with 21%). They “will experience a notable decrease in political advertising revenue in 2014 on a same-station basis, having led the industry in revenue percentages in 2012.” Allbritton Communications and Media General also could take a hit. …
The returns are in and show that this year’s elections provided a bigger windfall for TV providers than expected by Wells Fargo Securities’ Marci Ryvicker — who’s followed this stuff closer than just about anybody. Campaigns and interest groups spent $2.8B on local TV, $104M at national networks, and $467M on cable she reports this morning based on information from Kantar Media’s Campaign Media Analysis Group. The total TV spending is +23.3% vs. the 2010 elections, and +35.3% vs. the 2008 presidential election year. Television accounted for about 65% of all of this campaign’s political ad spending, which came to $5.19B, +14% from 2010. Ryvicker says that the political outlays for TV were $200M higher than she anticipated.
UPDATE: Gannett challenges SNL Kagan’s estimate that sales of political ads at the company’s TV stations will decline 10.1% vs 2008. Gannett Broadcasting President Dave Lougee recently told analysts that the company expects election-related ads to hit a ”new high” in 2012 following Q3 sales of $42M, +61.5% vs 2008.
PREVIOUS, 11:53 AM: The situation is kind of like a children’s soccer game where everybody’s a winner — except, perhaps, the viewers in battleground states who’ve been bombarded with campaign related commercials. Local TV stations likely will end up with anywhere from $2.6B to $2.8B in political ads this year, according to two projections today. SNL Kagan has a lower number, which is still a 68% increase vs four years ago. The 10 largest publicly traded broadcast TV affiliate groups should end up with $625.3M, +41.9%. The research firm says that Mitt Romney outspent President Obama in TV and radio ads in swing states including Ohio, Pennsylvania, and Florida. Gray Television will wind up with about $90.5M, up 86.7% vs 2008 followed by Gannett with $84.5M (-10.1%), E.W. Scripps with $79.5M (+93.8%), and Sinclair with $75.0M (+82.5%).
The projection today from ad firm Magna Global is a little conservative compared to some other forecasts. For example, Wells Fargo Securities’ Marci Ryvicker projected yesterday that political campaigns and groups will spend $3B+ this year on spot TV (up from $2.1B in 2008) with an additional $550M going to local cable (up from $333M). Even so, the Magna Global numbers confirm that the election will turn 2012 into an extraordinary year for station owners. With the political dollars, local TV ad sales will be up 14% in 2012 — and without them, the total would have been up just 2%. “Despite the rise of digital media, local TV remains essential in political marketing because only a ‘lean-back’ medium can effectively reach the low-interest, undecided voters who, by definition, are less likely to seek information from ‘lean-forward’ digital media or engage with digital campaigns,” the firm says. But industry execs and investors had better enjoy the good times while they can. Next year ad sales for all of television will fall 1.4% to $63B after rising 9% this year, Magna Global forecasts.
Two Wall Street analysts point to that conclusion in reports this morning that examine the estimated $2.8B being spent on local TV this presidential election cycle from different perspectives. Only about 800,000 voters are even persuadable this year, Wells Fargo Securities’ Marci Ryvicker notes citing information from Kantar Media’s authoritative Campaign Media Analysis Group. Even more startling, she says, “the BEST way to reach such voters is through ‘fringe’ programs such as Jeopardy and Wheel Of Fortune.” Thus far the biggest surprises in the campaign have been that spending is stronger than she expected in Wisconsin, but weaker in Pennsylvania and Missouri.
TV stations and their investors are already the big winners from this year’s elections. Political campaigns and groups will funnel a record $2.8B to local broadcasters, according to a report today by Moody’s Investors Service. And most recipients will use the bonanza “to position themselves to operate more comfortably in 2013, when political advertising virtually disappears,” the debt rating firm says. FoxCo is using some of its political cash to launch a a $175M financing to fund its first dividend for its backers. In addition, Moody’s says that LIN Television, Nexstar, and Sinclair “have all earmarked cash from the political windfall to acquire more stations in 2012, and we believe more M&A activity will follow.” Moody’s Senior Analyst Carl Salas says that ”pure-play U.S. television broadcasters expect to earn up to 25% more in revenues from political advertising in 2012 than in 2010. The expected increase of more than $500 million will mark the largest dollar increase ever measured over a two-year election cycle.” To put that into perspective, he says that political ads “will account for up to 9% of the U.S. broadcast industry’s average annual revenue, well above the historical 6% to 7% norm.” But don’t expect Moody’s to raise everyone’s credit rating. Traditional ad sales still account for the bulk of their revenues, and they are growing slowly.
Wells Fargo Securities’ Marci Ryvicker tracks political ad spending closer than just about anybody on Wall Street, and just raised her forecast (previously $4.9B) after watching cash gush into TV stations. Her new total compares with $4.6B spent in 2010. But it really stands out relative to the totals during the last two years that included presidential races: If Ryvicker’s right, then political ad sales this year will be 23% higher than in 2008, and up 95% vs 2004. She figures that local stations will account for 54% of the total spending, while 2% will go to networks and 9% to cable operators.
Political pros took a keen interest in July in markets including Zanesville, Ohio; Sioux City and Davenport, Iowa; Charlottesville, Virginia; and Las Vegas and Reno, Nevada. They saw the biggest increase in political ad spending relative to their market size in the month according to a report out this morning from Wells Fargo Securities’ Marci Ryvicker. The prolific analyst tracks political spending closer than just about anyone on Wall Street. She says that campaigns have spent $765.6M on TV so far in 2012 (ending July 29). The vast majority of that — $579.6M — went to local stations, including $120.7M in July. Of the local total so far in 2012, 42.5% was for presidential campaigns, 21.8% for ballot initiatives, 18.6% for Senate races, 7.6% for House contests, 5.0% for gubernatorial races, and 4.4% for other. The top markets measured by dollars spent are Cleveland ($24.8M); Los Angeles ($20.6M); Tampa ($19.4M); Washington, DC ($18.2M); and Las Vegas ($17.2M) — with much of the cash going to outlets owned by Fox, CBS, NBC, Sinclair, and Disney. But Ryvicker notes that these cities typically end up on top because of their size, not because they have the most contentious races. She says it’s more revealing to look at political spending relative to the total ad sales in the market.
A minor victory this afternoon for those who’d like to see television stations disclose on the Web the same information about political ad sales that they already have to make public on paper. The U.S. Court of Appeals in D.C. rejected a request by the National Association of Broadcasters to stay rules that the FCC adopted in April requiring the top four stations in the 50 largest markets to send their political ad data to the regulators for online posting. The rules are on track to take effect August 2. (The FCC wants all other stations to comply starting July 2014.) The NAB appealed the decision this month saying that TV stations will be “at a distinct disadvantage to their non-broadcast competitors” if they have to post the ad rates online after a sale. The damage to stations’ sales efforts would be so great that it “outweighs the benefits” to people who want to know who’s spending how much on TV to influence their opinions in an election. But the court said, without explanation, that the NAB ”has not satisfied the stringent requirements for a stay pending court review.” That pleased Free Press, an activist group that’s an intervenor in the case. “This first round victory goes to transparency and the public, and we’ll continue to advocate for better access to this already public information,” Senior Policy Counsel Corie Wright says. NAB spokesman Dennis Wharton says that while …
The National Association of Broadcasters came out swinging in an emergency motion today at the U.S. Court of Appeals in Washington. The trade group wants the court to stay an FCC ruling that requires stations to put on the Web information about political ad sales that they already must make public on paper. The NAB says that TV stations will be “at a distinct disadvantage to their non-broadcast competitors” if they have to post the ad rates online after a sale. It would especially help cable and satellite providers — who aren’t subject to the FCC rule — to adjust ad prices to win business from broadcasters. Indeed, the filing says, the damage to stations’ ad sales efforts would be so great that it “outweighs the benefits” to people who want to know who’s spending how much on TV to influence their opinions in an election. In April, the FCC adopted its new rules requiring the top four stations in the 50 largest markets to send their political ad data to the regulators for online posting. The rules were published last week in the Federal Register, putting them on track to take effect in early August. FCC chairman Julius Genachowski said at the NAB’s annual confab in April that opposing the online disclosure plan is “against technology, against transparency and against journalism.” Public interest and free speech …
In a change of direction, the House Appropriations Committee today voted unanimously to now allow the FCC’s rule on putting political ad data online to stand. As a part of today’s new amendment, the General Accountability Office will be required to conduct a review of the FCC’s rule. Just two weeks ago, the Financial Services and General Government subcommittee of the House panel added an amendment to the Federal Communications Commissions appropriations bill that blocked any funds for the implementation of the new rule. “This Committee is unsure as to why the FCC is stepping into an issue which is clearly not their area of expertise,” said the subcommittee in early June. The FCC’s rule, announced in April, would require the top 200 network affiliates to provide information about political ad buys to the Commission to put up online. The rest of the TV stations around the country would be expected to provide the same information in the next two years. This data is already available on paper for anyone who wants to take the time to see it. Today Subcommittee Chair Rep. Jo Ann Emerson struck down her own amendment and put forward the successful substitute that would now let funding for the FCC’s rule go forward with the GAO study of the rule’s impact over the next few months. The rule, which will now cover this year’s election, still has to be approved by the administration’s …
The Columbia Journalism Review provides a useful look at the economics of political TV ads here as it tries to answer an important, and deceptively complicated, question: Will much of the record $3B+ in estimated campaign spending this election cycle represent new money for TV stations? CJR grapples with a school of thought that says the impact is frequently exaggerated. The political buy, the thinking goes, just knocks out other advertisers, including ones who might have paid a higher price for the slot. Stations have to make time available to campaigns at what’s known as the “lowest unit rate” — the price offered to the station’s best customers for the time period. Still, CJR finds that “campaign ad dollars are mostly gravy.” Stations frequently increase their advertising inventory in the weeks leading up to an election. Other commercials usually aren’t bumped; most can be moved to air on days and times that are harder to sell. “That allows broadcasters a fair amount of
Broadcasters are not happy with today’s FCC passage of a rule that will force stations to put their political advertising information — like who is buying what time and for how much — online. Stations already have to compile and make available the information as public entities, but they were against putting things like ad rates online that could more easily be seen by marketplace rivals. Now the top 50 markets must post their data to an open FCC database this year — during the lucrative presidential election season — and all stations must comply by 2014. “By forcing broadcasters to be the only medium to disclose on the Internet our political advertising rates, the FCC jeopardizes the competitive standing of stations that provide local news, entertainment, sports and life-saving weather information free of charge to tens of millions of Americans daily,” the National Association of Broadcasters said in response to the vote, adding “we will be seeking guidance from our Board of Directors regarding our options.”
They must have known it was coming, though. FCC chairman Julius Genachowski used his keynote speech earlier this month in the broadcasters’ backyard, the NAB Show, to say opposition to the proposal was “against technology, against transparency and against journalism.” Public interest groups agreed today. ”We’re pleased that the FCC has ignored the overheated rhetoric …