Pols' Dough To Flow
Even with court blessing, reform law not expected to slow TV campaigning
By Bill McConnell -- Broadcasting & Cable, 12/14/2003 7:00:00 PM
New restrictions on campaign ads don't violate free-speech protections, a slim majority of Supreme Court justices ruled last week. Their decision leaves in place a 2002 law aimed at regulating campaign financing, but many broadcasters do not expect it to affect the flow of political ad dollars next year.
Political organizers have developed creative ways to circumvent restrictions on the money that political parties raise for broadcast ads. Consequently, station managers say the real issue isn't whether less money will be available but whether the primary and general elections are tight enough for their markets to reap the potential largess.
"We don't envision this will make much of a difference," said WHEC-TV Rochester, N.Y., General Manager Arnold Klinsky. "For us to get advertising in the primary depends on whether the Democratic race is still a contest."
His state doesn't pick party candidates until March 2—a month and a half after the initial Iowa caucus. Otherwise, he expects a slim election year for his market because post-convention presidential candidates are unlikely to target Rochester, there's no race for governor, and Sen. Charles Schumer's reelection bid isn't likely to be competitive. "In terms of [post-primary] presidential money, I don't think we've ever gotten a nickel."
Debbie Turner, general manager at WTVF(TV) Nashville, said initial inquiries for Tennessee's Feb. 10 primary are only beginning to come in. She expects a year similar to the 2000 presidential year but nothing like the "extraordinary" 2002 battle that landed Republican Lamar Alexander in an open Senate seat. "There are no statewide races this time," she notes, "so it's hard to gauge whether this will be a strong election."
Wall Street is basing its predictions more on the competitiveness of the presidential and various Senate and gubernatorial races than on campaign-finance-reform restrictions.
Sanford C. Bernstein & Co. analyst Tom Wolzien last week was sticking to his aggressive prediction of a $1.6 billion infusion for stations, despite the court's ruling. The 2002 law will do little to stem the flow of ad money, he said, because the restrictions on unlimited "soft-money" contributions to political parties prodded donors to shift their funds to tax-exempt interest groups, which also can take uncapped amounts of money but don't have to reveal their backers. "If soft money had been allowed to come back, it would have been a flip of funds from one type of organization to another."
Even analysts predicting a leaner year for broadcasters than 2002's $1.2 billion blame the dearth of close races.
"The excessive spending per gubernatorial race in 2002 was an anomaly," said CIBC World Markets analyst Michael Gallant in a new report. Not only will the $23 million per race drop to a "more normalized" $10 million," he predicts, but the number of races is down from 36 two years ago to 11. He predicts overall 2004 political spending will be down 10% from 2002, but that's still up 27% from 2000.
Bear Stearns analyst Victor Miller also predicts ad spending will be down, to $1.1 billion. If the court had tossed out the soft-money restriction, he said, perhaps another quarter billion could have been added. Still, the political infusion will add roughly 8% to station revenues in 2004, he predicts.
Of course, the court's ruling isn't all about the TV revenues. The legal debate centered on the free-speech rights of candidates and political groups vs. the need to stem the real and perceived corrupting influence of campaign contributions on the political process.
The Supreme Court, by a 5-4 margin, ruled the aim of checking money's influence justified the cost in First Amendment rights. Led by Justices John Paul Stevens and Sandra Day O'Connor, the majority upheld restrictions on political ads aired close to elections, as well as virtually all the other major provisions. They wrote that the law prudently addresses the dangers that politicians will be guided by "the wishes of those who have made large financial contributions."
Dissenters, represented by Justice Antonin Scalia, said the ruling made for "a sad day for freedom of speech." Incumbents, not honest government, win under the law's restrictions, they said.
The law prevents corporations, trade unions and interest groups from airing ads that mention candidates' names 30 days before a primary and 60 days before a general election.
That portion of the law was opposed by the National Association of Broadcasters because campaign ads are a primary source of revenue for stations. NAB's reaction to the ruling was muted. The decision "will cause substantial changes in the manner in which federal candidates utilize broadcasting to reach the voters," NAB President Eddie Fritts said in a statement. "This is a complex 300-page opinion that will require extensive evaluation before its full impact is understood."
The court also upheld the ban on unlimited donations to political parties. Soft money had become a primary component of political campaigns. Ostensibly used to rally voters to the polls, it instead allowed parties to funnel unlimited sums raised nationally into local campaigns.
Not surprisingly, the authors of the 2002 law praised the court's ruling. "This opinion represents a landmark victory for the American people in the effort to reform their political system. Now that the Court has spoken, we must make sure that the law is properly interpreted and enforced," said Sens. John McCain and Russ Feingold and Reps. Christopher Shays and Marty Meehan.
The primary plaintiff in the challenge to the law, Sen. Mitchell McConnell, maintained his position that it violates free-speech rights while doing nothing to take money out of politics; "Wealthy donors like George Soros are writing multimillion-dollar checks to fund massive special-interest groups to run political ads. Outside special-interest groups have become the modern day political parties. Soft money is not gone; it has just changed its address."
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