Local TV

Super-Charged for a Second-Half Windfall

Economic headwinds may blow, but PAC mentality has station groups primed for raucous revenue 7/09/2012 12:01:00 AM Eastern

Amid all the uncertainty in local TV today, a few truisms remain.
One is that when the Olympics and a presidential election fall in consecutive
quarters, business will be ridiculously healthy. Yet the second
half of 2012 will be stronger still for station groups—thanks to the noisy,
nasty, controversial and richly lucrative concept known as the Super PAC.
Attempting to model revenue from these free-spending political groups is
something of a folly, say broadcast vets. This is unprecedented, uncharted stuff.

For the broadcast groups owning stations in
the half-dozen-plus states deemed election battlegrounds,
the money will come in early and often,
fast and furious. “Super PACs are the noisiest news in
the marketplace,” says Leo MacCourtney, copresident
of Katz Television Group. “We don’t have a history
of Super PACs. We will write that history this year.”

B&C polled a dozen local TV leaders, from group
chiefs to rep firm executives to consultants, to gauge
their forecasts for the second half of the year. Predictions
ranged from a high single-digit increase compared
to the second half of 2011 on up to about a
40% uptick—making for an aggregate increase of
about 25% for stations in the combined third and
fourth quarters.

Core business—a more realistic measuring stick
for local TV’s health—is expected to be up in the
low single-digits.

Without a doubt, dark clouds lurk, including
economic uncertainty both in Europe and here at
home. But optimism going into the second half is
unmistakeably abundant. “As we budgeted the year,
we didn’t expect to have as good a first half as we
did,” says Chris Cornelius, president and COO of
Barrington Broadcasting. “We think that will carry
over to the second half.”

‘Super’ Spending

Driving the optimism is, of course, the approach
to Election Day in November, as two presidential
candidates with seemingly endless resources fight for
one job, and the Super PACs—which of course don’t
qualify for the lowest unit rate that the presidential
camps get for their buys—spend all too freely to ensure
a victory. “We can charge [Super PACs]
whatever we want,” gushes one station group
chief. “What they’re going to spend is going to
shock everybody in the industry.”

MacCourtney notes that the Super PAC
spending is not a redistribution of cash that
would traditionally go into a candidate’s coffers,
but is what he calls “new money finding
its way into the political process.” These unchecked
political action committees may well
push total 2012 political spend on TV stations
over the $3 billion threshold, says Kenneth
Goldstein, president of Kantar Media’s Campaign
Media Analysis Group. “It’s really a
race—it’s absolutely competitive,” Goldstein
says. “Romney has raised a bunch of money,
and a bunch of groups support him.”

Spending will undoubtedly eclipse the $2.5
billion spent in 2008. The presidential expenditure
should heat up in advance of the parties’
conventions in late August and early September,
catch its breath for a few weeks, then start up
again in earnest later in September. Goldstein
says the presidental spending windfall will be
limited to six or seven states, including Colorado,
Nevada and Iowa.

But the races for Senate and House seats, along
with local-issues money centered on everything from
same-sex marriage to immigration to the divisive
healthcare matter, will ensure a wide array of markets
and stations gets at least a taste.

“There are enough local races to prop up other
markets,” says Bill Hague, senior VP at Frank N.
Magid Associates. “It may not be great like North
Carolina and Florida, but I still think there will be
[substantial] political money.”

Fun and Games

Speaking of hot races, 200-plus NBC affiliates welcome
the Summer Olympics to their air in just a few
weeks, and a number of favorable factors—including
the star power of world-class swimmer Michael Phelps
and a viewer-friendly time zone in England—will likely make the Games more of a television success than
other recent Olympics. “Our two biggest stations are
NBC stations, and they’ve had very good [Olympic]
selling seasons,” says Alan Frank, president and CEO
of Post-Newsweek. “Perhaps because it’s London, or
because of the success NBC had with the last couple
of Games, but there’s strong interest. It’s not only on
the part of clients, but on the part of viewers, too.”
And the early numbers are promising. As of press time,
NBC’s broadcasts of the U.S. Olympic Team Trials were
drawing their highest ratings since 1996.

Broadcasters continue to be pleased with the automotive
spending they are seeing, as vehicle purchases
stay strong following a long period of pent-up
demand. Several group chiefs report the auto category
up 15%-20% over last year, when production
was slowed due to the tsunami in Japan, before rebounding
near the close of the year.

“Dealer spending is up in the double digits, and
we expect it to be up in the double digits in the
second half,” Cornelius says. “I don’t see anything
getting in the way of that. And we’re seeing it in all
markets. I can’t think of a single market where we
don’t have significant growth in automotive.”

Auto isn’t the only category showing major
growth. While telecommunications is down, Mac-
Courtney says dining, retail and financial services
are all up well into the double digits for Katz’s station
clients. Others have more modest numbers, but
positive ones nonetheless.

“Automotive is still driving [the growth], but retail
and financial services are not bad,” says Steve
Lanzano, president and CEO of the trade association
TVB. “Hopefully that engine keeps cooking.”

The back half of 2011 saw a flurry of station group
acquisitions, and some industry watchers envision
a lively last two quarters of 2012 as well. Newport
Television and Nexstar Broadcasting remain on the
block, though both groups’ footprints across far-flung markets may be a tough sell for strategic buyers.
While some M&A insiders say the gap between
would-be buyers and sellers remains wide, Richard
Foreman, founder of media brokerage firm Richard
A. Foreman Associates, says attractive properties,
such as leading news stations and outlets with duopoly
potential, will get their share of attention. “I
think it will be busy,” Foreman says. “I think we’ll
see the strong players getting stronger.”

Pretty High Anxiety

Despite all the optimism, local TV leaders still
have their guards up. By most accounts, the recently
concluded network upfront market was lackluster,
both in terms of inventory sold and the price
increases. ABC, CBS, Fox, NBC and The CW sold
$9.57 billion worth of ads in the upfront, according
to trading firm Miller Tabak + Co., up a modest
4.1% over last year, while prices went up a respectable,
but hardly resounding, 7.4%.

“With the stock market, consumer confidence, unemployment
and global macroeconomic
headwinds [that] surfaced
over the past two months,
the scatter ad market started to
weaken to low-growth levels and
had the effect of dampening the
upfront negotiations,” says Miller
Tabak analyst David Joyce.

Dismal daily reports about the
failing economies of European
nations have many concerned
about the effect on the already
sensitive domestic economy.
Many voice anxiety about America’s
ability to withstand another
unforeseen crisis here or abroad, such as last year’s
tsunami or 2010’s BP oil spill.

“We keep hearing about economic concerns and
the contagion in Europe, and what it could do to our
economy,” says David Amy, executive vice president
and CFO at Sinclair Broadcast Group. “Everyone’s
concerned about what can happen here. It’s very frustrating
to keep hearing about doomsday scenarios
and how bad things are.”

Station group chiefs are also wrestling with another
tricky economic picture—their own affiliation deals
with networks that demand increasing amounts of
compensation to keep the relationships intact. In recent
months, Fox parted ways with a pair of stations
in Idaho, showing the affiliate community that the
network clearly means business when it comes to
sharing big chunks of retrans cash.

Executives at groups such as Meredith and Raycom—
and elsewhere in the Fox community—are anxiously
watching to see if Fox exercises its option to acquire
smaller stations in their markets and shifts the Fox affiliation in-house. “Relationships can be fluid,” acknowledges
Paul Karpowicz, president of Meredith Local Media.
“Our group doesn’t anticipate anything happening,
but those are things you have to deal with.”

No One Ever Said 13 Was Lucky

But through the dark clouds, abundant sun is shining
on broadcasters’ faces. Their most pressing matter
in the back half of 2012 may just be effectively
juggling commercial time so the Super PACs and
presidential camps, along with the mom-and- pop
marketers who spend money on local TV year-round,
all get the spots they desire. That’s a “First World”
problem if ever there was one.

“The test for all of spot TV
will be managing your inventory
well,” says MacCourtney.

Inventory should remain tight
even after Election Day, when
those local advertisers ramp
back up to heavy rotation after the political spots
clear out. Broadcasters are hopeful, if not overly optimistic,
that the largesse will stretch into next year.
“[2013]—that’s the story, not 2012,” Hague says. “I
think [broadcasters] could be bleeding out of their
eyeballs. It will be a typical TV odd year, where you
have to do it the old-fashioned way.”

E-mail comments to mmalone@nbmedia.com
and follow him on Twitter: @BCMikeMalone