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Political Payoffs

Election 2004 delivers early bonus to broadcasters: $219 million 5/30/2004 08:00:00 PM Eastern

For TV stations, the election-year party is rocking months earlier than expected. Long before the usual burst of campaign-ad spending following the August political conventions, candidates, parties, and interest groups are grabbing ad time in presidential "swing" states and in markets with tight races for governor and Congress. Network affiliates in the 21 battleground states could see double-digit increases in political revenue, compared with this point in 2000.

Early and Often
TV groups with stations in swing states benefit big time as presidential candidates launch ad barrages well before the conventions
TV Group 1Q 2004 1Q 2000 Increase
SOURCE: Company reports
Hearst-Argyle $10.1M $7.7M 31%
Scripps $4.2M $1.7M 147%
Belo $4.5M $4M 13%
Sinclair $3.4M $2.8M 21%

Hearst-Argyle, Scripps, Belo, Gannett, and Sinclair have all reported major boosts to first-quarter revenue, thanks to the infusion of ad dollars. "It's going to be a great year for local stations that have made an investment in news," says Sanford Bernstein & Co. analyst Tom Wolzien.

Industry analysts predicted last fall that stations' take from this year's election would jump sharply—60% from 2000—to as high as $1.6 billion. But pundits seem surprised that so much has been spent so quickly. "The money is much greater than before and being spent much earlier," says Tim McAuliff, CEO of Petry Media Corp., which links TV-station groups with the campaigns and other buyers of ad time.

So far, the two presidential candidates have shelled out $219 million. Compare that to the $114 million, per Congressional Quarterly, spent at this point by George Bush and Albert Gore in the 2000 election.

Why the early buying frenzy?

Republican strategists fired the first ad salvos months ahead of schedule, McAuliff says, because Kerry's early status as the presumptive nominee offered them a target. Plus, Americans' growing uneasiness with the president's handling of the occupation of Iraq pushed them to scramble in the hopes of reversing his slumping poll numbers.

Kerry's team has responded in kind.

Which pleases TV-station-group owners, gleeful over the campaign's haul. "The political category helped us achieve near-record top-line performance, getting the year off to a very good start," Hearst-Argyle Television CEO David Barrett told analysts when his company's first-quarter numbers were announced in April.

Hearst's first-quarter political advertising reached $10.1 million, up 31% from the same period 2000. The infusion of political monies pushed Hearst first-quarter 2004 revenue up 12% vs. first quarter 2003. Excluding the ad spending, Hearst's haul during the first three months of this year would have risen less than 10%.

"Political revenue came in much better than expected," says Sinclair Broadcasting CEO David Smith. The $3.4 million take thus far is $1 million more than he expected. A striking 80% of Sinclair's political intake is coming from stations in six swing states: Florida, Ohio, Illinois, California, Maine, and West Virginia.

Gannett Chairman Douglas McCorkindale attributed his company's 11% increase in operating revenue largely to campaign ads, too. Gannett, though, doesn't break political revenue out publicly.

The burst of political spending is flowing over to cable, typically an also-ran in the political-ad game. Cable's $20 million take to date, spent largely on national news networks like Fox News and CNN but on sporadic local spot buys, as well, remains paltry compared with broadcast's share. But operators are hoping to pick up the pace when the November push draws closer. "Historically, the dollars spent on cable run 5%-7% of the amount spent on broadcast," says Steve Cunningham, president of Target Media Networks, a consultancy helping campaigns buy spot time from cable systems. "Now the numbers are looking significantly higher."

Cable is likely to pick up steam as the campaigns become more desperate to reach that crucial 4% of undecided voters who will determine the election's outcome. Broadcasters will continue to reap a windfall as candidates sustain a full-court press. In addition, the controversial 527 nonprofit organizations have promised to spend hundreds of millions. They have barely made a dent in the money pledged to them.

Says Wolzien: "The cost per thousand to reach the three voters who decide this election is astronomical."

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