Stations Log Record Windfall
TV political-ad spending tops $2 billion
TV political-ad spending tops $2 billion
Television-station managers typically have a straightforward view of politics: It doesn't matter who wins; it's how many ads they buy. The bloodier the fight, the better.
So no matter which candidate secures the most votes or which party controls Congress after the unusually caustic midterm elections climax this week, TV broadcasters are the clearest victors.
The intensity of the fight for control of Congress is driving political-ad spending to all-time highs. Spending by candidates, parties and groups behind initiatives on state ballots is estimated at $2.25 billion this year, breaking the $1.5 billion record set in 2004, a campaign fueled by presidential primaries and a tense general election.
The money flows mostly to markets with tight races or hot ballot initiatives, where political parties and various committees are lobbying specific issues heavily. Stations in markets with one-sided congressional fights and little local action see a trickle.
Even though the gains are temporary and only in select markets, the volume has taken some by surprise. “What used to be a $1 million race is now $1.7 million,” says Evan Tracey, COO of TNS Media Intelligence's Campaign Media Analysis Group. Tracey, whose data are relied on heavily by campaigns and stations, has had to revise his estimates repeatedly upward as Election Day draws near.
In California, ads over a ballot initiative that would tax oil companies to fund alternative-energy programs are particularly rife and alone could account for $400 million-$500 million in spending, according to Sheri Sadler, president of California political media agency Sadler Strategic Media.
She likens buying time for candidates to “coping with 15 pregnant women who are all due on the same day. Everybody goes through the same symptoms at the same time.”
TNS' Tracey pegs political-ad spending at $2 billion. TV stations get the vast bulk of donors' largesse and candidates' desperation. He estimates that, on average, they snag nearly 80% of the political-ad spending in a media market.
However, this year may prove a breakthrough for cable operators, which have long been marginal in the political-ad game.
This season, however, cable systems got a big dose of money from congressional and governors' races. TNS doesn't fully track political spending on local cable, but rep firm National Cable Communications estimates that systems are grabbing around $250 million of political-ad money spent this year. That's 11% of total spending, up from 7% operators secured during the 2004 election. The rest largely goes to radio and newspapers.
The glaring omission in this advertising bonanza is the Internet. Tracey estimates that less than one-half of 1% of political advertising will go to Internet outlets.
With the Web, it's hard for local candidates to generate much “reach.” The sites that reach a large number of local voters are generally tied to TV stations or newspapers, which the campaign is probably already buying. And, of course, it's easy to simply upload attack ads to YouTube for free.
“The Web is not a messaging tool,” says Tracey. “It's a great fundraising tool.”
Political-ad buyers primarily buy local evening and morning newscasts, concentrating on the one or two strongest news stations in a market. Those are almost always affiliates of the traditional Big Three networks: ABC, CBS and NBC. Weaker news stations—generally Fox, The CW and MyNetworkTV outlets—are left scrambling for scraps.
“This is a tale of the haves and have-nots,” says Kathleen Keefe, VP of sales for Hearst-Argyle Television. Her station group is blessed with strong stations in Louisville, Ky., and Cincinnati—two of the 16 cities that TNS' Tracey calls “perfect storm” markets, which have multiple hot races with players all clamoring for the same evening-newscast slots. Further, Hearst-Argyle stations are known for their top-rated newscasts.
Hence, Bear Stearns media analyst Victor Miller sees Hearst-Argyle as one of several large station groups whose financial picture will get a boost from political spending this year. Among the others are Nexstar Communications, Gray Television and Young Broadcasting. He sees less benefit for groups with the bulk of their stations in cold markets (CBS, Scripps and Gannett) or that tend to have weaker newscasts (Sinclair and Tribune Broadcasting).
Even strong stations have to work hard to manage their inventory. Federal statutes force stations to give political candidates the same rates they give their best customers, such as car dealers and department stores. That doesn't apply to political parties and other groups, which can be charged at premium rates as they rush in for last-minute time.
So station managers maximize revenues by persuading candidates to advertise outside of news, freeing prime minutes for high-priced political-party and issue advertisers. Broadcast sales executives say those special-interest groups typically pay 50%-100% more than candidates.
Cable's gains are driven in part by a strategy shift. During the 2004 race, major Republican shop National Media Inc., searching for more-specific demographics, shifted 20% of the Bush campaign's budget away from spot-TV buys in battleground states to national cable networks and radio. Using audience data from media-research firms Scarborough and Nielsen Media, National Media's buyers determined that they could reach certain types of Republicans missed by local broadcast.
Other buyers paid attention. This year, both parties expended much more effort chasing specific demographics on local cable. They didn't just buy local avails on news networks but bought on such networks as Lifetime and HGTV (targeting women) or Discovery and History (older, upscale men). Says Kevin Cuddihy, divisional managing director of No. 1 cable operator Comcast's ad-sales unit, “They're taking a broader approach.”
Soon, broadcast and cable sales executives will be out selling again. Even though big elections come every two years, stations and systems need to work the system early, visiting state capitols, for example, to bolster relationships with campaign strategists in the slow months.
“If you have any selling points to make, you need to make them earlier in the year, not during the 60 days prior to an election,” says Hearst's Keefe. “They're swamped.”