For 2002, the buck starts here

Political advertising could reach $750 million this year as candidates hustle for cash
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President George W. Bush paid a visit to the Big Apple last week, partially to soothe a city still hurting from Sept. 11 but also to help raise money for George Pataki and his campaign to return to the New York governor's mansion this fall.

At two fundraisers—a $15,000-a-head affair at the home of Mayor Michael Bloomberg and a $1,500-per-person dinner at the Sheraton New York—Pataki raised $2.6 million and increased his campaign account to $20 million.

So it goes. In state after state, incumbents and challengers alike are busy raising as much money as they can, as fast as they can, to fuel campaigns for federal, state and local offices.

And all that fundraising will mean a welcome advertising bonanza for local broadcasters after the ad-business disaster that was 2001. One Wall Street media analyst, Bear Stearns's Victor Miller, estimates that candidates and advocacy groups with advertising to support them will spend $750 million on local TV this year.

If Miller is right, 2002 might be the biggest year ever for political advertising. In record-setting 2000, politicians spent $606 million on local and network television ads, according to the Television Bureau of Advertising, although some estimates put the spending at $850 million or higher.

In any event, political spots will be the third-largest national advertising category for TV stations in 2002, right behind automotive and retail.

And the extra cash could be significant for a lot of broadcasters. According to Miller, the political money may be the difference this year between the 2%-4% decrease in station revenue compared with 2001 and a 4% increase.

"We analyzed the national and local election landscape," writes Miller in a report to be released this week, "and believe companies such as Hearst-Argyle Television, Young Broadcasting, Gannett Co., Belo, Granite Broadcasting, Sinclair Broadcast Group, E. W. Scripps and Meredith Corp. could be the biggest beneficiaries of 2002 political ad spending."

There will be plenty of political action this year, including 36 gubernatorial races and 32 U.S. Senate races. Democrats and Republicans will battle hard to control the Senate, where the Democrats now hold a razor-thin one-seat majority.

The California gubernatorial race is shaping up to be the most expensive in the nation, by far. Democratic incumbent Gray Davis is trying to fend off former Los Angeles Mayor Richard Riordan, Secretary of State Bill Jones and independently wealthy businessman Bill Simon Jr.California's candidates for governor alone will raise and spend $236 million this year, estimates Stan Statham, president of the California Broadcasters Association, and 80% of that will be on local television.

It's too early to predict how much New York's gubernatorial race will cost, but Pataki and Democratic challengers Andrew Cuomo and Carl McCall have raised a combined $30 million, and the primaries are still eight months away.

In Florida, incumbent Governor Jeb Bush will face either former U.S. Attorney General Janet Reno or Tampa attorney Bill McBride. "The governor's race alone could see some $85 million in play," says Patrick Roberts, president of the Florida Association of Broadcasters.

In Texas, Democratic gubernatorial candidate Tony Sanchez plunked down $7 million for a media buy right out of the gate. Sanchez comes from a wealthy oil family and is worth some $600 million, says Harvey Kronberg of the Quorum Report, a newsletter on Texas politics. Sanchez hopes to face incumbent Republican Rick Perry, who took over when Bush was elected president, but first he must get past Democrat Dan Morales in the primary.

Pennsylvania also will stage an expensive gubernatorial race, with two well-known Democrats facing off in a May 21 primary. Former Philly Mayor Ed Rendell and state Auditor General Bob Casey already have $10 million each in the bank to fight a primary that is expected to be the most expensive in state history. In the fall, one of them will go up against Republican State Attorney General Mike Fisher to take the spot left by Tom Ridge, now director of homeland security for the White House.

Even smaller states will generate surprising amounts of spending. South Dakota will stage one of the country's hottest Senate races this year: a fight between Republican U.S. Rep. John Thune and incumbent Democratic Senator Tim Johnson. Political observers see the race as a proxy face-off between President Bush and Senate Majority Leader Tom Daschle. Observers predict the two will spend a total of $15 million in the state to secure a seat. "That's almost $40 a vote," says Lee Axdahl, chairman of the South Dakota Broadcasters Association.

In Missouri, both candidates for Senate—Democratic incumbent Jean Carnahan and Republican challenger former U.S. Representative Jim Talent—plan to raise $10 million each.

The gubernatorial races in Michigan, Illinois and Massachusetts are expected to generate a lot of cash for TV stations as are the Senate races in Arkansas, Colorado, Georgia, Iowa, Montana, New Hampshire, North Carolina and South Carolina.

With campaign-finance reform coming to the House floor this week, broadcasters are reluctant to crow about the political windfall. And, as they like to point out, political advertising comes with strings attached. By law, they have to make room for it at rates they normally reserve for their most favored clients.

"There's a myth out there that broadcasters salivate and love to receive campaign ad dollars during election years," says CBA's Statham.

"The fact is that broadcasters make a lot more when they sell their valuable limited time to other people—retailers and others—because we have to sell it to politicians at the lowest unit rate," Statham says.

"As broadcasters we feel a dual responsibility," says Jack Sander, executive vice president of media operations for Belo. "We accept political advertising, but we don't aggressively solicit it. But we do feel a responsibility to make as much inventory available as possible."

"Does political advertising create some short-term hassles for broadcasters because they have to shuffle around advertisers?" asks Paul Taylor, executive director of the Alliance for Better Campaigns. "Perhaps yes, but my guess is that these are problems they are quite happy to have."

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