Local broadcasters are expected to see slow growth in core ad sales, but will see a record-setting boom in political spending during the 2016 campaign, according to a new report from Moody’s Investors Service.
Moody’s projects ad revenue from the auto, retail and service categories to increase by 0.5% to 2.5% for the rest of 2015. That will leave total revenue down 6% to 9% from 2014, an Olympics and election year.
“During election years, political advertising can account for 10% to 20% of a broadcaster’s revenue, depending on how many stations are in election battlegrounds,” said Moody’s VP Carl Salas. “Many broadcasters anticipate record-setting campaign spending and political advertising revenue in the upcoming 2016 election season.”
The core ad gains reflect improving consumer sentiment and economic growth.
“After six years of economic recovery, US spending on broadcast advertising in 2015 will approach pre-downturn levels,” said Moody’s Salas. Local demand is compensating for weakness in national spending.
Moody’s expects Spanish-language broadcasters to do better than English-language outlets.
The election campaign spending will bring high margin revenue to broadcasters E.W. Scripps, Gray Television, Media General, Nexstar and Sinclair Broadcasting. Moody’s says Gray and Scripps will have two of the highest levels of political ad sales as a percentage of total revenue.
Broadcasters will also be seeing increases in their retransmission fees by more than 20%, though reverse comp to the networks will reclaim some of that revenue.