In 2000, political ad spending totaled more than $800 million. The overwhelming majority of it went to local TV stations through national spot advertising. The over-the-air broadcast networks got none.
That could change dramatically in 2002-but probably not without some complaints from stations-if the networks embrace new technologies being developed by Pinnacle Systems, a Mountain View, Calif.- based manufacturer, and others.
Sources say Pinnacle has developed an ad delivery system that would allow networks to take the concept of selling regional and sectional ads down to the level of individual markets. For example, P&G could, theoretically, advertise more than 200 products (one per market) across the country using only one 30-second window. Other tech firms are working on the same concept, which grows out of the "central-casting" idea already embraced by some station groups that operate multiple stations from one facility.
Those who know about the spot ad developments say one network is extremely interested in the technology and wants to work out a deal with Pinnacle, which declined to comment for this story. None of the networks contacted last week 'fessed up either.
That's not a surprise. It's a thorny subject with affiliates, who could be expected to have reservations about their own network selling against them in the local market. And for the system to work, there's a big catch: Dedicated server/commercial insertion devices have to be installed at the local stations in each market.
One network-Fox-tried to get its affiliates to buy into that idea two years ago when it recaptured some of its affiliates' prime time ad sales inventory. In fact, even Fox affiliates confirm that the network had the contractual right to install such servers. But there was such a wide protest among the affiliate body that Fox backed off.
At least one other network has the legal right to install such servers at their affiliates-UPN. That's according to one well-placed source at the network.
But Tony Vinciquerra, executive vice president, Hearst Argyle Television, says none of the Hearst's affiliate contracts gives any of the networks the right to put such equipment at their stations. That's not to say he'd automatically rule out an arrangement. "But we're certainly not going to allow them to sell our markets on a local basis unless there's some sharing of revenue."
The WB's 100-plus markets, many of which are run on local cable channels, already use a variation of the technology. The WB can feed different spots, not just to individual markets, but to individual cable head-ends, says WB COO Jed Petrick.
Both Petrick and Chris Rohrs, president of the Television Bureau of Advert on the spot market. "If all you're buying is a couple of markets, what are you going to do with the rest of the country?," he asks. "It shouldn't be taking the place of national spots."
According to Rohrs, networks have limited their use of regional and section ads to about 5% of their total business. "If they were to use Pinnacle's system to go after local market business and move above that 5% level, it would represent a fundamental change in the business relationship with their affiliates," he says. "Why would affiliates clear spots in their markets for networks to siphon off their revenue base?"
Still, the Pinnacle technology could help grow network ad revenues, says Petrick. "It's perfect for a car company, spending local dollars, that wants to run different creative in every market. Anything you can do to make yourself more adaptable to the advertisers needs, the better off you are."