Political Ads Called ‘Gigantic Band-Aid’ for TV Stations’ Bottom Lines
New York (AP) - For TV viewers, this cutthroat election year is a riot of attack ads and media saturation made possible by big-money donors. For TV stations, it's a stimulus package.
One research group expects TV political spending to hit a record $3 billion, and the windfall may continue well past Election Day because regular advertisers are getting squeezed out of the schedule and could spend their ad budgets later. Coming out of a recession that put some broadcasters in or near bankruptcy protection, political spending is emerging as a critical -- but temporary -- source of revenue.
Several factors created the upsurge: tea party enthusiasm, self-financed millionaire candidates, an unusually high number of toss-up races and a Supreme Court ruling in January that eased rules on corporate campaign donations.
Ad rates are going up overall because political campaigns are taking up much of the commercial time. Station managers say many regular advertisers aren't able to buy ads now. That frees up money to spend later.
"The money is much stronger than we anticipated, and we thought it would be pretty big," says Chris Bailey, who manages ABC affiliate WOLO in Columbia, S.C. His station is benefiting from a particularly expensive House race, one where Rep. Joe Wilson -- famed for his "You lie!" outburst during last year's State of the Union address -- is fighting to keep his job.
The Campaign Media Analysis Group, a unit of the consulting firm Kantar Media, projects that spending on political television ads will hit $3 billion this year. Not only would that top a record $2.4 billion spent during the last midterm elections in 2006, but it would also surpass the $2.7 billion spent in 2008, when both congressional and presidential campaigns poured cash into TV ads.
The political boon is showing up across the industry. Political advertising revenue should account for more than 11 percent of the total at local broadcast stations this year, according to Magna Global, a unit of Interpublic Group of Companies that tracks ad spending. That's up from 7 percent in 2006.
Darrin McDonald, general manager of Fox affiliate KVVU in Las Vegas, says political revenue in his TV market is on track to hit $30 million this year, compared with $22 million in 2008.
That's all the more welcome in a state where economic troubles have taken a big bite out of local advertising budgets. In Nevada, home prices have fallen more than 50 percent from their highs -- among the worst in the nation. The state still has an unemployment rate of 14.4 percent, almost five percentage points above the national average of 9.6 percent.
"Political advertising has been a gigantic Band-Aid for this market," McDonald says.
He can largely thank Senate Majority Leader Harry Reid and tea party challenger Sharron Angle.
According to the Center for Responsive Politics, a campaign finance watchdog group, the candidates and outside interest groups have spent more than $58 million combined. Much of that went to television. That's about seven times what Reid and his GOP rival at the time spent in 2004.
Reid-Angle is one of 47 tossup races in the House and Senate, compared with 35 tight races around this time during the 2008 campaign and 25 back in 2006, according to the Cook Political Report.
The tea party can't take all the credit for helping to revive the local TV business this year.
The Supreme Court in January struck down restrictions on how corporations and unions can spend money in elections. Evan Tracey, chief operating officer of the Campaign Media Analysis Group, says it could end up adding $100 million to $200 million in television spending this year, or about 3 percent to 7 percent of the projected total.
At the same time, self-financed candidates such as former eBay CEO Meg Whitman in California and Connecticut's Linda McMahon, the former head of World Wrestling Entertainment, have spent millions of their own money to run for office. Whitman has spent a record $142 million of her own money so far.
The crunch for commercial time has been such that local affiliates of NBC and ABC have begun selling commercial slots that are ordinarily reserved for national advertisers.
Coming off an abysmal 2009, local stations need any extra cash they can get.
Excluding political ads, local broadcast TV revenue fell 15 percent to $13.8 billion last year, according to Magna Global. The firm predicts an overall jump of more than 20 percent this year and says nearly half that increase comes from political ads.
The uptick brought by political campaigns is also registering at some of the country's biggest media companies.
CBS Corp., which owns 28 local stations, expects political revenue to hit nearly $200 million this year. Some of that total will come from the company's radio stations and billboards, but the vast majority is TV. CBS hasn't broken out the total during previous elections, but the company says 2010 will be a record.
Not all media are benefiting equally. Newspapers, for instance, get relatively few political ads -- and those businesses still make up the bulk of large media companies including Gannett Co. and Tribune Co. And some TV stations fare better than their competitors because of how political parties and candidates are targeting their audiences.
"For the most part, the demographic that campaigns are looking for is 50 years and older, which is not in our wheelhouse, per se," says John Spinola, who manages WFLX in West Palm Beach, Fla. The station is an affiliate of Fox, the network of "The Simpsons" and "Family Guy." Spinola says political advertising has been "very good" but not "over-the-top good."
This despite that fact that WFLX's market is brimming with big-money campaigns. Tea party favorite Allen West is in one of the country's most expensive House races. Then there's the Senate campaign, which became a three-way race when Gov. Charlie Crist gave up on trying to beat tea party favorite Marco Rubio in the GOP primary and ran as an independent. Finally, Rick Scott, the tea party's choice for governor, has a campaign war chest of more than $48 million, most of it from his own wallet.
Another station manager in West Palm Beach, Steve Wasserman of WPTV, says the station will earn more from political ads in 2010 than it did in recent elections.
"When you have a hotly contested governor's race that's too close to call, and then a three-way Senate race besides, it does really get the juices flowing here," he says.