Political ads make swing-state TV stations hot properties
The increasingly expensive elections that play out across the country every two years are making TV stations look like a smart investment, with the revenue piling up each time a candidate says “I approve this message.’’
The New York Times
When Allbritton, the media company that owns Politico, put its seven television stations up for sale this spring, analysts quickly singled out one as the most attractive: WJLA, the company’s ABC-affiliated station in Washington, D.C. It is the biggest of the bunch, the best known and, perhaps most important, a magnet for political spending
WJLA banked $33 million in election-related advertising last year. Only three stations in the United States earned more, and two of those were also in Washington. That’s because the stations’ signals reach a crucial battleground state, Virginia, as well as the political power brokers in the nation’s capital. If Allbritton were to sell WJLA by itself, it could fetch $300 million.
That math helps explain why Gannett paid $1.5 billion for 20 stations last month, why the Tribune Co. agreed last week to pay $2.7 billion for 19 stations — and why more consolidation in the marketplace is forecast for later this year.
The increasingly expensive elections that play out across the country every two years are making stations look like a smart investment, with the revenue piling up each time a candidate says “I approve this message.’’
Despite an array of digital alternatives and a rapidly transforming television business, 30-second commercials remain one of the most valuable tools of campaigns and political action committees. As Leslie Moonves, the chief executive of the CBS, which owns 29 stations, memorably said last year, “Super PACs may be bad for America, but they’re very good for CBS.”
Next year’s midterm elections will be a boon to stations as well, and “2016 could be amazing,” said Mark Fratrik, the chief economist for BIA/Kelsey, a media research firm and consultancy.
Station owners have come to dread what they call “odd years,” like 2013, when there is little political spending. For stations blessed to be in swing states, political ads routinely represent a third of overall ad revenue in election years.
For instance, WBNS, the highest-rated station in Columbus, Ohio, grossed about $50 million in advertising last year, of which at least $20 million was attributed to campaign spending. Columbus is the nation’s 32nd-largest TV market.
Contrast that to the next biggest market, KSTU, the most popular station in Salt Lake City. Kantar Media estimates that KSTU brought in about $29 million in advertising last year.
On paper, these two stations are equals; WBNS came out far ahead because Columbus was in the middle of a hotly contested race between President Obama and Mitt Romney to win Ohio’s 18 electoral votes.
Fratrik said stations in Ohio enjoyed, on average, a 38 percent increase in total ad revenue last year, in large part because of political spending. The increases were more than 40 percent for some stations in Wisconsin, where a recall election for governor added to the political drama.
One station being bought by Tribune is up the road from Columbus in Cleveland. Another is in Milwaukee. Two others are in Virginia, and one is in Colorado.
As he talked up Tribune’s acquisition to investors, Peter Liguori, Tribune’s chief executive, made sure to mention the increased exposure to swing-state advertising.
Political advertising is a lifeline, even if the sheer volume of ads sometimes makes viewers want to hurl the remotes at their sets.
“We get complaints from viewers,” Michael J. Fiorile, the chief executive of WBNS’ owner, the Dispatch Broadcast Group, acknowledged. “The bigger complaints are from regular advertisers who really get pushed off the air.
“Don’t get me wrong,” he added with a chuckle. “It’s a good problem for us to have.”
Dispatch, which is locally owned, is not up for sale, and Fiorile said his stations would survive without the every-other-year campaign ad bonanza. But owners of other stations have been able to command a premium, and maintain a healthy profit margin by virtue of their location in competitive states.
“There is no doubt that the prospect of higher political revenues for Big Four affiliates — especially those with higher local news ratings — makes those stations quite a bit more valuable than those without,” said Robin Flynn, a senior analyst for SNL Kagan.
The spending comes not just from presidential campaigns, but from local and statewide races. Flynn’s data show that Los Angeles, in reliably blue California, beat out Washington as the top market for all political ad revenue last year, partly because of huge spending on ballot propositions.
Although the Obama campaign gained attention last year for its careful ad targeting, which sometimes resulted in effective but cheap ad buys on obscure cable channels, local newscasts remained one of the most desirable places for political ads. In Washington last fall, WJLA and another Washington station, WTTG, took the extreme step of adding extra half-hours of news temporarily to make room for more ads.
But anyone hoping for a commensurate increase in the size of local newsrooms would be sorely disappointed. There was a slight increase in local-TV hiring last year of about 4 percent, according to a Hofstra University researcher, Bob Papper. Salaries stayed stagnant and declined in some cases.
The influx of ad spending has also left stations vulnerable to criticism that they are not doing nearly enough to fact-check all the ads they are profiting from. Timothy Karr, a senior director of strategy at Free Press, a public-interest group, studied Cleveland, Milwaukee and four other local markets last August and September, and found what he said was “a near-complete station blackout on local reporting about the political ads they aired.” Denver was the best of the six, he said, and even there, 2,880 ads from five PACs and outside groups were countered by just five fact-checking news segments.