Local television station owners in particular can expect to beat other media forms at attracting political dollars just because TV remains the fastest, loudest way to impact voter turnout. That includes local cable, which is expected to garner 18% of total political advertising spend--up from 10% in the previous election cycle.
The ability to influence voters at the polls, even in the 11th hour, is something local television in particular still does best. It would be economically devastating for local broadcasters to lose any of the quadrennial election ad dollars they rely on to make up for declining ad revenues elsewhere. By the time the next presidential election rolls around, local broadcasters will have learned to capitalize on the digital technology scheduled for a Feb. 17, 2009 transition. Or some will literally die trying.
Despite consumers' rapid adoption of specific interactive platforms and devices, politicians and advertisers are still learning how to make the most of micro targeting and rallying the forces on the Net. While a handful of presidential hopefuls aggressively peddle their platforms online, most campaigning still happens face-to-face, on the road or on television.
However, the Internet has increased the amount of time and money that candidates and issue advocates spend trying to reach voters. Gradually, it will make the direct rapport between politicians and their constituents more fluid. A recent Jupiter Research report argues that this will be the presidential election cycle during which candidates and parties will learn to more skillfully use politically oriented blogs, widgets and social networks for organizing and advertising to target voters.
But at present, the early campaigning, early primaries and the emotionally charged regional issues that demand special ballot voting in all states--everything from stem cells to labor laws--are providing the brightest financial spot local broadcasters have enjoyed in years.
JP Morgan analyst John Blackledge estimates TV broadcasters such as CBS, ABC, NBC, Fox, Sinclair, Hearst-Argyle, Meredith and LIN will benefit from presidential primary ad spending in the fourth quarter 2007 through Feb. 5, 2008 to the tune of $150 million--up from about $60 million in 2004. The larger local broadcast groups have an estimated 60% revenue exposure to the primaries.
Overall, political ad spending on television will total roughly $2.2 billion for the 2008 presidential race, up about 38% from the record 2007 political cycle, Blackledge said. Because of the reactive nature of campaign advertising, it is expected to account for about 71% of the total spot growth in 2008 and about 6% of total overall television spot ad revenues.
The four leading presidential candidates have already spent more on the Iowa primary race than John Kerry spent on his entire presidential ad campaign in 2003 and 2004. Former Mass. Gov. Mitt Romney has become the first presidential candidate in history to have already aired more than 11,000 political ads costing nearly $8.6 million. By comparison, former New York Mayor Rudy Giuliani has spent nothing on television ads to date. Spending by all 17 Democratic and Republican presidential candidates--which will collectively top $800 million in the race for the White House--is ramping up in Iowa and other battleground states, such as Florida, New Hampshire and Ohio. Due to changes in political fund-raising laws, most presidential campaign funding is at record levels; Hillary Clinton and Barack Obama each have raised more than $20 million.
Television broadcasters can expect to pocket up to 75% or more than $2 billion of the estimated $3 billion that will be spent on all forms of 2008 election-related advertising, according to Evan Tracey, founder and COO Campaign Media Analysis Group. So far in 2007, $550 million has been spent on state and local races and issue advocacy, representing a 150% increase from the last four-year election cycle.
For its part, digital media has lowered the barriers for entry for any candidate to produce cost-effective, influential advertising that breaks away from the usual follow-the-leader strategy. The inexpensive, immediate nature of the Internet has allowed also-ran candidates (such as Sen. John McCain, R-Arizona) to extend their campaigns. A greater number of less-expensive media options are allowing candidates to make last-ditch efforts, since their names are already on primary ballots and they still have funds to burn.
The potential wild-card candidacy of New York Mayor Michael Bloomberg, former vice president Al Gore or even political satirist Stephen Colbert could swing most of the action back to television screens, where the 2008 run for the White House will definitely play out. "Politics is a television business. It is the biggest megaphone available to (candidates)," Tracey says. "Internet search and banner advertising will do better than they've ever done, but it will amount to little more than a rounding error when put next to broadcast TV."
Until the Internet can prove itself more of a messaging tool and not simply free streaming video and Web chat, "candidates will be a little gun shy to push a bunch of money out to the Web," Tracey added.
This may change for the 2012 election, by which time Internet video will be firmly entrenched in mainstream media. TV broadcasters, already vulnerable to the shift of ad dollars to interactive platforms, must be pragmatic about the long-term financial impact of digital transformation. They may not always be able to rely on the presidential election-year spending boost. What will be telling: weaker-than-usual ad revenues expected from next year's Beijing Olympics, another artificial quadrennial bottom-line booster.
Indeed, taking the election year ad spending out of the equation, TV broadcasters' overall revenue growth picture is grim. Nearly 10% of local TV station revenues are exposed to "at risk" sectors, such as real estate, financials and home furnishings, where advertiser spending slumps in an economic downturn. Generally, about one-third of essentially flat broadcast TV revenues are reliant on local ad spending, with the remainder coming from national sales.
The quadrennial elections should remind TV broadcasters of the critical importance of their local connections to consumers, advertisers and other constituents. Armed with digital interactive options, broadcasters should be on the fast track to more innovative and aggressive development of local revenue-generating ties. In a compressed media world of click-quick communications and images, local is broadcasters' big brass ring--until a more savvy and effective media force takes it from them.