• by David Goetzl  @dgoetzl, March 17, 2008

Word last Friday that Michigan may be close to a deal to hold a do-over Democratic primary in June was welcome news to more than one local station executive. Including Bob Prather.

Prather, president-COO of station group Gray Television, had offered a droll plea to investors earlier in the week: "Send your cards and letters to the Democratic Party and urge them to have a re-vote in Florida and Michigan." He then offered up some presumably tongue-in-cheek political commentary: "I think that's the only fair thing to do at this point."

Like other operators, Gray stands to benefit if Democrats hold re-votes in the race between Hillary Clinton and Barack Obama in those two states--with their neck-and-neck battle presumably bringing a flood of TV ad dollars. Station groups lost out when the first round of Democratic primaries in Florida and Michigan in January violated party scheduling rules. In response, the candidates didn't campaign there.

"Those are normally two of our hottest states for political dollars," Prather said on a conference call to announce fourth-quarter results.

Gray owns affiliates in the capitals of both states, the NBC station in Lansing, Mich. and CBS outlet in Tallahassee, Fla. While not Detroit or Miami, they're key players in the Gray portfolio of mid-market stations--and generate considerable political spending with state capital residents tending toward the politically aware. Gray also has the NBC affiliate in Panama City, Fla.

While Prather said the lack of Democratic dollars in the two states earlier in the year "hurt us," Gray and other operators ironically could wind up benefiting more from a second go-round, with so much more at stake.

On Friday, Michigan officials indicated they were moving toward a June primary. A decision is expected in Florida today on whether a second vote there is feasible.

Prather said Gray had expected to take in up to $600,000 in Florida and Michigan in January, but with the Democrats not spending, it only brought in about $47,000 from Republican John McCain.

Political spending is a crucial pillar of a station group's business--so much so that Prather can often be heard on a conference call weighing in on which governors' races appear to be highly competitive and how that may affect Gray. This year's close Democratic Presidential race, lasting so late into the year and with two well-funded candidates, has proven to be a boon for some operators--if not Gray yet.

In 2006, the previous federal election year, Gray generated $42.8 million in political spending--13% of its annual revenue.

In the recently completed fourth quarter, Gray, which operates 36 stations in 30 markets, reported $84.3 million in revenues--a 17% drop compared to the same period a year ago, and mostly due to a sharp decline in political dollars. Local spot dollars increased 6%, but national spot continued to disappoint, Prather said.

He said there appears to be a "mantra" among agencies and advertisers to shift dollars away from national spot to webisodes, YouTube and other experiments. And he said he expects the slowdown to continue for some time.

Potential help, he suggested, could come from a rise in homes receiving HD channels and advertisers looking at a benefit in producing commercials for that more pristine format. "Advertisers are going to realize they all of a sudden have a new (opportunity) out there that (offers) a lot more dramatic presentation of their products--so I'm hoping that's going to generate some interest in national," he said.