1H political spending up 20–25% vs. 1H12 despite softer 2Q. It seems that political spending remained softish through early June but is now accelerating. However, we think it's important to note that despite the softer 2Q results, political spending increased 20–25% vs. 1H12 on the strong 1Q16 results. The increased spending is coming from the Clinton and Congressional campaigns. Democrats are making a push for the House, although Mr. Lanzano doesn't expect them to make much of a dent.

Full-year political outlook remains on track. The full-year 2016 political outlook hasn't changed since we met with Mr. Lanzano in mid-April and he still expects political spending on TV stations ads to come in at around $3.3bn. This would represent 14% growth over the $2.9bn in 2012. There is uncertainty around how Trump will spend in the election given recent questions about fundraising and turmoil in campaign leadership. However, this should be offset by spending by outside groups, which have raised significant funds to date. We highlight an OpenSecrets analysis of FEC data that shows that outside spending groups had raised $702mm through April 28, 2016, almost 3.5x the $202mm raised through April 28, 2012. To the extent that the Republican establishment doesn't support Trump, it is expected that funds will be deployed to support Republican candidates in tight Congressional races as it becomes more imperative for them to maintain control of Congress. As far as swing states are concerned, Mr. Lanzano doesn't see any major changes, but he does think that Illinois and Indiana could be somewhat more competitive given Trump's appeal to those electorates. However, he doesn't see New York or New Jersey as emerging battle ground states.

2Q core: more of the same. It seems that core is expected to be flattish in 2Q, so in line with pacings from the 1Q earnings calls. After a tough April, May and June were better. Auto benefited from increased dealer inventories that resulted from an increase in the number of cars coming off lease. With regard to other key categories, Healthcare is still doing well, Retail is down a little bit but okay, Telecom continues to struggle, and QSRs are flat to slightly down (which is an improvement.)

2016 core likely flattish. Looking out, it seems that core is expected to be flattish to slightly up for the year despite political crowd-out. A key driver is the Olympics, where NBC is seeing strong demand due in large part to Brazil's being in a prime-time-friendly time zone. The Rio Olympics are expected to generate $600–650mm in spending vs. $500mm for the previous Olympics. Mr. Lanzano also expects that 3Q core will be bolstered by advertising on the conventions. (Bloomberg recently reported that CNN and Fox News are seeing an 8–20x increase vs. normal ad rates for spots during the conventions).

GTN most leveraged to strong political outlook. Since 1Q earnings, the stock is down ~20%, a large part of which is due to softer 2Q political guidance. A strong political result would allow the company to de-lever, which should drive accretion to the equity and, more importantly, allow the company to participate in accretive M&A as we head into 2017. Recent industry discussions are supportive of the view that consolidation should accelerate following the completion of the incentive auction.

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