Local TV Political Ad Revenue Exceeds Expectations; Likely to Surpass 2020 Total

An analysis by S&P Global Market Intelligence's Kagan unit shows that six broadcast TV groups reported political ad revenue of $525.3 million, up 81.1% from the $290.1 million reported in the third quarter of 2018, the last midterm election year.

For broadcast TV, political advertising started earlier in the election season over the last few election cycles. This year's political ad cycle started well before the primary elections, leading to an increase in year-to-date political ad revenue to $921.4 million for all TV stations, up 108.5% from the same period in 2018 and a 3.9% increase from the presidential election year 2020.

Many broadcasters are expected to bring in the largest share of political ad revenue in the fourth quarter as the weeks leading up to Election Day usually have the heaviest dose of TV political advertising. Some very hotly discussed issues were on ballots that led to a surge in political ad revenue outside of the swing-state regions. These topics included abortion rights, inflation, gambling and sports betting.

California, traditionally a Democratic state, is a case in point. It saw a record amount of advertising due to ballot initiatives. The largest spend was for ads focused on legalizing sports betting. Native American tribes went up against online gambling companies, including DraftKings Inc. and FanDuel Inc., over the issue. Campaigns for and against the measure raised some $570 million, according to The Sacramento Bee.

In addition to unforeseen ballot and issue advertising, the Georgia Senate runoff between Sen. Raphael Warnock and former NFL player Herschel Walker kept a heavy dose of advertising flowing into December.

Kantar/CMAG Senior Adviser Steve Passwaiter estimates that the 2020 Georgia runoff added about $525 million in additional political ads, and an additional $125 million could be spent in the 2022 runoff election in that state. A new law mandating runoff elections to be held within four weeks of the primary or general election date means the vote will take place Dec. 6, limiting the number of days for candidates and their political action committees to target the state with ads.

Large TV station groups with Big Four TV stations in Georgia stand a lot to gain from the runoff. Among them, Gray Television has the most stations: six. Sinclair Broadcast Group has four; Nexstar Media Group has three; and TEGNA has two.

Of the broadcasters in Kagan's election ad-spend analysis, Gray TV has been the largest beneficiary. The company brought in $260 million through the first three quarters of 2022, a 40.5% increase from the $185 million reported during the same period in 2020. During the Gray TV third-quarter earnings call on Nov. 4, CEO Hilton Howell estimated full-year 2022 political ad revenue to be about $500 million, and he referenced the early spending trend. "2022 now appears to be the first election cycle in at least 20 years in which the fourth quarter of the year does not produce more than half of our political advertising revenue for the full year," he said.

Nexstar also expects to reach the half-billion mark in political advertising in 2022. During its third-quarter earnings call, Founder and CEO Perry Sook reported total net political ad revenue for the fourth quarter of $260 million, which would put the company at the $500 million mark in political ad revenue for the year. "2022 has not only been a record midterm election year for our political advertising, but it is nearing an overall record for our political advertising, including presidential election years," Sook said.

Political ad revenue guidance for Sinclair remained in the $335 million to $340 million range, according to the company's third-quarter earnings call. Political ad revenue outpaced 2018 pro forma results by 28% in the third quarter, and year-to-date was down only 2% over pro forma results in the 2020 presidential election year.

With political spending coming in higher than expected this year and fundraising for this midterm election exceeding expectations, the 2024 presidential election is likely to be contentious, with ad dollars starting to come into TV early in the election cycle. Voters' angst about the economy and inflation may stagnate through to the next election day, which could mean another heavy wave of advertising for broadcast TV.

This article was written by Peter Leitzinger, Research Analyst, Media & Communications, for S&P Global Market Intelligence's Kagan division. He can be reached at peter.leitzinger@spglobal.com.

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