We have reviewed updated political advertising spending trends at local TV station groups based upon data covering the period through October 31 from Advertising Analytics, which aggregates and tracks political ad bookings in real time. Political advertising growth continued the deceleration we observed in September, falling by -5% for the 17 largest station groups in October 2016 vs. October 2015. October is the make-or-break month for this category of spending with approximately half of the year’s total. The data we have reviewed indicates the year will end well below levels which most expected at the beginning of this election cycle.
Political advertising – paid media spending by candidates running for President, Congress and various state-wide races along with Super PACs and issue-based advertises – is one of the most significant factors impacting advertising growth across the United States every second year. Local TV disproportionately benefits as it allows for an optimal balance of geographical targeting and a capacity to impact persuadable voters’ perceptions of issues. While digital media is certainly growing in importance, it is still most widely relied upon for narrower direct-response-like applications such as fundraising. For a sense of scale, during the last Presidential election year of 2012 local TV stations and local cable generated $2.6bn from political advertising, per Magna Global. During the most recent non-Presidential election year of 2014, this spending amounted to $2.3bn. Both figures were approximately double the amounts generated by these media owners only a decade earlier and represented approximately 15% of all local TV spending. This revenue source appears more significant when considering that well over half of all political revenue to local TV is generated in the month of October alone, and that it tends to be concentrated geographically, too.
To update our current perspectives, we have reviewed new data from Advertising Analytics through October 31. Advertising Analytics aggregates and tracks political ad bookings in real time based upon information that media owners are obliged by the FCC to make available.
Across 17 of the largest station groups (including ABC, CBS, Cox, EW Scripps, Fox, Graham Media Group, Gray, Hearst, Media General, Meredith, NBC, Nexstar, Raycom, Sinclair, Sunbeam, Tegna and Tribune) and on a like-for-like basis (with the same stations owned by each company in each of 2016 and 2014) we can see that October bookings were down by -5% vs. 2014, with median network group spend up by +2%. Total year-to-date bookings are up by +12% over the same period in 2014, as gains were mostly generated in the earlier part of the year. As spending through October accounted for 93% of all political spending during 2014, we can safely say that total spending for the year will likely end up only around +10% for the full year vs. 2014, which would suggest that 2016 will involve less total political spending relative to the last Presidential election year of 2012.
Illustrating individual growth rates at some of O&O station groups on a like-for-like basis, Advertising Analytics’ data indicates that political ad bookings for October spending was +22% at stations owned by ABC, +4% at stations owned by CBS, -21% at stations owned by Fox and +90% at stations owned by NBC. Among some of the major independents, Sinclair was up by +19%, Tegna was down by -33%, Tribune was +2%, Meredith was -9% and Media General was -34%. As October represents the bulk of the quarter’s spending, these spending levels are likely to reflect full fourth quarter trends for each of these groups.
Despite the weak levels of political advertising spending that occurred this cycle relative to expectations that were present at its beginning, investors may choose to be mindful that spending will likely return to higher levels in 2020. Of course, this presumes a resumption of “normalcy” in the political landscape, which may yet turn out to be an optimistic expectation.
FULL REPORT INCLUDING RISKS AND DISCLOSURES CAN BE FOUND HERE: TV Update 11-1-16.pdf
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