The Hearst-Argyle CEO tells security analysts that the total for the year will exceed the comp year of 2003, when the station group took in $18.1 million. On the negative side, he sees no sign of a turnaround in auto advertising, which was down 9% in 2006 compared to 2005.
Like other odd-numbered years, 2007 will be an off year for political advertising revenue at TV stations—fewer elections, fewer candidates, fewer dollars than in even-numbered years when most elections occur.
But the CEO of Hearst-Argyle Television says the take in 2007 among his stations will be better than that in 2003, the comparable year in terms of political elections. “That’s the most bullish political forecast I have ever given,” he told security analysts today after the release of the station group’s earnings for the fourth quarter and full year of 2006.
And 2003 is a tough comp, Barrett said. That year Hearst-Argyle’s KCRA Sacramento benefited from heavy spending around the gubernatorial recall reelection in California, in which voters replaced Gray Davis with Arnold Schwarzenegger. In 2003, Hearst-Argyle stations posted $18.1 million in political revenue.
“We are going to see the presidential candidate spending earlier [in Hearst-Argyle markets] than they have in the past and that will contribute to political activity higher than the norm [in 2007],” he said, noting California and Florida are considering moving their primaries to early February.
Barrett said some stations have already gotten political buys from candidates, including one from Republican Mitt Romney in Orlando, Fla.
Also fueling campaign spending at Hearst-Argyle stations in 2007 will be a mayoral race in Kansas City, Mo.; a gubernatorial race in Kentucky and a senate race in Louisiana, Barrett said.
Of course, the anticipated 2007 spending will come nowhere the record $88 million in political advertising that Hearst-Argyle stations booked in 2006 or the $86.7 million in 2004.
The political revenue gave a big boost to Hearst-Argyle in 2006, contributing greatly to a 22 percent year-over-year increase in total revenue in the fourth quarter and an 11% increase for the year.
Without the heavy political, Hearst-Argyle is projecting that total revenue for 2007 will decline between one percent and four percent. The fall off would be greater but for the fact that the group will enjoy a full year of revenue from WKCF Orlando, Fla., a station it purchased for $218 million in the third quarter of 2006. Industry estimates peg WKCF’s annual revenue at as much as $38 million.
Barrett didn’t talk much about 2008—the next even-numbered year—when most analysts believe overall campaign spending on TV will set a new record, topping the $2 billion of 2006, but it was clear that he, like other broadcasters, believes 2008 will be big.
In addition to the wide-open presidential race in 2008, Barrett said, Hearst-Argyle stations will be in the middle of 14 senate races and 18 gubernatorial races. “Some will be very heavily contested,” he said.
Even if states like California and Florida hold earlier primaries, Barrett said, spending at Hearst-Argyle stations around the Iowa caucuses and the New Hampshire primary in January 2008—the traditional first stops for presidential hopefuls—should be unaffected. The campaign funds the candidates are raising are “staggering,” he said.
If only the news in auto advertising were as good as that in political campaigning. Barrett said the category, which accounts for 25% of the company’s ad revenue, was down 9% in 2006.
Given flat car and truck sales projections for the year, Barrett said he doesn’t “see a big upturn in auto pacing.
“Honda, Accura, Mazda, Mitsubishi are pacing up a little bit ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â¦ across the whole company, but that leaves behind a lot of other brands that you should conclude are flat to down a little bit.”
A merger of Chrysler and General Motors, which has been rumored, would not help, Barrett said. “We have seen these consolidations of industries—whether it’s financial services or the retail category—take some money out of the marketplace.”
Barrett said he didn’t know whether Hearst-Argyle would eventually have to share its growing retransmission consent revenue with the broadcast networks. “We will have to cross that bridge when we get there,” Barrett said in response to a question. “I’m not sure that is going to be the case, but one never knows.”
Network relations are good, he added. “The networks’ “general attitude right now is we are adding great value to their national distribution platform.”
Two weeks ago, when ABC World News with Charles Gibson topped the evening newscasts, the network was quick to credit “the great lead-in they got from stations,” Barrett said. “That’s a fact.”
Barrett said that he is pleased with Hearst-Argyle’s acquisition last year’s of WKCF Orlando and its integration with its NBC affiliate in the market, WESH.
If Hearst-Argyle can create similar “highly attractive” duopolies like WKCF-WESH, it would be “a good use of cash,” Barrett said. He declined to comment on the suggestion that Hearst-Argyle might create duopolies in Cincinnati and Harrisburg, Pa., by buying the Clear Channel Television stations in those markets. The entire Clear Channel group is on the trading block.
Barrett seemed less eager to buy standalone stations. “If we are going to go into other markets, it’s going to have to be a station that is a good fit with us, and it’s going to have to be at a price that we think is rational,” he said. “What we always are going to try to do is avoid paying up for the value that we create.”