There’s one part of the country where the economy in general — and the health of TV stations — is not faring as badly as the rest of the country. The Plains states have benefitted from strong prices for energy and commodities, stable housing prices and lower unemployment, plus they never had a large amount of national spot to lose.
Map the current recession and you’ll see the economic pain falls mainly outside the Plains.
Television markets in the nation’s breadbasket and energy-producing states — an area roughly encompassed by the 1803 Louisiana Purchase* — are faring better than others and giving broadcasters there some hope for 2009.
Those markets have escaped the worst of the real estate meltdown, they boast high employment rates and were buoyed, until recently, by healthy energy and commodity prices.
“It’s a shallower recession there,” says David Wyss, chief economist for Standard and Poor’s and a key source of economic data for the Television Bureau of Advertising.
Although falling energy and commodity prices have softened of late, the region should weather the tough times better than both coasts and the Rust Belt, the experts say.
“I would think that relative to the rest of nation, it should continue to be relatively more immune to effects of recession,” says John Challenger, CEO of Challenger, Gray & Christmas, the Chicago-based outplacement consulting firm that tracks and analyzes employment. “The region doesn’t have the same reliance on banking you see on the East Coast, or on automotive manufacturing you see in the Midwest.”
Ulysses Carlini, general manager of KHAS, the NBC affiliate in the Lincoln-Hasting-Kearney, Neb. (DMA 106), says the Farm Belt is feeding station revenues.
“Grain prices have been very good,” Carlini says. “And when grain and agricultural prices are favorable, we find a lot in those industries spending money.”
The Hoak Media station anticipates first-quarter revenues will be flat to slightly up compared to the prior year, he says.
Hearst-Argyle Television is among those larger groups that are benefiting from a presence in the Plains states.
“The markets aren’t down as much as those that had a housing boom,” says Kathleen Keefe, Hearst-Argyle vice president of sales. “That would be Omaha, Oklahoma City, Louisville, Milwaukee, Kansas City — right there in the middle of the country.”
Where real estate prices have fallen, so have auto sales and, consequently, auto advertising, which TV stations count on for around 25 percent of their annual revenue.
Paul Taylor, chief economist for the National Automobile Dealers Association, says that his research shows that the worst of the real estate troubles are over in 28 states. And guess what: 16 of those 28 states are within the Louisiana Purchase parcel. (The other 12 are mostly southern states that also did not experience the housing boom or bust. Florida and Virginia are the exceptions.)
The health of the Plains states is reflected in their unemployment rates. According to the U.S. Bureau of Labor Statistics, nationwide unemployment was 7.2 percent in December, the last month for which figures are available, up from 6.5 percent in November.
Yet, the November unemployment rate in most of the Louisiana Purchase parcel was significantly lower: Wyoming, 3.2 percent; North Dakota, 3.3 percent; South Dakota, 3.4 percent; Nebraska, 3.7 percent; Iowa, 4.3 percent; Kansas, 4.9 percent.
If you happen to be Ro Grignon of Curtis Squire, with stations in Sioux Falls, S.D.; Fargo, N.D.; and Duluth, Minn., or John Tupper, who owns stations in Bismarck, N.D., and Minot, N.D., you might be thinking that as recessions go, this one’s not too bad.
“One of the reasons business is so good is that the oil industry discovered 500 billion barrels of oil under western North Dakota, the Bakken Shale discovery,” says Tupper.
That discovery had little impact on Fargo, in the eastern part of the state, but November unemployment there was an enviable 2.7 percent.
North Dakota, along with Wyoming and Montana, are in the enviable position of anticipating a state budget surplus in the 2009-10 fiscal year.
For Grignon, things are going pretty darn well with his Fox affiliate KVRR in Fargo (DMA 120): “Even without political, we’d be ahead of last year,” he says.
Fox’s contract to broadcast the Minnesota Vikings football games, plus an early newscast at 9 p.m., also are key contributors. But it helps that Fargo’s a small market and thus somewhat protected from the gyrations of national spot.
“We’ve never gotten much national spot so it’s local all the way,” Grignon says.
National spot is the first to take hits and the last to recover in a recession, says Val Napolitano, president-CEO of Petry Media Corp. Predictably these days, sales teams are putting a lot of energy into selling local spot.
The nation’s midsection just happens to encompass a lot of smaller markets. Such markets typically are insulated from boom-bust cycles. The paradox: In good times, they see little benefit from big national spot campaigns; in lean times, they suffer less.
“In radio in the last few years, medium and small markets have outperformed larger markets,” says Mark Fratrik of BIAfn. “The reason is that for general managers, being in smaller markets makes it easier to get their message to advertisers. Will that work with TV? I suspect it does.”
There are varying opinions on when we’ll turn the corner on the recession, ranging from mid-summer to the first quarter of 2010. First signs of an economic spring probably won’t come from those smaller, mid-section markets that are weathering the downturn well. Instead, it’s the hardest hit states — Florida, California, Nevada, and Arizona, for instance — that are most likely to be the recovery bellwethers.
And if you want to get a read on when TV advertising will recover, monitor the networks, says Napolitano: “There’s a cause-and-effect between network spending and spot spending.”
*The Louisiana Purchase area encompasses all or part of the following states: Louisiana, Arkansas, Missouri, Iowa, Wisconsin, Minnesota, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, New Mexico, Colorado, Wyoming and Montana. Note: In U.S. Dept. of Labor Bureau of Labor Statistics terms, this area encompasses two regions: West South Central, which includes Arkansas, Louisiana, Oklahoma and Texas, and West North Central, which includes Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.