2014 Spot TV: Total Up 11%, Core Up 2.6%

With the biennial return of big-time political advertising and a large injection of Obamacare-related advertising, local TV broadcasters can expect 11% growth in total spot revenue next year, which will offset the 9.3% decline the industry is experiencing this year, according to the annual TVNewsCheck Spot Forecast.

The growth will come in spite of downward pressures like the shift of more ad dollars to national cable, a dip in ad spending by telecommunications companies and the still-shaky economy.

Core spot revenue, which excludes political and Obamacare spending and serves as a measure of spot fundamentals, will grow just 2.6%, less than the 3.9% rise that’s expected this year, the forecast says.

The forecast is the result of a survey this summer of 16 TV station groups, rep firms, research firms and media agencies and represents a consensus of their individual forecasts. The broadcasters and rep firms shared their forecasts on the condition that they be kept anonymous.

Participating research firms and agencies include ZenithOptimedia, Jack Myers Media Business Network, Pivotal Research, BIA/Kelsey and SNL Kagan.

Last year at this time, the TVNewsCheck Spot Forecast for 2013 said total spot would fall 7%, while core would rise 4%. This year’s reforecast for 2013 was about the same for core, but down more than two additional points for the total, to -9.3%.

The respondents attribute the steeper decline for total spot in the reforecast to higher than expected political spending in 2012, making for tougher comparisons, and lower than expected advocacy spending in early 2013. Also, the percentages may have been affected by the fact that the participants in the original survey were slightly different than those in the reforecast.

Political advertising from campaigns and advocacy groups will account for most of spot growth next year.

Elizabeth Wilner, VP of the research firm Kantar Media CMAG, says her firm hasn’t put out an official ad projection for the midterm elections yet, but she expects it could be north of $3 billion. “There will be a lot of competitive primaries — Senate and gubernatorial races,” she says. “At the same time, there will be relatively few competitive House races.”

Wilner adds that the money will be more evenly disbursed than it was in the presidential election year of 2012, when it was concentrated in 10 battleground states. Next year will see 30 Senate and 30 gubernatorial races.

Robin Flynn, a senior analyst at SNL Kagan, says that in the last midterm election year, 2010, more than $2 billion of political money flowed into media companies, the lion’s share going to stations. And she expects 2014’s numbers to be even better.

Mark Fratrik, VP and chief economist at the research firm BIA/Kelsey, says that while his firm doesn’t track political spending specifically, news reports suggest that $2.8 to $3 billion was spent in 2012 across all media. “If that’s true, then I bet that $2 to $2.1 billion will be spent on political advertising in 2014. “

And once again TV stations will be first in line. “2014 will see increased use of social media, online and cable, but I think that local spot — whether in newscasts or other types of programming — will still be an important part of most political campaigns,” Fratrik says.

TVB believes advertising related to Obamacare — or, more formally, the Affordable Car Act — will add $1 billion to the top lines of broadcasters over the next two years.

Because most of that money will not be recurring, broadcaster in the survey did not include it within their core revenue.

The ad money will come from at least four sources: government-run exchanges informing uninsured citizens of their obligation to buy insurance and instructing them on how to do so; insurance companies promoting their products to new policy buyers; advocacy groups promoting or opposing the Obamacare rollout; and hospital and other medical centers letting the newly insured know where they can go for treatment.

The single biggest source will be the insurance companies, says Val Napolitano, president-CEO of Petry Television. They will spend $700 million starting his year going through all of 2014 and into 2015, he says.

Driving the core growth will be auto, the largest ad sector contributing to station coffers, and telecommunications.

Survey respondents predict a 5.8% rise in the category in 2014 year over year, just up a tick more than the 5.7% increase they’re expecting this year.

Auto advertising spending is directly tied to the numbers of cars and light trucks sold. Jeff Schuster, SVP of LMC Automotive, says his research firm is forecasting sales of 16 million next year, up from 15.6 million this year. That’s still way off the high-water mark of 17.4 million sold in 2000.

According to the respondents, the telecommunications category will also be strong this year (up 8.9%), but not as strong as this year (16.8%).

Some of the respondents express concern about AT&T, traditionally one of the largest spenders in the telecom category.

One broadcaster noted that AT&T  canceled spot buys for his group in the fourth quarter.  Others suggest that AT&T’s deal this summer for naming rights to Dallas’s Cowboys Stadium (now AT&T Stadium) and an agreement to become the official wireless provider at Walt Disney World and Disneyland signals a possible change in marketing strategy.

The TVNewsCheck survey failed to collect enough forecasts on other key categories to come up with a consensus forecast for them. But, speaking anecdotally, the respondents say the outlook is not particularly good for most.

One reason is the migration of spending to national cable and digital, they say. Another is the sluggish U.S. economy. “We’re at the tail of the tail spin,” says one executive. “Under the surface, there’s much trepidation from consumers and local businesses. We need a stronger and more stable government and economy to get everyone comfortable again.”