Hearst’s Keefe Sees Ad Rebound Continuing

Without the heavy spending by political candidates, most TV station sales executives were not expecting much from 2011, but they were expecting a little more than what they got.

But no one is complaining too loudly, certainly not Kathleen Keefe, who as VP of sales at Hearst Television oversees the the top line at 31 TV stations in 25 markets. Despite the rocky economy, she believes auto advertising will make a big comeback in the final months of this year and remain strong in 2012, complementing the return of the big-time political money in the presidential election year.

In this interview with TVNewsCheck Editor Harry A. Jessell, Keefe talks about the auto market and other factors affecting ad revenue for her company and the industry. While 2012 will likely be a record-setting year for political spending on TV stations, she says, it won’t be for Hearst, whose markets will be light on Senate and gubernatorial races next year.

She also dismisses cable’s claim to the political loot, downplays the loss of Oprah and her fans, endorses TVB’s new direction and vows to deny guarantees to media buyers who won’t give stations credit for DVR viewership.

An edited transcript:

What has been the story of 2011 in terms of sales for Hearst and the rest of the industry?

Well, 2011 is actually a better year than people realize. Things started pretty well in the first quarter and then the earthquake and tsunami in Japan really did impact some very large advertisers for us, specifically Toyota, Lexis, Honda and Acura. Their planned spending versus what they actually spent went down quite a bit. That reduced spending also caused other people to step back a little bit. Our auto category is still up in the mid-single digits even with the sustained reduction in spending from those four lines.

What we have been expecting all along has been a big increase in auto spending starting in September or October as the supply problem is corrected. Early indications are that that is going to happen. Now, the debt ceiling debate and the resulting stock market fall really walloped consumer confidence in August. But my sense — and this is just watching and talking to people — is that consumer confidence is being restored. We’re getting better. Things are calming down. So if that all does work out, we should see a pretty good ramp up through the end of 2011 and into 2012.

So you think 2012 is going to be strong year for auto, too?

Yes. I spend a lot of time trying to figure out how many cars are going to be sold because my ad budgets are directly tied to that. People are going to have to buy cars at some point. So my expectation [for car sales] for 2012 is greater than any estimates that are out there.

What about the other categories? How are they doing this year?

The other negative thing that happened this year was AT&T’s proposed merger with T-Mobile, which I guess is now in a little trouble. That and the lack of workers to install their U-Verse product has slowed their advertising down through the third quarter.

On the other hand, health services — hospitals and doctors — are up quite a bit, in the low double digits and, actually, retail is doing pretty well. Health is an emerging category for us. We have got some very good hospital business, but not everywhere. That tends to vary by city and depends what the hospital culture is in the market.

How about markets? Are there any particularly bright spots or dark spots?

The Florida markets are still struggling, although there are good signs of job growth, and the number of foreclosures is not increasing. So I would say Florida and Northern California; those two areas are still struggling to come back a little bit. The Midwest seems to be less vulnerable to these ups and downs than the coasts. So we’ve got Omaha, Des Moines, Kansas City all in there doing pretty well. The Carolinas are doing pretty well, too.

What about Boston? That’s your big one.

Boston was chugging along really well for the first six months of the year and then has sort of slowed up a little bit for the summer. It seems to be picking back up again in Q4.

Everybody is the business in looking forward to 2012 and the extra dollars from political and Olympics-related spending. Is Hearst well positioned for political next year?

We’re very well positioned in presidential primaries, in the house races and in whatever comes up on ballots, which usually hits us pretty well in California. But this will not a record breaker for us because of the number of senators and governors that I have up. Some years, we have 32 senators and governors running in our markets. This year, I think I am at 14.

So, less than half of what you do in your best years.

But I do think it will be a record-breaking political year for the business. It’s just a matter of where your footprint is and how many governor races you have and how many Senate races you have.

What’s your strategy for dealing with the glut of political advertising around election day?

Well, we have got lots of election days. We start off with the Iowa caucus the first week of February and then go right into primaries in New Hampshire and then South Carolina and we will just keep going throughout the year, up until the general election in November.

We literally will sit with a white board and count how many candidates we have and how many spots they’re going to want to buy in advance because they have buying patterns and you can figure them out fairly quickly. Then you just start saying, OK, if I have 15 spots in my 6 o’clock news today, this Senate guy is going to want one, this governor guy is going to want one, the other Senate guy, the other governor, the presidential. You just count them up and plan ahead so you don’t take so much business that you either have to preempt your regular advertisers or not take some of the political.

So you take pains to accommodate your preferred clients.

Absolutely, absolutely. We don’t want to be in a position where we’re not running any of our regular advertisers.

What about cable? Is cable encroaching on your political take at all?

Local cable, I think, is at about 15% of the total local television spend for political. I think they have kind of leveled off at that point. I don’t see a whole lot more room for them to grow.

Whether for political or anything else, national cable looks attractive because of its low cost-per-thousand. But it’s such an inconsistent reach product. The A and B counties aren’t all covered. You can’t buy the same programming in Washington, D.C., and Kansas City and expect the same kind of reach because populations are different. As an industry, we all have to focus a little bit harder on presenting the story that if you want to reach local markets, you really need local television and that national cable is just inconsistent from a geographic point of view.

Do any see any signs that digital media, whether it’s a website or all this mobile stuff we’re hearing about, are becoming a significant contributor to the top line?

Signs, yes. You know what the coolest thing is right now? It’s apps. At WPBF in West Palm Beach, we created a hurricane app, then we sold it to a bank sponsor and got a good price for it fairly quickly. We did the same thing in New Orleans.

It’s going to be a huge opportunity for us. It’s just a matter of how fast we can create these things. If you have got your smartphone, you know how many apps you can have. Quite a lot.

There seems to be a standard price out there for apps. I was talking to a guy in the [Hearst] magazine division about one of his apps and I said, ‘Well, that’s pretty cool. How much did you get for it?’ And it was exactly the same as what we got for the West Palm Beach hurricane app.

You had a lot of stations carrying Oprah. Losing the show has got to be a hit on the top line, right?

Well, I don’t know that it is and I will tell you why. Other than this last spring where she was reaching her finale, she had really started to fall off. So we’re actually excited about some of the program changes we’re making. For the most part, it’s either Ellen, Dr. Oz or Dr. Phil at 4 o’clock.

Is Hearst doing anything in news this season that might have an impact on your sales?

We have actually just gone through a very large expansion of news [broadcasts] back to 4:30 [a.m.]. We have expanded our morning news a lot. Then, in addition, we have been expanding news[casts] on Saturday and Sunday morning.

That should help out in political season too, right?

Absolutely, absolutely. We’re going through the transition of people getting used to the 4:30 that we went through when we went to 5:30 and then back to 5. So the buying community has to get comfortable with 4:30, but they will.

You sit on the executive committee of TVB. How is the new sales-oriented TVB working out?

I think they’re doing very well. [TVB President] Steve [Lanzano] has done a very nice job of making a transition into this position and the sales team has been very successful. They have got one of the sales people going into local markets and presenting to the local advertising community and that’s been a big hit.

Have you lost anything in the transition from [former President] Chris Rohrs to Lanzano?

Well, first off, Chris was the right guy at the right time in the right place and he did an extraordinarily good job. I am happy to have been associated with TVB and him through that process. Steve is taking the organization in a different direction. TVB probably needs to be doing a bit more research than we are and I think that’s in the plans.

Let’s talk about the media buyers and their continued resistance to giving you credit for recorded viewing on DVRs. Where does that stand?

The whole situation that happened last year with the live-only, live-plus-eight-days flip flopping — the really poor communication between Nielsen and their client base on all sides — really did make it a very confusing and angry situation for the local advertising community and that’s unfortunate.

I would tell you that there are still conversations going on, but I think every company is kind of making up their own minds on how they’re going to do business. Hearst’s position is we will guarantee the live-plus-same-day or live plus more than one day currencies, but we’re not guaranteeing off of live-only ratings because live-only ratings are no longer an accurate reflection of how TV is being consumed today.

Do you think the entire industry can rally behind that?

A lot of companies have taken that position.