Maximize Political Ad Revenue’s Potential

Stations have already begun to compete for the $3.3 billion in political advertising that Kantar Media’s Campaign Media Analysis Group (CMAG) says will be spent on local television over the next year. Local television is by far the largest category in the $4.4 billion CMAG expects to be spent across all media platforms in this, the first national election without an incumbent president since the Supreme Court’s Citizens United decision in 2010.

There is clearly a lot at stake when it comes to ensuring your ad sales and accounting teams are ready to address the unique requirements that are part and parcel of this revenue opportunity. That is why we at MFM asked Bobby Kahn, a lawyer and CEO at Canal Partners Media LLC, a media-buying firm specializing in political advertising, to pass along some revenue management tips from the media buyer’s perspective.

Following are a few highlights from his response. You can read the entire “Where Credit is Due” article in the November-December edition of MFM’s The Financial Manager magazine:

1.    Cash (In Advance) Is King

“It’s very clear that cash (in advance) is king,” Kahn observes. “With some very narrow exceptions, political advertising is all cash in advance. This is one area of political broadcasting that is simple, and supported by broadcasters and agencies alike, since broadcasters do not want to get stuck with unpaid invoices, and neither do agencies.”

However, one question that can sometimes get different answers from stations and media buyers addresses when to make the cash payment. Kahn feels there shouldn’t be any debate, noting “For federal candidates, the Federal Communications Commission has determined that TV stations can only require that payment be made no more than one week in advance of a flight. This ruling is rooted in the requirement that stations provide ‘reasonable access’ to federal candidates.”

2.    Monitor The LIFO Debate

While the one-week rule does not apply to non-federal candidates, there is a “request for declaratory ruling” pending at the FCC questioning the use of the “last in/first out” (LIFO) preemption priority. “There is a question, in our judgment, on whether it’s appropriate to require payment too far in advance if preemption is based on when an order is placed,” according to Kahn, who recommends checking with your station’s FCC counsel for the latest on this issue.

3.    Timely Rebates on Rates Exceeding Lowest Unit Charges

All legally qualified candidates are entitled to the lowest-unit charge for the same class and amount of time. “Lowest-unit charge rules do not kick in until 45 days before a primary or caucus. Before the window, candidates are entitled to a discount based on comparable rates,” summarizes Kahn. “Application (of the rule) has its problems, but one thing is clear: the commission requires that stations issue timely rebates for any rates that exceed the lowest-unit charge.” While the FCC does not define “timely,” Kahn recommends auditing all orders on a weekly basis.

As Kahn goes on to explain, weekly audits for lowest-unit rebates should be applied to all orders before the election, except those running in the final week of the campaign. In his experience, some stations wait until the end of the election cycle to issue rebates.

“This practice not only violates the Communications Act, but it also makes no sense,” he comments. “Candidates would rather have the funds before the election — to be reinvested in spots on the station — and stations would no doubt rather avoid returning money after the election.”

4.    Better Communication Between Sales And Accounting

“With all the money flowing to stations, the volume of buys in campaigns and all the last-minute changes, it is critically important that the sales and accounting personnel stay in constant communication about the status of accounts.”

Kahn notes that there are instances in every election cycle when the sales manager or rep will call the media buyer “in a state of panic” to track down a payment when it’s actually already at the station, “either at the front desk or in the hands of someone in accounting.”

5.    A Game Plan For Make-Goods

In situations where spots are missed, Kahn feels it is in the interest of all parties to communicate and agree to make-goods rather than cash refunds. “As with lowest-unit charge rebates, it would be better to apply any extra money to make-goods rather than receiving post-election refunds,” he urges, adding “After the election, we are very aggressive in reconciling accounts, so get those invoices in!”

6.    Exemptions For Super PACs

Most of the rules discussed by Kahn, including lowest-unit charge rules and limitations on pre-payment, apply to TV spots purchased by a political candidate. “Super PACs and other non-candidate committees have few rights as far as the FCC is concerned.”

Super PACs are also unencumbered by rules limiting campaign contributions, and for that reason they represent the largest source of political ad dollars. That money is already being spent.

A Center for Public Integrity analysis of data provided by Kantar Media/CMAG found PACs ran more than 8,400 presidential race-focused ads from Oct. 1, through Oct. 26, compared to 400 spots purchased by candidates.

Tribune Broadcasting President Larry Wert’s recent comments to Variety magazine bear this out: “Certainly it’s the PAC funding that is really driving the overall growth. Races vary by state and by market, and those will ebb and flow, but the PAC dollars look like they’re just going to continue to escalate.”

Consult With Your Attorneys and Industry Experts

While Kahn is an attorney, he strongly urges stations and other media providers to work closely with their legal counsel to ensure compliance with the FCC rules governing political ad spending.

Members of MFM and our BCCA subsidiary, the media industry’s credit association, also rely upon the extensive resources available from industry resources such as NAB’s Political Broadcast Catechism, which is available in the NAB Store.

I would also encourage you to read the Political Advertising Handbook for the Television Sales Executive, which was prepared by Garvey Schubert Barer attorneys Erwin Krasnow & John Wells King, and to monitor attorney David Oxenford’s Broadcast Law Blog for the latest developments affecting political advertising.

If these sources don’t cover your question, I encourage you (or your attorney) to contact Robert “Bobby” Baker in the FCC’s Media Bureau. You can find his contact information on the FCC website — fcc.gov. Baker and his team are committed to providing timely responses to inquiries about political advertising rules. They feel that all parties are better served when questions are answered during the campaign period rather than months or even years later.

As Bobby Kahn observes: “A relatively few dedicated individuals at media companies and advertising agencies are following the money — figuring out how much to pay, or how much has been received, and whether the books are balanced.”

By helping to ensure your ad sales and accounting teams have the knowledge and tools they need for managing political ad money effectively, you will be ensuring your station reaps the best results from what everyone agrees will be an unprecedented revenue opportunity.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.