EXECUTIVE SESSION

Record Political Ad Boom Looms, But …

TVB’s political ad guru Jack Poor says there’s good news and bad news for TV stations in this election year. The good news is that their four-fifths share of total TV spend will be up 20% to around a record $2.5 billion, and no other medium seems positioned to cut into stations' share. The bad news is that the total take will be suppressed due to the lack of any major gubernatorial contest that swelled the coffers in 2010.

At the TVB Forward conference last September, Ken Goldstein, of Kantar Media CMAG, predicted that political spending at TV stations this year would fall between $2.5 billion and $3.5 billion. Even the low end of that range represents a record for political spending.

Listening intently to that forecast was Jack Poor, VP, marketing insights of TVB. He’s the TVB’s expert on the political category, and spends much of his time in contact with political campaign consultants and the media buying agencies that direct all the spending by candidates and their supporters.

In this interview with TVNewsCheck‘s Harry A. Jessell, Poor says he believes spot TV will be doing well to capture $2.5 billion this year. While it’s true the presidential race and closely contested Senate races will generate big bucks for stations, he says, the take will be suppressed the lack of any major gubernatorial contest that swelled the coffers in 2010.

The good news is TV in general can expect to grab as much as a third of the total political ad spend and TV stations can expected to get four-fifths of that, he says. No other medium seems positioned to cut into stations’ share.

An edited transcript:


Are we going to have a record year this year?

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I think so. I think $2.5 billion is a pretty good number, but I would be scared to go higher than that. I will tell you why. Two billion five is a 20% increase over 2010 for television stations. That’s a pretty big increase.

What’s contributing to that increase?

We have got a presidential campaign going on here which we did not have in 2010. The fundraising figures have all been good. The super PACs are going to increase spending. There are going to be more states in play for the presidential race. McCain took federal funds on the Republican side last time so there was a cap on the amount of money he could spend.

Then, you have got issues like early voting, which people are starting to address. That could lengthen the window in which they’re going to have to spend. The last time around, the early voting in the states where that’s applicable was about 50% of the total vote.

In the Senate, it’s 53-47 or something like that with retirements and open seats so that’s going to be in play and the House has all the freshmen seat holders from 2010. All those seats are going to be in play. There are PACs that are specifically devoted to the Republican takeover of the Senate and the Democrats want to recapture the House. So there’s going to be a lot of spending on a lot of different levels.

You think more states will be in play on the presidential level?

They’re looking at four new states that qualify as battleground states and those are Iowa, New Mexico, New Hampshire and Arizona.

Arizona?

Yep. That’s part of Obama’s Western strategy. If Obama can’t carry Ohio or he can’t carry Florida, he is going to have to do very, very well in the West and the ones he can win in the West are Colorado, which he won [in 2008]; Nevada, which he won; and he was very close in Arizona and New Mexico.

Where will the big Senate races be?

It looks like there are going to be eight or nine really heavy-duty senate races. One of them is [Democratic incumbent Claire] McCaskill in Missouri and another is [Republican incumbent] Scott Brown in Massachusetts. Those are going to be highly contested.

And you think a lot of PAC money will be going into House races?

Yes, there are specific PACs that have been formed to recapture the House for the Democrats. Also, that’s where a lot of the party money goes. Plus, redistricted districts. In states that have gained districts, obviously they’re going to be open districts, and in states that have been forced to consolidate, they are going to be discombobulated, too.

So what are the factors that might depress the spending?

The biggest single thing — and I think people overlook it — is that what caused the monster year in 2010 [were] gubernatorial races. You must have had $600 million worth of gubernatorial spending. That’s going to cause a huge void. It’s going to create difficult comps.

You had monster, monster races. In California, the gubernatorial race was $200 million. Meg Whitman spent $115 million of her own money, and there were big governor races in California, Florida, Texas, Illinois, Pennsylvania, New York, Ohio, Massachusetts and Wisconsin. That was enormous.

Is anything happening at the state-house level this year?

The biggest gubernatorial race is Beverly Perdue in North Carolina and after that they get very small.

Why do you remain so confident that most of the money is going to go to spot TV?

It happens to be the perfect medium for what these guys are trying to do. TV overall, forms of TV, usually gets about 63% to 66% of the advertising budget. Of that, local TV gets about 80%, local cable gets about 15% or 16% and then the rest goes to network cable and network broadcast. It’s very, very consistent.

When you’re dealing with a tactical spend like this and you’re dealing very close to the election with lots of changes, TV is very functional as far as getting in and out of markets and having immediate impact. So it just works and they know how to work it as a medium. It’s not going to change as long as the political system stays the way it is.     

You mean the electoral college?

Yes. If they go to a popular vote system, you would assume that most of the presidential spending would go national.

You didn’t mention digital media at all.

Here’s the thing on digital. Digital media last time around, I think, was 1% or 2% and it may double and go to 2% of 4% of the paid media. As far as paid video, there will be more of it, but I don’t think it will be a major factor. The problem with it is, as far as persuasion media, you have got to initiate it. Most online video has to be initiated by the user and most people are not going to initiate political ads because they don’t like them.

What about local cable? Why can’t it make deeper inroads? It has the same geo-targeting capability as TV stations do.

Yeah, they do, but they have limited inventory and very low ratings.

What do you mean they have limited inventory? Cable networks are filled with spots?

Well, on the networks that people watch, the local cable operators get just three minutes an hour.

Yeah, but you’ll have three minutes on 20 networks.

Yeah, but people aren’t watching them.

Alright. So the real problem there is just viewership.

It’s low viewership and it’s lack of inventory. Combined, it’s what holds them at 15%.

So how much of this money that stations get goes into news?

Well, it’s funny because it depends. In 2008, the presidential campaign, only 29% went into news; 27% went into primetime and the next biggest dayparts were access, early fringe, daytime and then late fringe.

Now when you get to the Senate and House, in 2008, instead of 29% that the presidential candidates put in news, the Senate and House guys put 7% of their money into news and only 17% into primetime and then pretty much the same in access early fringe, daytime and late fringe. So what happened was, they don’t have as much money. They can’t afford to use prime as much so they’re sticking with the other dayparts.

Has this split among daypart spending changed much over the past few election cycles?

It hasn’t moved much. I will give you one that’s interesting though — state and local, including gubernatorial and everything else at a state level. In 2008, 41% of their budgets went into news which is very high. In 2010, it went down to 35%. Prime in 2010 was 21% up from 15% percent in 2008. You know what that is? That’s the gubernatorial stuff kicking in again. Most of the money at the state and local level in 2010 was the gubernatorial money. Those people were very well funded and they could afford bigger commitments to primetime.

You would expect it to revert back to 2008 levels though?

Yes, this year, for sure, without the gubernatorial races.

Candidates aren’t just moving into other dayparts for money reasons. They’re going there to pursue voters, right?

Yeah. They’re going there to increase their reach and they have all gotten very good at targeting. They do it by political persuasion and they do it by voted-in-the-last-election. So they basically go after liberals who have voted, that are likely voters; conservatives who are likely voters; and middle-of-the-roaders who are swing voters and likely voters. They know what kind of programming appeals to them more than others. So they do some targeting and with cable networks, too. Obviously, the Fox network is a conservative choice and CNN and MSNBC are liberal choices. So they go that route, too.

I know you speak before a lot of these political buying agencies and consultants. What kind of feedback do you get from those people about broadcasting?

They’re generally very complimentary of the professionalism and the skill that the stations and the reps display in processing the business because it’s very hectic, it’s very last minute and the tonnage is incredible. The reps have become specialized, stations have installed political specialists and they have done a good job.

That’s on the plus side. The problems that arise are on pricing. They want to make sure that they’re not getting overcharged; that they’re being treated fairly and within the law; and they also have a problem with some stations’ cancellation policies.

As they’re doing the tracking, for instance, especially in say the congressional world and they want to give up on one race and move into another, they don’t want to spend for two weeks after they make that decision because there’s a cancellation policy. So that’s a thing that causes some resentment.

What about the local unit charge? Are they happy with the way the stations are handling that?

I think they are. That raises an interesting question. This year around, some [political media] agencies are going to set themselves up so that they will legally be able to handle more than one candidate or super PAC. So what’s going to happen is, buyers are going to have access to more rate information by a different class of advertiser than in the past. It’s going to create more transparency issues than were available in the past.

What advice do you have for the broadcasters to make sure that they get the most out of this opportunity?

What we preach is, this is the category that arguably we do the best in of any category that we sell to. We urge them to remember that. Keep that in mind that these are our best customers and treat them that way.

I thought the car dealers were your best customers. How do you accommodate them when the political spending gets fast and furious in September and October?

Each group has tried to work out its own strategy. Some of them urge the advertisers to book early in non-preemptable positions and protect themselves that way. Others have said: switch dayparts to less demanded political dayparts. I mean, there are various strategies to accommodate them, and the stations really work that out on their own.

An awful lot of stations don’t have to worry about it because they’re not in battleground states or they don’t have a big senatorial thing coming through or gubernatorial this year for anybody. So it really varies, but they’re keenly aware of it and they do advise their regular advertisers on what’s going on.


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