With billions of political dollars coming their way, TV stations' spot revenue will grow 13.5% next year, according to TVNewsCheck's annual survey. The gain would be much greater if stations could only figure out how to get more than 2% growth from all their other ad categories.
Spot TV 2016: Total Up 13.5%, Core Up 2%
The voracious appetites of politicos for ad time will cause TV station revenue to grow at a healthy double-digit clip in 2016, but non-political or core spending will contribute little to the windfall.
So say 14 station groups and industry analysts surveyed by TVNewsCheck’s annual Spot TV forecast.
Their consensus is that total spot, political included, in the upcoming presidential election year will grow a whopping 13.5%, while the core component creeps up just 2%.
For those rooting for spot, the best that can be said about 2016 core is that it will be better than the paltry 1% core growth now projected for this year. Without the heavy political spending, the survey says, the 2015 total will be down 7.5%.
That’s worse than expected. Last year’s TVNewsCheck annual forecast for 2015 had total spot sales falling 6.3%, with core rising 2.4%.
Hopes are sky high for political next year. “2012 was the largest year ever for political spend, and it looks like we’re going to be near that level for 2016,” says Leo MacCourtney, president of Katz Television Group. “How the super PACs play out, and how the candidates get funded between now and the middle of next year, will be key.”
It’s not just the sheer number of candidates, and the fact that there is no presidential incumbent that makes the 2016 election outstanding. “Outside groups — Super PACs and others — are paying rates that are exponentially higher than what candidates are paying,” says Elizabeth Wilner, SVP of political advertising for Kantar Media’s political unit CMAG.
“There’s documented evidence of groups being charged three times as much already. And we’ve already got groups offering to pay seven or eight times as much as what candidates are paying,” Wilner adds.
CMAG puts total political advertising on TV next year at $4.4 billion, $3.3 billion of which should flow to spot, $800 million to local cable and $300 million to networks. In comparison, the total kitty for TV in 2012 was $3.8 billion, with $3.2 billion going to spot and $600 million to local cable.
But there’s a larger element of uncertainty about CMAG’s forecast than usual because of so many unknowns, Wilner says. For example: will Super PACs supporting Hillary Clinton grow in funding to rival Republican PACs? How many of the myriad Republican nominees will fight to the bitter end? Will there be candidates who choose to run as independents?
And digital will be a bigger factor this time around, says Brian Wieser, senior research analyst for Pivotal Research Group. “TV is still the dominant tool that most politicians will use. But there’s some wild cards in terms of how much issue money is out there and whether clever tactics will end up getting a lot of attention, and possibly money too.”
The experts give multiple reasons for core’s weak performance year after year. “Local TV is suffering from the same thing that the rest of TV is suffering from — i.e., ratings that keep going down, and it seems at an accelerating rate,” says Vincent Letang, EVP and director of global forecasting for MagnaGlobal. “Depending on the target [demo], they’re down 5% to 12% compared with 12 months ago.”
Marci Ryvicker, the lead media analyst at Wells Fargo Securities, seconds Letang. “People are watching less TV than in the past, and broadcasters don’t get paid for time-shifted viewing. The change in consumer habits is changing the entire TV ecosystem. The stations are less impacted, but they are not immune.”
“Overall, I believe long-term broadcast television stations are not a growth business,” says Jack Myers, chairman of Myers Business Report. While stations are getting into the programmatic space, they’re not doing it fast enough, he says. “It’s keeping them out of the mainstream of where the business is headed.”
Mark Fratrik, SVP and chief economist at BIA/Kelsey, says TV stations are not keeping up in helping advertisers target consumers. “There’s a challenge for broadcasters in not having the level of data that other media may have about their audiences. On the other hand, if you decide you want to target geographically with cable or digital, you might also think about including TV because of the broad reach of the stations.”
Part of core’s difficulty is auto, the No. 1 category accounting for about 25% of stations’ spot revenue.
Auto ad spending on spot has not been keeping pace with auto sales as it has in the past. The survey respondents had the category flat this year, but up 2% or 3% next year.
The auto malaise is apparently not universal. Keith Bowen, Tribune Media’s chief revenue officer, says Tribune’s auto business is currently “healthy,” particularly among local dealers and dealer associations.
“As for next year, we will need to wait to see what happens,” he says. “Auto demand is driven by many factors including job and income growth, interest rates and the stock market.”
Keeping core in positive territory this year and next will be fast food/casual, furniture, telecommunications and finance, broadcasters and analysts say.
“We’ve all read about McDonalds’ challenges, but the overall category is very strong,” says Wayne Freedman, VP of sales for Raycom Media. “A stronger economy and lower gasoline prices has resulted in more money in consumers’ pockets, and they’re using that money for entertainment and eating out more. It’s not just QSR that is benefitting. So is the casual dining category, including restaurants like Applebee’s, Chili’s, Outback and Longhorn.”
Within retail, “the furniture category has been strong and getting stronger all year. Continued low interest rates and the improved housing market has led to consumers restarting home improvement projects that may have been put off. We’re seeing strength in other retail categories like electronics and sporting goods, as well,” says Freedman.
Freedman noted a new report from e-Marketer that projects that holiday spending will be up 5.7% this year, the best annual gain since 2011.
Telecommunications, one of spot’s firepower categories in recent years, suffered from lower advertising commitments in 2015 — first because Time Warner Cable and Comcast were waiting for a regulatory green light. When the deal finally fell apart, money from those two companies was freed up for spot buys. But there was another lag while AT&T completed its acquisition of DirecTV in July.
“We could see increased competition in the telco/wireless business — promotions around AT&T and DirecTV and some of the things happening with Sprint and T-Mobile. There’s fierce competition within that marketplace,” says Justin Nielson, a senior research analyst for SNL Kagan.
Within the finance category, the insurance has been “crazy good,” says one TV executive. A big factor in that is the move by Aflac from network to spot advertising.
And there is also hope for improvement among the banks. “But a lot of that’s driven by expectations for the GDP, which we expect to be 2% to 3% in 2015 and 3% to 3.5% in 2016,” says Carl Salas, a VP and senior credit officer for Moody’s Investor Service.