What Stations Must Know About Political Ads

As TVNewsCheck recently reported, TVB’s Jack Poor expects stations to receive some $2.5 billion in political advertising this year. Looking at the huge sums being spent during the Republican primary elections, there’s good reason to expect these predictions are well on their way to becoming a reality.

Given the significant part that political ads will play in this year’s ad revenue results, it’s important for stations to do as much as they possibly can to ensure they comply with FCC rules governing political advertising. This begins with confirming that your ad sales and credit and collections teams are up to speed with the latest requirements and adhering to these rules in your dealings with political advertisers.

MFM asked Jack Goodman, a Washington-based communications attorney and former general counsel of the National Association of Broadcasters, to address common questions concerning broadcast campaign commercials.

As part of our mission to identify and share industry best practices, I wanted to pass Goodman’s thoughts on these questions along to you. Please note that this information is being provided for information purposes only. I encourage you to consult with your legal counsel concerning any specific political advertising practices involving your company. I’ll also add some additional industry resources that you may find very helpful at the close of this column.

How do packages affect my political rates?

“Stations frequently sell advertisers a package combining spots in various classes and other kinds of advertising, such as sponsorships or ‘mentions,’ production services or advertising on station Web sites,” Goodman notes. “However, selling advertising as part of a package does not change the way a station calculates its lowest unit charge.”

Goodman goes on to explain that stations are required to give candidates the lowest unit charge (LUC ) for ads that contain a candidate “use,” typically an identifiable voice or picture, and that are sponsored by the candidate or one of the candidate’s authorized committees. 

“Politicians can get the benefits of discounts provided as part of a package, even if they purchase only one spot. Stations that sell packages must first divide the package price among the elements of the package,” Goodman says. He recommends having station incorporate this calculation on the face of the contract or in an internal memo.

“If the price for a spot in the package is the station’s LUC for a spot in that class, it must be disclosed to candidates. Similarly, if the package includes a class of time that the station does not otherwise sell, such as a non-preemptible spot, the availability of that class of time also has to be disclosed to candidates,” he adds.

What does the FCC say about bonus spots and how should we treat them and make-goods for under-delivery of political ads?

“The FCC says there is no such thing as a truly ‘free’ spot for a commercial advertiser,” Goodman notes. “Instead, it views bonus spots as a form of quantity discounts. Since stations are required to treat candidates during the political windows as they treat their most-favored advertisers, stations have to assign a value to ‘bonus’ spots they sell to commercial advertisers and include that value in determining the station’s LUC for each class of time.”

Goodman also points out that “this rule applies whether or not the bonus spots run during the political window. If an advertising contract in effect or available during the window includes bonus spots, those spots are counted in determining the LUC, even if they run before or after the political window.

“Stations have flexibility in assigning a value to the bonus spots, but the value they place on those spots may determine the LUC for that class of time,” Goodman adds. “A station could, for example, determine that bonus spots to be run in latenight have a very low value if it is prepared to offer candidates latenight spots at that low price.”

Goodman has found that the issue of make-good spots has also caused a lot of confusion for stations.

“Spots that are aired as a result of a technical glitch do not affect the LUC so long as they do not run in a better time period than the original spot,” Goodman notes. He goes on to say, “Stations also may offer advertisers ratings guarantees, and spots run to make up for under-delivery will not affect the LUC. However, If stations offer a ratings guarantee class of time, they must disclose the availability of that class to candidates and negotiate with interested candidates how they would fulfill the guarantee if, as is often the case, the relevant ratings information is not available until after the election.”

“Where stations should be careful, however, is in offering make-good spots to advertisers who were not guaranteed ratings but who are unhappy with their results,” Goodman warns.  “Those spots could be viewed as bonus spots and could reduce the station’s political rates.”

If I allow commercial advertisers to pay with a credit card, do I have to let candidates do the same?

Goodman responds, “While the FCC has not ruled on this exact issue, stations normally must extend the same commercial privileges to candidates as they do to commercial advertisers. So if you allow commercial advertisers to pay with a credit card, then you must do so for candidates as well,” he advises.

With the number of questions and confusion that can arise from complying with the FCC rules governing on LUCs, MFM is publishing an article containing additional information in the March-April issue of our bi-monthly magazine, The Financial Manager (TFM). A complimentary copy of the publication will be available via MFM’s website during those months. The MFM site also offers a soft copy of the The Political Advertising Handbook for TV Stations, which was produced by Garvey Shubert Barer’s Erwin Krasnow. Krasnow is also MFM’s pro bono Washington counsel.

The handbook is designed to complement NAB’s Political Broadcast Catechism, which is available through the NAB Bookstore. NAB members may also download complimentary copies of the NAB Political Agreement Form (PB-17), which includes an agreement form for political candidate advertisements and an agreement form for non-candidate/issue advertisements. NAB Members can access a complimentary PDF of the forms by contacting its membership department via phone (202-429-5400) or email ([email protected]). 

In addition to providing resources that can assist with understanding the rules, MFM and its BCCA subsidiary have sought out industry experts who can be very helpful in understanding the needs of this year’s political advertisers and how to offer the types of media placement opportunities that can attract their ad dollars. 

The upcoming March-April issue of TFM includes a piece by MFM member Robin Szabo, president of Szabo Associates, about credit and collections issues specific to political advertising. One of the insights I found interesting is that a credit card payment isn’t the same as cash in advance because someone can dispute a credit card charge.

Ken Goldstein, president of Kantar Media, has just spoken to attendees our CFO Summit, which is currently underway in Fort Lauderdale. He will also be delivering a keynote address at Media Finance Focus 2012, our  annual conference, which will be held May 21-23 in Las Vegas. 

Goldstein is one of the country’s premier experts on the use and impact of political advertising. He has authored or co-authored more than 30 books, refereed journal articles, or book chapters and is a consultant for the ABC News elections unit and a member of their election night decision team. I am looking forward to hearing his timely updates and sharing these insights in upcoming columns.

In the meantime, I hope to hear your thoughts on the challenges and opportunities resulting from the 2012 political campaigns.

Mary M. Collins is president & CEO of the Media Financial Management Association and its BCCA subsidiary. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.