Who will win the TV ad races?
Geetha Ranganathan, Paul Sweeney, Brad Barker & Joshua Yatskowitz
Bloomberg Intelligence analysts
TV political ad projections for 2016 vary, yet windfall certain
While political TV ad forecasts vary, 2016 may set a record.
Estimates range from CMAG’s $4.4 billion to a much larger $11.4
billion from Borrell, though that estimate includes other media as
well. SNL Kagan projects $3.3 billion, with Magna at $3 billion.
Regardless, experts agree that this will be the biggest year
for political ads on TV, even with $1 billion in estimated digital
spending. CMAG said that more money has been spent on TV
at this stage than before due to fierce political competition.
TV ads may hit record $4.4 billion as presidential
Political TV ads may rise 16% to a record $4.4 billion this year vs.
$3.8 billion in the 2012 election, based on estimates by Kantar
Media’s CMAG. Three-quarters of that amount may be spent on
local broadcast TV ads, with about 18% projected to go to local
cable TV and the remainder to national ads.
With the presidential nominations still up for grabs, political ad
spending may rise even further. Poltical ads may generate 14%
of 2016 station revenue, according to SNL Kagan.
Broadcast political ad spending to climb in 2H, mostly in 4Q
Political ad spending will likely ramp up during the year, with most of
the spending coming in 2H. Nexstar, Sinclair and Tegna combined
for $355.1 million in political ad spending in 2014 and $293 million
in 2012. In both years, about 5% of spending came in 1Q, 10% in 2Q,
25% in 3Q and 59% in 4Q.
With a crowded Republican primary race, some extra spending
could be pulled forward, especially in states with early primaries.
Most expenditures, however, are likely to remain in 2H, leading up
to the election.
Political spending to displace core ads for broadcasters in 2016
Higher political ad spending in 2016 will be partially offset by
displacement of core advertising, especially in 2H. Tegna’s pro-forma
total ad revenue grew 13% in 2H14, while core ads fell 5%. Over that
period, Nexstar’s total ad revenue rose 25%, while core ads were flat.
Core ad spending has been flat-to-slightly up in recent years and
isn’t likely to be a growth driver for broadcasters, especially if ratings
continue to fall. Development of digital platforms may help offset the
pressure on core broadcast ads.
Broadcaster margins may get boost from political ad spending
More buyers of ad time during political campaigns may help
broadcasters expand their margins in 2H. The increased
demand for the finite amount of air time may drive up ad prices.
On a fixed-cost base, higher prices would boost margins.
Sinclair’s adjusted Ebitda margin rose to 36.1% in 2014, up from
34.5% in 2013. During the 2012 presidential election year, the
company’s margin was 38.8%. Tegna and Nexstar reported similar
trends, with 2014 margins increasing from 2013, though lower
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