“You can’t count on political money until the check arrives,” said Steuart. “Romney is a good example of that—this spending is very unpredictable. It could amount to nothing, or it could be beyond your wildest dreams.”
Political peaks and ‘hammock years’
Of course, it’s easier to be philosophical when there are other campaigns to keep the cash coming in. CJR has already noted how stations in Scranton and nearby markets benefited from a contested Democratic congressional primary that drew in substantial spending from outside groups. Pennsylvania’s Republican Senate primary was also good to broadcasters, with the victor, Tom Smith, spending $6 million of his own money. (Station heads tend to have a nonpartisan appreciation for the candidacies of the 1%. Gray’s Prather recalled with fondness Bruce Lunsford, who sunk $8 million of his own money into Kentucky’s gubernatorial primary in 2003 only to drop out several days before the vote.) Steuart said her station lost several thousand dollars worth of Romney’s ads, but the cancellation freed up space for “healthy spending” in competitive local and state-wide races, and also for commercial advertisers.
That brings us back to one of the questions we started with: To what extent are the political ad buys actually producing “new money” for the stations, and how much are they just taking the place of commercial ads?
Campaign ads are “not all just gravy to the stations,” said Steve Lake, the senior manager of national accounts at SourceMedia, which owns KCRG, the dominant station in the Cedar Rapids, Iowa. “There is lost revenue associated with political advertising. Try as we may, sometimes we cannot make good on all the spots that get displaced because of time-sensitive nature of events. There is an amount where you say we’re just going to have to credit it.”
In other words, those Pennsylvania broadcasters were probably not a full $2.9 million poorer after the Romney campaign canceled its buy—and likely wouldn’t have been even without other campaigns picking up the slack.
Still, most of the time, campaign ad dollars are mostly gravy. That’s partly because the concentrated demand drives up prices for all ad buyers. But it’s also because stations often don’t have to turn away commercial ads to accept political buys. Advertisers buy inventory in packages—they may, for example, buy a certain number of ads to run within the month, or within the quarter during a certain “daypart” (industry-speak for time of day). That allows broadcasters a fair amount of flexibility to juggle inventory and make way for time-sensitive ads that need to air during a specific day or hour.
Then there’s the fact that ad inventory is not exactly finite. Salas, the Moody’s analyst, explained that local broadcasters can accommodate high demand by creating more news programs and thus more high-value advertising spots. More common is for stations to temporarily add or lengthen news programs, or simply to add more spots into existing programming.
One way to get a handle on just how much stations benefit from political ads is to take a closer look at Gray Television, an industry leader in terms of the share of revenue generated from campaign buys. During the last mid-term elections, political ads accounted for 17% of the company’s total revenue, nearly double the industry average of 9%.
In 2010, that leading position earned the group a record $57.6 million from political advertising. The following year was also a record for a non-election year, but political revenues still fell by over three-quarters, to $13.5 million. That’s a reduction of $44 million in political revenues—which nearly matches the company’s $41 million overall decline in ad revenues. In other words, as political buys plummeted, revenue from other ads remained mostly stable.
That’s an imperfect calculation that obscures other areas of growth and loss; in an interview, Prather, the company’s president, said revenue sources vary too much from market to market to come up with a general rule.