Analyst: CBS Corp., Sinclair, Lin Media Best Positioned for Election Ad Windfall
"Of the diversified media companies, CBS has the most TV and radio revenue exposure to the contentious political races of 2012," says Wells Fargo's Marci Ryvicker, who expects political advertising to reach $4.9 billion this year.
NEW YORK - CBS Corp. and TV station owners Sinclair Broadcast Group and Lin Media are among the media companies that have the biggest exposure to markets with hotly contested political races this election year, Wells Fargo analyst Marci Ryvicker said in a report on Thursday.
"As we leave the volatile year (in terms of both the economic and advertising climates) of 2011 behind us, investors are seemingly focused on potential catalysts for 2012," she said in explaining the importance of her research that focused on highly contested governor races, as well as key Senate and House races and presidential swing states.
"Of the diversified media companies, CBS has the most TV and radio revenue exposure to the contentious political races of 2012," she wrote. "CBS has the most TV revenue exposure (at 28 percent) and radio revenue exposure (at 27 percent)." She estimates that CBS could attract $160 million in political TV station ad revenue this year, or 10 percent of her estimated TV station revenue for the company, compared with $155 million in 2010 and $115 million in 2008. The company could also get $53 million in radio spending, she added.
Other entertainment conglomerates have "significant segment-specific revenue exposure to the most hotly contested political races (with Disney/ABC at 24 percent, News Corp./Fox at 22 percent, Comcast/NBC at 19 percent of each of their TV revenue)," but political ad revenue "does not typically have a material impact on consolidated results given the companies' size."
Among other media firms, Lin and Sinclair are "best positioned" for the 2012 elections as they have the most TV revenue exposure to hotly contested races at about 40 percent, Ryvicker concluded.
Of the radio companies that she covers, Saga Communications and Entercom have the most revenue exposure to the hotly contested races, at 36 percent and 28 percent, respectively, according to the analyst.
In broader observations, Ryvicker said that "broadcast TV has historically garnered the greatest share of the political ad pie - roughly 50 percent to 60 percent - but we also included companies with radio assets as any incremental spending in this medium (no matter how small) is likely to have a significant contribution to year-over-year growth."
She also forecast 2012 political advertising to reach $4.9 billion, with $2.8 billion allocated to broadcast TV, up 16 percent over 2010 and 27 percent over the 2008 election year. Ryvicker also expects $256 million in political ad spending on radio.
"We consider our forecast to be conservative primarily due to the slow start to fundraising, which we attribute to the fact that no clear Republican party leader has emerged thus far," she said.