Political Ads: TV's $2.9 Billion Battle
No matter which presidential candidate prevails Nov. 6, local television already is this election cycle's big winner.
President Obama and Republican nominee Mitt Romney are waging an intense contest to tie up as much advertising time as they can between now and Election Day, with the GOP super PACs giving Romney a big spending edge. The competition is driving up ad rates as available airtime dwindles in swing states. "The campaigns are booking ad time just to make sure it's still around," says Travis Ridout, a Washington State University political science professor who tracks campaigns. "I suspect they'll start to fight over it."
Both the official presidential campaigns and unregulated super PACs are spending an unprecedented amount on national and local TV spots. According to Pivotal Research Group analyst Brian Wieser, by the end of this election cycle, political spending on TV ads will have topped a stunning $2.9 billion. The previous record was $2.2 billion, set in 2010. "There's just a lot of money being spent -- much more than expected," says Wieser. "The super PACs are driving it."
Wells Fargo's Marci Ryvicker, an authoritative analyst of political ad trends, recently raised her estimate for total ad spending this election cycle -- including congressional and ballot proposition buys -- from $4.9 billion to $5.2 billion. She upped her forecast after local TV ad buys in August surged to $171 million, an astonishing 77 percent increase compared with July. A recent report from Wells Fargo shows how closely overall TV spending tracks the campaign's intensity: In January, ad spending was $36.5 million. During the summer, before the conventions, ad buys ticked up to $57 million in June, $75.2 million in July and $193.4 million in August.
Local and national campaigns rely on political consultants and boutique ad-buying firms -- many of which spring up only around election time -- to secure airtime, with buyers taking a percentage of each purchase. The process is no more complicated than booking a restaurant table -- no payment is necessary until the spot airs. Because most local stations are obliged to broadcast only 22 hours of network programming a week, they can expand their available ad time to meet demand by cutting into locally produced or syndicated programming. Typically, local ad rates -- which usually start at $50 a spot in rural swing-state markets -- climb with demand as Election Day approaches. It wouldn't be unusual to see ads selling for as much as $50,000 a spot during the October crunch, says Wieser.
According to Ryvicker, "History would tell us that roughly 75 percent of total political dollars are spent within the last seven to eight weeks leading up to a general election." Hence the frenzied competition now between the Obama and Romney camps. Wells Fargo estimates that local TV will rake in nearly 46 percent of this eleventh-hour spending.
How important are political campaigns to the TV business? In a generally soft ad environment, spending on local station spots is expected to grow an impressive 15 percent in 2012 compared with 2011, driven by the campaigns. Wells Fargo projects that local TV's share of total political advertising will be 54 percent, which translates to $2.8 billion. Current-affairs shows that air during and after primetime are most desirable, hence all those political ads during Dateline and local news.
Stations in contested swing states aren't complaining. In Iowa's influential Sioux City media market, for example, nearly 24 percent of local broadcast ad revenue is coming from political buys. Wells Fargo reports big dollar totals in similar battleground markets during the past month, including $35.2 million in Cleveland, $29 million in Tampa, Fla., $28 million in Las Vegas and $23.2 million in Orlando. "It's efficient, it's targeted, and they can make copy changes quickly," says Mike MacLean, director of sales at ABC's Tampa affiliate, of the allure of local TV.
In the past, political ad buyers would try to coax MacLean into divulging how much time competitors had purchased. But the FCC now requires that such information be disclosed, so campaigns can make purchases knowing exactly what the other guy is doing.
In mid-September, Obama bought big in Florida's major markets. Before that, he booked $77 million worth of local ad time in eight contested states, including $19.5 million in Ohio. Although the president's ad buy might seem excessive, it's dwarfed by the $128 million the Republican super PACs already have spent to defeat him, a trend that shows little sign of changing. "The airwaves are cluttered in the hot swing-state markets like Tampa and Denver," says one Democratic strategist. "We'll be outspent to the last day."