The Big Winners From Political Advertising

by Jonathan Berr | June 5, 2012 8:00 am

Earlier this year, a Bloomberg News[1] story argued that Lin TV (NYSE:TVL[2]) could be the biggest winner as political advertising spending booms because it owns 17 TV stations in 12 swing states. Unfortunately, for Providence-based Lin TV, about 40% of that money will be pocketed by the TV networks.

In fact, as the hotly contested presidential election draws nearer, demand for TV ad time is expected to outstrip supply, which is good news for newspapers publishers, including Gannett (NYSE:GCI[3]), and for CBS (NYSE:CBS[4]) as well because, in addition to owning its namesake TV network, it’s a major player in the radio market. Cable networks such as News Corp.‘s (NWS:NWSA[5]) Fox News, Time Warner‘s (NYSE:TWX[6]) CNN and Comcast‘s (NASDAQ:CMCSA[7]) CNBC will also benefit.

Meanwhile, Lin and other TV station owners such as Sinclair Broadcasting Group (NASDAQ:SBGI[8]) are going to disappoint many advertisers at a critical time — when car companies introduce new models and retailers begin back-to-school sales — because they won’t have time to sell, according to Kip Cassino, a senior vice president at Borrell Associates.

“In years like this, there’s a lot of advertising space going to national buys, and there’s less local spots to sell if you are a local station,” Cassino said in an interview. “It’s not necessarily a terrific thing to have this deluge of advertising dollars.”

Shares of LIN TV, whose stations include Austin’s KXAN and Buffalo’s WIVB, have plummeted more than 34% this year. Sinclair, owner of 74 stations, has fallen more than 29% during the same time, while Gray Television (NYSE:GTN[9]), which owns 36 stations, is off more than 19%. Investors are worried that these companies’ core business will suffer if the economy continues to tank, said Edward Attorino, a media analyst with Benchmark Co.

“That’s why these stocks are sucking wind,” he said. “I believe that TV will be fine when all is said and done.”

Political TV advertising is being closely scrutinized by the press because[10] this presidential election likely will be the most expensive in history. That possibility led the National Association of Broadcasters to sue the FCC last month to block a rule requiring that TV stations post political ad data on the Internet. Broadcasters were particularly concerned that publicizing rates for political ads would hurt their ability to negotiate with other marketers.

Borrell Associates is forecasting that political ad spending will top $9.4 billion in 2012, up more than 40% from the Obama-McCAin battle in 2008. The majority of the spending — more than 57% — will go to broadcast TV, equaling about $5.6 billion, an increase of 30.6% over 2008.

Cable spending is expected to more than double to $938 million, and radio spending will top $818 million, up more than 48%. Newspaper spending will jump more than 28% to $699.5 million. Online ad spending is forecast at $159.2 million, an increase of more than 600%.

Voters also might find candidate ads in new and potentially annoying places. “In certain markets such as Columbus, Ohio, people are going to see political ads when they go to the movies,” Cassino said.

Jonathan Berr is long CBS. Follow him on Twitter@Jdberr

Source URL: https://investorplace.com/2012/06/the-big-winners-from-political-advertising/

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