|
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |  |
MARCH 5, 2007
TV's Boomlet From Election '07 Broadcasters will thrive on early ads. But it's a mixed blessing Normally, 2007 would be considered an "odd" year in the local TV business. Odd in that there are no national elections and, as a result, not much in the way of political advertising dollars. But 2007 is shaping up to look more even than odd. Numerous candidates—23 have expressed an interest in running for President so far—are set to spend a record amount on advertising well in advance of the runup to November, 2008. Local TV stations could pull in $700 million this year, more than twice as much as they did in 2005, the last odd year. Bear, Stearns & Co. (BSC ) media analyst Victor Miller figures that by the time the votes are tallied from the Presidential and congressional elections 20 months from now, candidates will have poured a record $2.5 billion into TV spots. Great for local broadcasters, right? Yes and no. The political bounty will help offset tepid spending by other traditional advertisers and could certainly pretty up the balance sheets, as the abundance of private-equity loot makes cashing out all the more tempting. But the easy political money could also keep local stations from tackling issues that, in this YouTube (GOOG ) world, make their business among the most seriously challenged in media. (BusinessWeek parent The McGraw-Hill Companies (MHP ) owns four local TV stations.) WHAT MAKES 2007 SO DIFFERENT? For one thing, five states, including California and Florida, are expected to move their primaries up to the first week of February next year, creating a Super Super Tuesday in which 41% of all delegates get picked. Needless to say, the flurry of spending ahead of that key date could begin this fall. Moreover, since neither the President nor the Vice-President is running in 2008—the first time this has happened since 1952—most candidates lack the familiarity of incumbency and will need to spend heavily to introduce themselves to the electorate. Ranked against other national advertisers on local TV in election years, politicians are now second only to automakers. A decade ago, political advertising didn't even make the top five. Television executives are understandably intoxicated by the coming wave of political money. One of them can barely contain his glee. Politicians don't get "Brownie points for being No. 2," he says. "So these candidates spend like drunken sailors near the end." But here's the rub: Rabid candidates raising and spending tens of millions of dollars for local spots will almost certainly push out other regular advertisers. And these companies already have many more ways to get their message out—including the Internet, of course. Crunching the numbers is instructive: When you remove the double-digit gains from political advertising in 2006, ad revenue growth at 10 of the top TV station owners ranges from 5% to -2%. Such numbers don't bode well for a business in unprecedented upheaval. Local TV stations are spending millions to meet a federal mandate to be fully digital in 2009. That will allow them to offer more channels, but there's no guarantee that viewers will tune in. (Blame such distractions as the iPod and Xbox.) Yes, broadcasters have been buoyed by the prospect that cable operators will finally pay them to carry the local stations (before, broadcasters with their free-over-the-air programs were treated as free), but those revenues are still not certain. That's why shareholders are restive and pressuring big media groups to put local stations on the block. New York Times Co. (NYT ) sold its 9 TV stations in January to private equity; CBS dumped 7 in February. Clear Channel Communications (CCU ) plans to sell its 42 stations as part of a plan to take itself private, while Tribune Co. (TRB ) could auction off its 19 stations. Smart TV guys won't take their eye off the ball even as the political dollars stream in. "All advertising is good for us," says Tom Kane, president and CEO of the CBS Television Stations Group (CBS ). "But we certainly don't take the focus off those who are with us year in and year out." Spoken like an executive who doesn't see the world in odds and evens. For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia  By Tom Lowry
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2007, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version