In a February earnings call with investors, iHeartMedia CFO Rich Bressler touted the lift political advertising will bring for the San Antonio-based media company this year.
"We all love the races that are going on -- and whether it's Trump or Cruz or Rubio or Sanders or Clinton, that bodes well for all of us," he said. "We feel very, very good about this year going into political."
iHeartMedia, formerly known as Clear Channel, isn't alone.
While radio companies haven't been top of mind when it comes to new and exciting modes of political advertising -- think Facebook, Twitter, Snapchat -- they will enjoy a solid boost this year as candidates want more targeted advertising; they are expected to turn to the medium to sway voters in local races that will be hotly contested. Deep dive: How Pandora helps candidates target voters
"What radio is best for -- and why we think they're going to benefit -- is a call-to-action, get-out-and-vote rally," Michael Kupinski, analyst at Noble Markets Group, said.
Likely presidential nominees Donald Trump and Hillary Clinton have somewhat polarizing ratings and will have to turn to call-to-action advertising, Kupinski said while acknowledging that more dollars will be spent on radio later in the cycle as candidates have traditionally viewed the medium as a last-minute tactic.
Unlike television, which has historically benefited from presidential races, radio tends to gain more from local races -- yet another factor that will serve as a boon for players in the sector this year.
"If the house and senate races are tight -- and we think that they will be with democrats trying to take over the house and senate -- there will be more spending on local races," Kupinski said.
Within the radio universe, iHeartMedia, Cumulus Media (CMLS) - Get Cumulus Media, Inc. Class A Report and Salem Media Group (SALM) - Get Salem Media Group, Inc. Class A Report in particular will reap such benefits.
According to research firm Borrell Associates, radio is estimated to see around $916 million of political spending, compared to $809 million in the last presidential cycle and $485 million in 2014. This represents approximately a 12% increase between presidential cycles.
Borrell Associates revised in April its estimates for political spending during the 2016 Election Season to be around $11.7 billion, up from its initial projection of $11.4 billion. Radio and digital had the highest percentage increase in the new estimates, increasing 10.8% from $827 million to $916 million and jumping up 8.2% from $1.076 billion to $1.165 billion, respectively.
Political advertising has already started to come in stronger than expected and will make a substantial difference for radio companies in the third and fourth quarters by bringing in a significant portion of total revenue, Kupinski and other industry followers explained.
Among radio station operators, iHeartMedia appears particularly well-positioned to emerge as a beneficiary of the election season due to its digital presence and footprint in what have typically been seen as swing states that include Ohio, Iowa, Florida, Virginia, Colorado, Nevada and New Hampshire, said Peter Leitzinger, associate analyst at SNL Kagan.
iHeartMedia has 72 stations in Ohio, 68 in Florida, 29 in Virginia, 27 in Iowa and 22 in Colorado. This is significantly more than several of the company's rivals. Cumulus Media will also reap the benefits from its swing state presence but has just 19 stations in Florida, 15 in Ohio, 6 in Virginia and 6 in Colorado. Salem Media has 14 in Florida, 6 in Ohio and 8 in Colorado. More stations in swing states means a larger reach, which gives the operator an ability to charge a higher rate for advertising.
Last July, iHeartMedia started preparing for the uptick in political spending and hired Kenny Day as its senior vice president of political sales and strategy from Yahoo!'s BrightRoll. He heads Pandora's political advertising on broadcast radio stations as well as the company's digital music and streaming radio service, iHeartRadio.
Referring to Day's hire, iHeartMedia's Bressler said this February that the company "feels very, very good" about the 2016 election cycle and is already seeing the benefits. Political revenue has been generating steady growth over the years, Bressler added, noting that political revenue clocked in at $105 million for iHeartMedia in 2012. Political revenue came in at $87 million in 2014.
For its part, despite a smaller swing state footprint, Salem Media has already attributed its stronger-than-expected first quarter revenues of $64.6 million to higher-than-anticipated political revenue advertising, which was about 33% higher than the previous cycle during the first quarter.
There is yet another factor that will lift ad spending for these broadcasters this year: a broader group of swing states.
"Because of Trump's popularity, some of the states that haven't been swing states, have been brought into the mix a little bit more," Leitzinger said, pointing to Pennsylvania as an example. iHeartMedia has 30 stations in Pennsylvania. Cumulus Media has 27 and Salem Media has 5. In addition to Pennsylvania, other wild cards of 2016 include Indiana, Michigan, Minnesota, Arizona, North Carolina, Wisconsin, Georgia and Missouri.
CBS (CBS) - Get CBS Corporation Class B Report , too, will reap the benefits thanks to its television and radio footprint. The media empire's radio portfolio consists of 117 stations in states including Florida, Colorado, Pennsylvania, Wisconsin and Missouri. Still, political advertising from radio won't have as much influence on the parent's overall revenue as will other segments including television. CBS is also exploring a sale or spinoff of the radio unit.
Where Radio Will Make an Impact
Democrats and Republicans tend to use radio differently, but both parties will use it heavily at the very end of the race.
Clinton hasn't turned to radio as much as Trump so far this season. Historically, Republicans have spent more on radio during primaries because they are effective in reaching conservative voters and other specific demographics. And if the races are tight, more spending will flow toward radio even on Election Day: Radio will be the last chance to reach many voters as they head to the polls.
Radio has been an effective medium especially for Sanders, said Moody's Investors Service analyst Carl Salas.
For instance, the Vermont senator turned to radio in order to respond to an attack from Clinton about auto bailout during the Democratic presidential debate in March. Sanders released a radio ad throughout stations in Michigan, claiming that Clinton is distorting the truth about his record and that he has always been on the side of Michigan workers.
"Radio is being recognized as an effective and large-reach medium," Salas added. "It doesn't get as much spending as television, but it's going to do better than it has in the past by a factor of 40% or more."
There is even hope among the industry that radio could make inroads against its oldest media rival in 2016: Television. While radio has done better in none-presidential election cycles, 2016 will be a healthier one partly because radio is increasingly emerging as an alternative to television, said Erica Farber, president and CEO of Radio Advertising Bureau, a trade organization for the industry.
"Television has always been so important and will continue to be important in this category. But when you think about it, there are no more television stations than there were four years ago and there are only so many spots available in the marketplace," Farber said.
Radio offers benefits to candidates that other media often do not, she further explained.
"You can get on air very quickly," she said. "We are learning more and more about local personalities on a station, and candidates understand that."
And radio is quickly adapting to this shift by changing its mindset and strategies. While talk radio was initially seen as the primary way to for media buying and political advertising, players are starting to recognize the importance of music radio.
"Registered voters aren't listening just to talk radio," Farber explained, asserting that there's still tremendous upside to come for radio companies.
In fact, candidates have been increasingly incorporating music in their campaigns, research company Nielsen observed in its Election Central report that urban adult contemporary and contemporary hits radio could be especially effective in targeting for register-to-vote initiatives.