Today, voters in Colorado, New Hampshire and Iowa are getting their first experience of the political advertising bloodbath that will last for the next five months. Priorities USA, the super PAC supporting Hillary Clinton, will air Donald Trump attack ads that are already running in Ohio, Florida, Virginia and Nevada. For now, the ad wars are one sided. While Trump has limited his advertising spending, as the salvos continue from the Clinton camp he is bound to return fire. Deep dive: How Priorities USA plans to spend its $136 million
Negative political ads may not be good for society and democracy, but it's good business for the media -- and local TV station owners in particular. For the broadcasters, who are squeezed between streaming video providers and cable companies, the presidential election cycle is a quadrennial gift that provides cash to reduce debt, pay dividends and fund acquisitions.
"It has become increasingly important because, for one, political advertising is now over 10% or 12% of average revenue and its growing fast," said Moody's Investors Service analyst Carl Salas of political ad spending, adding, "it's highly profitable." During times of peak demand, stations can sell political ads for 40 to 50 times more than the rates for the run of the mill car ad, making political spots disproportionately valuable.
The 2016 campaign is set break records, and not just because of the polarizing candidates. This election is the first-ever without an incumbent president in which the parties are freed from the financial restrictions eliminated with the Supreme Court's 2010 Citizens United decision. The landmark ruling allows corporations and unions to spend as much as they please to support, or defeat, candidates. And with the Senate and the Supreme Court in the balance, too, spending is set to hit record levels.
Some $11.7 billion is projected by ad tracking firm Borrell Associates to be spent in the 2016 election cycle. Overall advertising volume is already tracking at 122% over 2012 levels, with an estimated $408 million having already been spent on TV ads in the presidential race alone. Digital ad spend is expected to reach $1 billion for the first time ever, but the bulk of that $11.7 billion -- $5.9 billion -- is projected to go to local broadcast television. Others have called for broadcast TV political revenues of $3.4 billion to $4 billion, which would still set a record.
CBS (CBS) Chairman and CEO heralded the upcoming political season during a May earnings call. "Clearly, there are a lot of fireworks yet to come," he said, "and with those fireworks will come more revenue. "
While CBS, Comcast (CMCSA) 's NBCUniversal and Telemundo and the ABC division of Disney (DIS) can expect a political pay day, the companies with the greatest proportional exposure to the include local television station groups such as E.W. Scripps (SSP) and Gray Television (GTN) that have important station assets in swing states and in areas with hotly contested local elections. Fellow broadcaster Nexstar (NXST) is roughly tripling its political exposure with its $4.6 billion acquisition of Media General (MEG) . Spanish language radio, TV and digital media group Entravision (EVC) represents a direct play on the Latino market, which will be a pivotal given its size and some of Trump's remarks about Mexicans."Clearly it's been a very different political environment this year," said Television Bureau of Advertising CEO Steve Lanzano, who expects a more modest $3.3 billion-to-$3.6 billion of political advertising on TV, up from $2.9 billion in 2012. The primaries have already made for a stronger-than-expected first quarter. And while the first quarter topped expectations, the bulk of the spending comes in the latter half of the year, with the floodgates opening in October and early November.
And then there's the 800 pound comb-over in the room. "Who knew they would go on through California and that there would be a non-establishment candidate for President?" Lanzano asked, referring to the unusually long primary season, with California, the largest and last state to vote, competitive until the end. Deep dive: How Donald Trump is changing elections forever