The forecast of double-digit growth in spot revenue next year, the consensus of station groups and industry watchers surveyed by TVNewsCheck, is due almost entirely to expectations of heavy political advertising. Otherwise, ad sales will be flat with the auto, retail and fast food providing drags on the top line.
You can bet your bottom dollar that TV station ad sales revenue will spike up next year, given the heavy political spending that takes place during the midterm elections. But advertising in core categories — everything but political — will be hardly more than flat.
That’s according to a TVNewsCheck annual poll of broadcasters and industry analysts.
Factoring in political spending, total advertising is expected to increase 12.8% when compared with 2017 results.
But core will increase an average of less than 1% in 2018, weakened by diminishing auto spending that accounts for a quarter of all spot revenue and by the fact that some core advertising will be displaced by the political spots.
In recent years, core has chugged along at low single-digit percentage gains. But this year, it is expected to be worse than anticipated, moving into negative territory due not only to the erosion in the auto sector and a couple of other ad categories, along with some other troubling market trends — conditions that may continue next year.
Survey respondents anticipate that 2017 core will decline 1.4% over 2016 results. Widening the comparison to include political makes for a steep drop-off, which is not surprising, given the presidential-year spending last year. Total 2017 spot will be down an average 10.7%.
Fifteen TV broadcast groups and media analysts participated in TVNewsCheck’s latest annual poll, which was conducted in late August and early September. For their candor, the respondents were offered anonymity, although some of the analysts waived the privilege.
Respondents in the 2016 survey were more optimistic about 2017 than those surveyed this year. Back in August 2016, those polled thought 2017 core would increase 1.3% as the total fell 8%.
Behind The Numbers
Marci Ryvicker, Wells Fargo Security’s managing director of equity research in the media sector, says that the disappointing results for 2017 are due to a few factors.
“I think it’s auto; I think it’s the economy. There’s been no catalyst for change because there’s been political unrest. Things that Trump had promised would happen he’s not been able to get through. So, there’s infighting. There’s money still shifting to digital.”
“Every day there’s a new crazy thing in Washington,” says Mark Fratrik, SVP and chief economist at BIA/Kelsey. “That troubles me, not so much because it has a direct effect [on the economy], but how much confidence it takes out of consumers.”
Other trends may shape spot revenue in the coming year. For example, NBC O&Os and affiliate stations will kick off the year with a huge burst of advertising tied to the Winter Olympics in Pyeongchang, South Korea, and the Super Bowl.
More broadly, “the strong sellout at the TV network level during the upfront could push money into local. And the consolidation of Tribune and Sinclair could make for a more viable sales force that could push money into spot,” adds Jack Myers, chairman of MyersBizNet.
Graham Media CEO Emily Barr says to keep an eye on Nielsen. “It’s making significant changes, which will either take place later this year or before June of next year. This is going to impact what the ratings say about our audience, and that, in turn, could impact buying behavior.
“On top of that,” Barr adds, “you have automated buying really coming into its own in the coming year.”
Brian Wieser, senior research analyst, advertising at Pivotal Research Group, was among the most bearish respondents. “Local TV is suffering from the same thing it’s suffered from for decades, which is that the economy is increasingly oriented around national media.”
Wieser forecasts that core will drop 2.2% this year, 4% in 2018 and 4.2% in 2019.
Ups And Downs
According to the respondents, there are four standout ad categories for spot this year and next: telecoms, professional services, home improvement and that 10,000-pound gorilla, political.
But three other sectors are dragging the overall results down — most notably auto, but also retail and quick service restaurants (QSR).
First that gorilla: Kantar Media/CMAG’s projections come in below that percentage level. Its 2018 spot projection is $2.4 billion, a 14% rise over 2014’s $2.1 billion.
While it’s not an apples-to-apples comparison, it’s interesting to note that the estimate for next year falls below CMAG’s 2016 presidential year number for spot: $2.8 billion.
Another forecaster, Kagan Media Research, says that political will grow just 6.6% next year, but its dollar estimates are higher: $2.58 billion in 2018 compared to $2.42 billion in 2014.
In any case, expectations are high. “Fundraising is pacing ahead of prior like cycles,” notes one broadcasting executive requesting anonymity. While PAC spending was lighter than usual in 2016, it’s likely “to come back with a vengeance,” the broadcaster adds.
While Democrats are intent on winning back majority leadership in the House and Senate, the most aggressive spending is likely to come from gubernatorial campaigns, according to Steve Passwaiter, VP and GM of Kantar Media/CMAG.
“We’ve got 36 governor races, and a lot of them are open seats. If you look at Florida, Ohio, Michigan, Nevada, New Mexico, California, and Scott Walker running for a third term in Michigan, and a fistfight going on in Illinois between [Gov. Bruce] Rauner and [Jay Robert] Pritzker, it could get very expensive,” he says.
Passwaiter also notes that today Republicans control two-thirds of all state assemblies, 67 out of 99. “I think the Democrats are going to start to fight back and change some of that.”
