TVN Focus on Advertising | Spot TV 2021: Total -26%; Core +7.4%

By Janet Stilson
Source: tvnewscheck.com, October 2020

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The total drop is pegged to lower political advertising, while the increase in core looks to come from growing sports gambling, improved auto and solid business from categories like legal and home improvement. That’s the consensus of station groups and industry watchers surveyed annually by TVNewsCheck.

Rising above the rubble of the pandemic, the spot TV business may post a 6.6% increase this year over last, but that’s due almost wholly to political advertising.

When the seemingly bottomless amount of ad dollars tied to the elections is excluded, spot sales from perennial clients — so-called core advertisers — is expected to decline 18.1% from last year’s levels.

That’s according to TVNewsCheck’s annual survey of top TV station executives. This year’s respondents represent eight different station groups of varying size, servicing a widespread variety of markets, including the top 10. All requested anonymity in giving their candid assessments.

The extent of how badly the COVID-19 crisis has ravaged the core business is made even more plain by another set of figures. About 12 months ago, when station executives gave their predictions for 2020, they expected that total revenue would swell 19% over 2019 — about 12 percentage points more than what stations are now expecting.

Core advertising was predicted to come in around minus 1.3% at that time, about 17 percentage points better than current expectations. Nobody was figuring on the pandemic and the negative impact it would have on large sectors of the economy.

Yet the executives surveyed over the last couple of months see some reason for optimism in 2021, citing the exciting online sports gambling category; a much better picture for the extremely important automotive industry; and solid business from categories like legal and home improvement.

“The pacing [for spot sales] keeps getting better on a month-by-month basis,” said Steve Lanzano, president and CEO of the TVB. “In April, when things got really bad, we were basically down 40% to 45% on core. In July, core was down 15% to 20%. But total, including political was almost flat. Each progressive month has gotten better and better.”

Granted, there are a number of unknowns at play — not the least of which is how long it will take for most Americans to obtain an effective anti-COVID-19 vaccine.  That could be a huge relief to spot advertisers whose businesses are dependent on in-person interactions with consumers — like live entertainment, restaurants, retail outlets and the travel industry.

But, giving it their best shot, the station group execs predict that core will rise an average 7.4% next year vs. 2020. That kind of growth won’t make up for all the losses experienced this year, but it will be an all-important sign of rejuvenation after the towering wave of political spending sucks back out to sea after the election this November. Because political will recede, total spot revenue is expected to see a year-over-year decline of 26%.

A handful of media analysts surveyed came up with strikingly different numbers. Their averages for 2020 are in negative territory: minus 8.2% for total and minus 21.3% for core.

They predict total spot will be down 10.38% in 2021, and core will be up 5.6%.

But everyone is agreement that there are two extremely critical drivers for spot. “If political is the elephant, then auto is the rhinoceros,” says Mark Fratrik, SVP and chief economist at BIA Advisory Services. Those “animals” are roaming in different territory this year.

BIA is forecasting that spot will bring in $3.39 billion in political spending this year. “And I’m hearing in some places we may be low,” says Fratrik, suggesting another update may be forthcoming.

Steve Passwaiter, VP and GM of Kantar/Campaign Media Analysis Group (CMAG), is forecasting $3.5 billion in political revenue for spot. “We’ve anticipated that the pace would be record-setting,” he says. “We’re tracking California as the No. 1 state, as far as spending is concerned in the general election,” explaining that ballot measures are largely driving it. “North Carolina is pretty close [to topping it],” he says.

“The amount of money being spent is mind blowing,” Passwaiter adds, noting that there are now five Senate races that are into nine-figures, in terms of total expenditure — with North Carolina likely to set the all-time record. “That’s a ferocious pace.”

Then there’s the rhinoceros. Due to the auto manufacturers’ production stoppages related to COVID-19, light vehicle sales are expected to be down 18.2% this year compared to last, according to LMC Automotive. There’s a pretty close correlation between how many vehicles are sold and how much money the auto advertisers spend in the spot marketplace.

“We’re looking at a 13.9 million-unit year,” says Bill Rinna, director of Americas vehicle forecast at LMC, in speaking of 2020. In comparison, the highest level of light vehicle sales came in 2016, at 17.47 million. Last year, they were at 16.99 million, according to LMC.

But the auto industry’s condition is markedly improving. “In August we saw record transaction price levels,” says Rinna, who explains that some of that is due to higher prices, and part of it is due to people buying more expensive vehicles. “Next year we continue to see the market recovering. We’re looking at a 15.2 million-unit year.”

“Auto’s been trending up of late,” says Justin Nielson, senior research analyst at Kagan, a media research group within S&P Global Intelligence. Ads for used cars and those aiming to move some inventory to make room for 2021 models account for much of that.

“Talking with some of the broadcasters, especially with the Tier 2, the dealership category, they were doing fairly well in the later part of Q2 and into Q3,” Nielson says.

“[Auto advertising] has been surprisingly better than what some would think,” says Steve Pruett, executive chairman of Cox Media Group. “I believe there will be a pent-up demand that starts to materialize later on in 2021, once we get out of the recession.”

Pruett sees a bump from sports gambling advertisers in some markets: “If there’s legalized online sports betting it’s very impactful; there’s a lot of money,” he says. For example, he says there’s a “massive” amount of sports gambling spot dollars in Pennsylvania.

Lanzano sees other reasons for optimism. Because the real estate market is booming, “the mortgage market is exploding, which means home improvement is exploding. Legal business is also very good.”

There’s another factor at play: “The upfronts have obviously totally changed,” says a station group executive requesting anonymity. “I expect very little to get booked as an annual [purchase] for next year. Out of the gate, [spot] may see monthly buys for first quarter.”

That source notes the flexibility that local spot brings — the ability to cancel with two-weeks’ notice. “Especially with automotive. Obviously, everybody’s struggling with inventory. If one part of the country was able to get more or less inventory, for automakers to shift money quickly is going to be important to them.”

Jonathan Barnard, head of forecasting at Zenith, also notes that while brick-and-mortar retail operations have faced challenges this year, spot is benefiting from spending by online retailers like Amazon. “Primarily it’s gone to digital, but they definitely have a presence in television and radio,” he says. “Spot is probably one of the biggest beneficiaries.”

Despite the optimism expressed by many, some analysts have a more sober view. “One of the big gestalt trends that impacts all marketing is that brand managers that control the budgets are increasingly distanced from media decisionmaking,” says Jack Myers, chairman of MyersBizNet and MediaVillage.

Spot TV 2021 predictions: Total -26%; Core +7.4%. The total drop is pegged to lower political advertising, while the increase in core looks to come from growing sports gambling, improved auto and solid business from categories like…CLICK TO TWEETMyers notes that in-house agencies, along with procurement and finance departments, are increasingly responsible for the day-to-day investment of advertising dollars. “All of them are very disconnected from the media industry. So from a Katz or Cox point of view, it’s very difficult to impact on budget reallocation,” Myers says, referring to two big rep firms.

“We don’t see where the rebound comes for local TV,” says Michael Lezcegna, manager of U.S. market intelligence for Magna. Generally speaking, “we think that local media is going to do the same thing that print did after the 2008-09 recession, which was the mechanism for change. Print never grew afterwards.”

One large TV station group executive has a different view: “We’re killing it in business development — linear and digital. Our ratings are up 25% to 50%. The power of local broadcast is the best I have seen it in a decade.”