Recall Ad Boom a Bust

Aug 25, 2003  •  Post A Comment

Call it a bonanza that many TV stations don’t want.
At least seven or eight of the 135 candidates running for governor of California are gearing up to buy advertising time in the coming weeks. But many television stations in the state, instead of salivating at the prospect of a windfall in advertising revenue, are dreading the possibility of having to accommodate candidates’ ads during what is already a tight advertising market.
Indeed, a deluge of dollars could create a month of headaches for sales managers as they grapple with having to pre-empt higher-paying advertisers to make room for an unexpected wave of political ads that command lower rates.
“The California market was already extremely robust in the third and fourth quarter, so that even a few ads coming right now will make it airtight,” said Carolyn Bivens, president and chief operating officer of Initiative North America, an ad-buying firm. “Broadcasters will be faced with juggling political advertising and the dilemma of how many of their regular ads they have to bump. They will have to bump advertisers that are paying more.”
Ad sales executives at several of the stations in big markets agree. “We’re pretty full right now,” said the general sales manager of one station in Northern California. “We have a couple of holes, but this could get messy.”
Some also fear the risk of alienating regular advertisers, who are far more likely than the candidates to be looking to buy advertising time after Oct. 7.
Mike Kennedy, national sales manager at KRON-TV in San Francisco, said that while he will work hard to accommodate the candidates’ ads, he acknowledges that it’s going to be a balancing act. “You have to remember who’s going to be here after the election,” Mr. Kennedy said.
Stations also have to remember federal and state laws. The regulations require stations to accommodate candidates for federal office, such as those running for president, who want to buy advertising. However, statewide candidates are not covered in the same way. A station actually has an option not to take any political ads from any candidates for governor. However, if a station accepts even one recall race ad, then it must provide equal opportunity to buy ads to any and all candidates.
In other words, if a station sells Republican candidate Arnold Schwarzenegger five spots, then it will have to make the same number of spots available to other candidates, even if it means the station has to bump some nonpolitical advertisers to make room.
As of last Thursday, Mr. Schwarzenegger was the only candidate to have purchased spots. However, the other leading candidates-including Democratic Gov. Gray Davis, Democratic Lt. Gov. Cruz Bustamante, Republicans Bill Simon, Peter Ueberroth and Tom McClintock and independent Arianna Huffington-were expected to make some ad buys in the weeks leading up to the election, station sales managers said. Few expected anyone outside of the top seven or eight contenders to buy ad time.
The lack of enthusiasm for what is effectively found money flies in the face of both conventional wisdom and the observations of some experts. Those experts say the recall will be a boon to California TV stations, which were expecting 2003 to be sharply off from a year ago, when tight races helped drive up political ad spending in the state.
JPMorgan analysts Vinton Vickers and Sara Rouf estimate the recall election could produce political spending of close to $100 million, or 70 percent of the $144 million spent a year ago during California’s regularly scheduled election.
“We believe that political spending from [the] California governor recall could provide the state’s television station operators with a windfall, which should help ease some of the tough [comparisons] stemming from last year’s robust political advertising,” the two analysts wrote in a research note.

However, those on the front lines seem less sanguine. “Things might be better than they would have been [without the recall],” said Jeff Block, general manager at Cox Enterprises-owned Fox affiliate KTVU-TV in San Francisco. “But it’s going to be challenging and a pain.”
Because it’s the first time in 82 years that a sitting governor in this country has faced a recall election, many stations simply were caught off guard. During election years, stations typically allot part of their commercial inventory to political ads. This year most stations expected the ad buying to come from traditional spenders.
Timing is also a factor. September is typically a robust month for TV stations, which nab ad dollars for new model-year cars and back-to-school sales. According to many sales executives, this September is shaping up to be a strong one, with most large-market stations reporting little inventory available.
In addition, with the recall serving as the lead story most nights for TV stations in the Golden State, some observers suggest the candidates might not have to spend much to get in front of voters. Plus, there are signs that radio stations in California are grabbing a large chunk of the advertising spending pie because their rates are lower than those of television.
“We’re just not sure how it will affect things,” said Cathy Jacquemin, VP of ad sales at NBC owned-and-operated station KNBC-TV in Los Angeles. Ms. Jacquemin noted that after the war in Iraq depressed ad sales in the first half of 2003, most TV stations are seeing an uptick in advertising in the third quarter. If a flurry of political ads occurs, “It would put pressure in the marketplace,” she said.
National advertisers are also expressing concern, especially those who place ads for movie companies, which typically launch serious movies with Oscar potential in the fall. Unlike other advertisers, movies have to be on the air at specific times because release dates aren’t movable. They also pay the highest rates of any advertiser.
“Typically, you expect to be pre-empted in times like this-which isn’t good for movie companies or other advertisers,” said Andrew Lein, VP of account services for Palisades Media Group, Santa Monica, Calif., the media agency for Fox Searchlight, Artisan Entertainment and, until recently, Miramax Films.
Despite the unknowns, some stations see a proliferation of political advertising helping them. One such station could be WB affiliate KBWB-TV in San Francisco. General Manager Bob Anderson said that while he is still assessing how his station, which has no news operation, could be affected by political ad spending, he thinks he could see some upside as displaced advertisers bumped by news-heavy stations search for alternatives in the San Francisco market.
Cable networks and local cable system operators selling time on their systems could likewise see a pop if advertisers are turned away from the broadcast stations, said Rick Oster, VP and general sales manager at Adlink, which places ads with 44 cable networks in Los Angeles. “The viewers are shifting to cable in record numbers, and anticipate the political spending to be the same as every other category,” he said.
James Hibberd and Advertising Age’s Wayne Friedman contributed to this report.