As Election Day draws near, political candidates are increasingly turning to a single medium to carry their message and hopefully sway undecided voters: cable TV.
Political ad spending was supposed to break records in 2012 and it hasn’t disappointed — according to research group Borrell Associates, political ad revenue for cable was expected to double to $938.8 million from $468.8 million in 2008.
Cable networks are not expected to be the only beneficiaries of the growth in political ads. MSOs have advertising avails — generally, about two minutes of advertising time per network per hour — that they can sell to anyone they want. That inventory can be sold to political candidates and with targeting technology advancements made in the past few years, ads can be directed to specific neighborhoods of an MSO’s territory, making cable operators an increasingly attractive alternative.
“Cable can deliver ads to groupings at the node level, allowing campaign managers to surgically target their advertising not to battleground states, but to battleground neighborhoods,” Sanford Bernstein cable and satellite analyst Craig Moffett wrote in a recent research report. “Predictably, cable MSOs have captured a higher and higher share of political ad spending with each election.”
According to a recent report by ISI Group media analysts Vijay Jayant and David Joyce, Comcast is expected to lead the pack in political ad revenue, reaping about $200 million in the current election cycle.
At the Goldman Sachs Communacopia investor conference last month, Comcast chief financial officer Michael Angelakis said the MSO expected a healthy increase in political spending.
“We will have a good third quarter in advertising and fourth quarter due to political that comes every two years,” Angelakis said.
Jayant and Joyce wrote that Charter Communications has the most exposure in the battleground states (about 45.6%), but other large MSOs have a significant presence in those areas as well.
The analysts noted that there has been little political ad spending in those areas to date — part of the reason it expects Charter to reap jut $26 million in political ads.
“That said, Charter could see a late-cycle surge of ad revenue in those key states,” Jayant and Joyce wrote.
Charter officials declined comment.
At Cox Media — the advertising unit of Cox Communications — vice president of national accounts Brian Davis estimated that political ad revenue will be up about 25% from 2008.
“Cable is really coming of age,” Davis said in an interview. He added that although candidates have taken advantage of Cox’s targeting capabilities in past elections, this year they are casting a wider net, spreading their messages not just in traditional sources like news channels, but in general entertainment networks as well.
“In 2008, the majority of political spending was in 10 to 15 networks,” Davis said. “Obama alone is at least 35 networks deep [this year]. People are moving deeper, not because we’re driving it. It’s part of the plan coming in.”
While cable is obviously growing its political pie nicely, is still represents just about 10% of overall political ad spending this year. Borrell estimates that in total, political ad revenue will top $9.9 billion in 2012, with more than half of that ($5.6 billion) earmarked for broadcast TV.
Opening up the floodgates was a 2010 U.S. Supreme Court ruling — Citizens United v. Federal Election Commission — which said the government could not restrict political spending by corporations and unions. As a result, political action committees have significantly increased spending.
Borrell Associates senior analyst Larry Shaw estimated that about one-third of the total TV ad cash has been spent by the respective campaigns. Traditionally, candidates save the bulk of their TV ad budgets for the last few weeks before Election Day. And as Nov. 6 approaches, candidates are increasingly targeting their messages to attract what they see as their weakest demographics.
For both candidates, that will likely mean their ad money will shift to the battleground states of Colorado, Florida, Iowa, New Hampshire, Nevada, Ohio, Virginia, Wisconsin, Michigan, Minnesota, New Mexico, Pennsylvania, Missouri and North Carolina. With President Obama running neck and neck with Republican challenger Mitt Romney, the focus will most likely be on undecided voters and ads to get people to the polls, as some pundits expect a low voter turnout.
At Cox, which operates in two battleground states — Nevada and Virginia — the ad activity has been robust. Davis estimated that ad revenue in those states is pacing between 35% and 40% ahead of 2008.
“We’ve never seen this amount of activity ever going into Nevada,” Davis said.
Shaw said that political ad revenue could rise even higher for cable networks and operators, but added that the real growth may be for online ads, which have faster response times and can be targeted equally at specific segments.
“One of the big shifts and trends we’re seeing with online advertising right now is that targeting capability. A lot of Romney ads are showing up on Facebook,” Shaw said.
LOCAL CABLE SPEND
Shaw added that cable operators and networks may see the most growth in local races.
Across the country, races for 33 Senate and 435 Congressional seats, gubernatorial races in 11 states and many other state and local offices should eat up substantial airtime.
Shaw noted that the Democratic National Committee has made the House and Senate races a priority, adding that a significant Democratic victory could help end the stalemate between both houses — (Democrats currently control the Senate with 51 seats but Congress is dominated by Republicans with 240 seats.)
“All the political spending this year isn’t in the presidential election, it’s also in the local elections as well,” Shaw said. “That’s really where you’re seeing the increase in cable. Even four years ago you didn’t have quite the local targeting capability with cable that you do now. I think we’re seeing that increase in cable just because of that ability to target at a local geography level by the state and Senatorial candidates.”
Davis agreed that cable’s targeting capability has helped drive ad revenue, especially in state and congressional races. California, for example, has been one of Cox’s hottest political ad markets, with several state propositions on the ballot and 53 House seats up for grabs. Davis added that in state races, Cox’s targeting capabilities have been especially popular; adding that about 35% of every overall political ad dollar is spent on targeted ads.
“This year has really been about growing in share and a targeting capability that no one else has,” Davis said. “People are taking advantage of that.”