Political campaigns are on hiatus. Local car dealerships have little chance to lure anxiety-laden prospects into the showroom. So the TV news business — like other media — is getting smacked with advertising cancellations, after having planned for 2020 to be a revenue bonanza.
Trade publication Broadcasting & Cable reported Wednesday that ad sales are down 27%, according to a survey of executives.
The biggest impact to date is that a month ago Gray Television quickly withdrew its $8.5 billion takeover offer for Tegna (formerly Gannett’s broadcast division). Gray and Tegna are two of the five biggest local TV news chains. My guess is that big consolidation deals, demanding financing to be repaid with future earnings, are likely off the table for a while.
Dennis Wharton, executive vice president for communications at the National Association of Broadcasters, tracks the industry carefully. He told me that there is a saving grace as stations lose advertising: the roughly quarter to a third of local station revenue that now comes from retransmission fees.
Retransmision is what cable companies pay to carry the local stations. Contracts are typically long-term, five years or so, and as the TV industry consolidates, they gain leverage and can command higher payments as the deals come up for renewal.
But advertising is still king, and NAB president and CEO Gordon Smith has said, “The devastation to Main Street businesses — and to local broadcasters who support those businesses to drive commerce in hometowns across America — is unprecedented.”
NAB is making common cause with newspaper lobbyists from the News Media Alliance to get a piece of the action in federal stimulus packages, claiming local news is an essential industry.
Political advertising has typically been a goldmine in presidential election years, especially in swing states. The volume was headed for a lull anyhow as Joe Biden clinched the Democratic nomination early and the big buys from the Mike Bloomberg and Tom Steyer campaigns stopped.
Nate Silver’s FiveThirtyEight site tracks political ad spending and his latest shows a ski-jump downslope beginning in March. The two parties have war chests for huge buys closer to the November election, but the political category is dead in the water for now.
Auto has traditionally been the largest advertising category in non-election years for local stations. However dependence on those ads is slightly less now than in previous years, Wharton told me, as the blanket campaigns by dueling insurance and telecom companies gobble up local ad slots as well as national.
Local stations, now nearly all owned by the dominant chains, typically do not discuss the particulars of their finances. So I spoke to Elliott Wiser, a professor of broadcasting and marketing researcher at the University of South Florida St. Petersburg.
Wiser, formerly general manager at two Tampa Bay stations, made these additional points about the financial pinch for the local outlets:
- ”This is the worst year for this to happen,” interrupting the flow of political ads the stations had counted on when they drafted 2020 budgets last fall.
- ”When we come out of this, the car dealers and lawyers and others will resume (advertising) … but maybe not at the same levels … We just don’t know because we have never come out of a pandemic (and the deep recession) before.”
- Stations, as Wharton said too, have made progress in diversifying their advertising bases. “Medical is huge.” Hospitals and their affiliated specialized practices are pushing their brands without pause. And at least in Florida, there is a growing group of treatment centers for spine, teeth, eyes and more.
For now, local stations as with their newspaper counterparts can take comfort in strong audience growth for their newscasts, and hope to hold those gains through the long, phased restart in the coming months.
But an old truism probably applies — lost is lost. Little of the disappearing spending will be restored by companies facing the need to reduce their own 2020 expenses.
Rick Edmonds is Poynter’s media business analyst. He can be reached at firstname.lastname@example.org.