Broadcasters Expect Political Ad Windfall From Harris Candidacy
The Democratic Party’s switch to Vice President Kamala Harris as its candidate for the White House is expected to provide a huge boost to broadcasters’ political advertising haul from the 2024 election, TV and radio executives said during recent Q2 earnings calls. Broadcasters also see sports returning to traditional airwaves, and Nexstar CEO Perry Sook predicted pay TV is arriving at an “inflection point” that could arrest plummeting subscriber numbers and drooping retrans dollars. Outgoing Tegna CEO Dave Lougee disagreed during what he said would be his final earnings call before retiring. “The innings of net retrans as the growth driver have certainly come to the later stages,” he said. Mike Steib will succeed Lougee next week.
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Nexstar’s Q2 net revenue was $1.27 billion, a 2.3% increase from the prior year quarter, according to its earnings release. Tegna reported a revenue decrease of 3% from Q2 2023, to $710 million. Gray Television reported Q2 revenue of $826 million, an increase of 2% from Q2 2023, its earnings release said. Sinclair’s Q2 total revenue rose 8% from the prior year quarter, from $768 million to $829 million. E.W. Scripps' revenue was $574 million, a 1.6% decrease from Q2 2023. Cumulus reported total revenue of $205 million, down 2.5% from the same quarter in 2023, and iHeartMedia showed Q2 revenue of $929 million, 1% more than Q2 2023.
Broadcast executives with nearly every company reporting financial results said they anticipate record political spending on both sides as a result of Harris entering the race at the top of the Democrats' ticket. BIA Advisory Services, in a release Wednesday, predicted that the 2024 election would see $11.7 billion in local ad spending, a $560 million increase over a previous forecast in March and a 21.3% increase over the 2020 election.
President Joe Biden's "decision to pass the baton to Vice President Harris kept the existing Biden-Harris fundraising in place, seemingly galvanizing both parties and driving meaningful, incremental fundraising that ultimately will flow back into political advertising,” Nexstar COO Michael Baird said. “Biden stepping back has a significant positive impact, not just on the presidential race but right down the ballot,” Gray Television co-CEO Pat LaPlatney said. “It's going to be a very good year.” Both parties' fundraising and their advance bookings of broadcaster ad time “are ahead of plan and our expectations,” said Sook. “Whatever the presidential spending was going to be” in battleground electoral college states before Harris became the candidate, “it's new math today,” Lougee said. “To the extent that certain states become more highly contested than previously expected, we may see some upside,” said Cumulus CEO Mary Berner.
Nearly all the companies pointed to the recent NBA and other sports league deals with broadcast networks as a huge positive sign for the industry. “While much has been made about additional sports content heading to streaming platforms, we also see a large amount of sports content coming back to broadcast television,” Sinclair CEO Chris Ripley said. The college football championship game and the increasing trend of pro sports franchises shopping their games to local broadcasters are indicators that leagues prefer broadcasting's reach, executives said. Sports leagues “see the value of our reach and the value of our partnership well beyond just a check that we can cash,” Scripps CEO Adam Symson said. When live sports are simulcast on broadcast and streaming, the broadcast version consistently gets the lion’s share of viewers, Ripley said. “When you look at the reach, you look at the Paris Olympic numbers, the tune in is to the networks,” Sinclair COO Rob Weisbord said.
Most of the broadcasters blamed a shaky national ad market on macroeconomic rumblings. “There's no question that the higher interest rate is holding back spending,” Cumulus CFO Frank Lopez-Balboa said. It’s not clear if declining interest rates will accompany "weaker consumer demand,” he said. Robert Pittman, CEO of iHeart Media, believes the national ad market is rebounding and called 2024 a “recovery year” for advertising. Ripley said that Sinclair hasn’t had the same experience. “There are certainly concerns about the consumer slowdown but, so far, ... that's a lot of ... hand-wringing. I don’t think we’ve really seen it show up in terms of our performance.” Lougee said it's unclear if an economic slowdown is likely. "I don't think there's certainty. There's not a definitively negative view, but there's no definitively optimistic view."
Sook said that the increasing shift toward the linear format among media companies could lead to a change for MVPDs losing subscribers. “We expect the relative value of the pay-TV bundle, with all of its premium sports and local news content, to look more and more attractive, leading to an inflection point in the future in subscriber attrition,” he said. A drop in MVPD subscriber losses would prompt more retransmission consent dollars for broadcasters. “The broadcast television business model is anchored by loyal pay television subscribers,” Sook said. Lougee said broadcasters going forward should look to other drivers of growth rather than retrans. He said he was looking to future regulatory relief “depending on which administration wins,” on broadcast ownership or retransmission negotiations with virtual MVPDs, as a possible future growth driver in broadcasting.