The U.S. broadcast TV industry is currently in the doldrums. The year 2016 was expected to bring a substantial windfall for the industry as the upcoming Presidential elections usually results in increased political advertisement spending. In Apr 2016, Moody’s Investor Services projected an increase of 18% in ad revenues for TV broadcasters from the Presidential elections in 2012.
However, the ground reality is strikingly different from the projections. Soft advertisement spending by presidential nominees, especially by Republican candidate Donald Trump, has made the situation glum for TV broadcasters. With just one and a half month to go for the election, most of the TV broadcasters and analysts are of the opinion that actual political ad spending may be much lower than that in 2012.
TV Ads: Out of Vogue?
Many industry researchers wonder whether the current situation is a result of the unorthodox approach by the Trump camp or is an indication that spending money on TV advertisements is gradually becoming irrelevant for political superstars. At the moment, it appears that Trump’s lukewarm approach toward TV ad is the primary reason.
According to a Wesleyan Media Project report, 89,000 TV political campaigns were aired nationally between Aug 19 and Sep 15, 2016, down a significant 42% from the comparable period in 2012. Of the total, Democrat nominee Hillary Clinton and her supporters aired about 62,000 ads whereas just 27,000 ads were aired by the Trump camp.
As per the Federal Election Commission, in 2012, Republican nominee Mitt Romney spent nearly $50 million on advertising through July to September while Mr. Trump spent a mere $20 million. Clinton’s ad spending is in close proximity to that of Barack Obama in 2012. During the Jul-Sep cycle, Obama spent $111 million on TV ads while Clinton spent $108 million.
Whatever may be the reason, an overenthusiastic broadcast TV industry, which was thinking of a greater bonanza from political ads this year compared with the last Presidential election, is in nowhere near to the expectation so far.
As several TV broadcasters have started slashing their revenue estimates from political ad spending and various brokerage firms started predicting a soft ad market, stock prices of various leading broadcast TV operators took a beating in the first three trading sessions of this week.
Sinclair Broadcast Group Inc. (SBGI - Free Report) , which recently cut its guidance for political add sales declined 9.82% so far this week. Sinclair currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other major TV broadcasters which were affected include, Gray Television Inc. (GTN - Free Report) , The E. W. Scripps Co. (SSP - Free Report) , Tribune Media Co. (TRCO - Free Report) and CBS Corp. (CBS - Free Report) which lost 8.8%, 7.70%, 6.47% and 3.30%, respectively. In addition, leading TV operators like TEGNA Inc., Nexstar Broadcasting Group Inc. and Meredith Corp. also witnessed a considerable slide in their respective stock prices.
Many industry watchers are hopeful that things may take a positive turn as the elections approach. The industry may receive a boost from an uptick in political ad spending. However, if the situation remains the same and if Trump finally wins the election, there are possibilities that soft spending on political ads on TV will become the new trend.
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