Fundraising, competitive races to drive stations' record midterm ad take

Strong fundraising, partisanship, contentious issues and competitive races are expected to drive record spending for TV station groups during the 2022 midterm election cycle.

The question is how high.

While analysts agree 2022 is likely to outpace 2018 spending levels, some believe this year could top the 2020 election cycle.

"It's going to look more look like a presidential year than a midterm election," said Steve Passwaiter, vice president and general manager for North America at Kantar Media Intelligences Inc. "It's not a question of it being busy, but just how historic a midterm cycle it will be."

Comparing estimates

Kantar anticipates that fundraising could reach some $13 billion for the cycle. Gauged by allocations during recent cycles, the media measurement and analytics firm estimates that about 60% of total campaign expenditures will be pushed toward free media. In turn, there will be some $7.8 billion in overall advertising outlays, with local TV stations garnering $3.8 billion.

That projection falls short of the stations' more than $4 billion take in 2020 but is up from $3.05 billion for the 2018 midterm cycle.

Kantar is being more conservative than some others, said Passwaiter, noting that the 2020 election cycle benefited from early presidential candidate spending by billionaires Michael Bloomberg and Tom Steyer. It also saw the Georgia Senate runoff, which resulted in another $500 million to $600 million in media spending, half of which went to stations serving the state.

Kantar may revise its forecast after the primaries, perhaps boosting its projections by a few hundred million overall, according to Passwaiter.

The Television Bureau of Advertising, the trade organization for the local U.S. broadcast TV industry, holds a more bullish view. With fundraising pacing at twice the 2018 level at this stage, so much partisanship and competitive races, it is a question of how much the stations will exceed the $4 billion mark, TVB President and CEO Steve Lanzano said.

The TVB put stations' take at $3.1 billion for the 2018 cycle.

"Depending on their footprint, some station groups' ad revenues will probably be very close to, if not beat what happened in 2020," said Lanzano.

Kagan, a media research group within S&P Global Market Intelligence, expects TV stations to register a 15% rise in political ad revenue to $3.49 billion during the 2022 midterm, from $3.04 billion in 2018.

Early spending and competitive races

Kagan analyst Peter Leitzinger noted that station groups have seen higher levels of spending during the first quarter. These include Nexstar Media Inc., Gray Television Inc., TEGNA Inc. and The E.W. Scripps Co., all of which recorded significant first-quarter political ad revenue gains, compared to the corresponding period in 2018.

The first-quarter spending bodes well for later in the year, as much political ad spend occurs in the weeks and months leading up to November. "With so much of the money going to enter the market in the last 60 to 90 days, it's going to cause some turmoil," Passwaiter said. "Then, we'll probably get a half hour or 40 minutes before the next cycle begins."

A big question is just how many Senate races will prove competitive.

Leitzinger believes the balance in the Senate could hinge upon four or five races, with close battles expected in Pennsylvania, Georgia, Arizona, Nevada and Wisconsin.

Passwaiter is eyeing those same states, as well as North Carolina and New Hampshire.

On Lanzano's scorecard, 10, possibly 12, of the 34 Senate races are expected to be competitive, while 14 and perhaps 16 of the 36 gubernatorial races could wind up in that column. With redistricting, Lanzano said there could be as many as 72 competitive House races.

For Passwaiter, the impact of redistricting is more of a wild card. "Redistricting is always the latest installment of the incumbent protection act," he said.

Issues and inflation

While gun control and abortion may be top issues for some voters, concerns over rising consumer costs will be at the center of both parties' campaigns.

"Groceries and gasoline. These are things that sock families smackdab in the pocketbook," said Passwaiter.

Leitzinger said polls are showing Americans in all parts of the country are extremely concerned about inflation, and those worries are reaching down to local elections. "That will drive up political advertising overall," he said. "People want change; the pocketbook is universal."

Political connections

There will be more spending and ad targeting via connected TV platforms during this election cycle. E.W. Scripps registered $265 million in political ad revenue during the 2020 election cycle but could have added more to its coffers, if not constrained by limits on its linear ad load and competitive races within its geographic footprint.

The company has formed the Scripps Political CTV Consortium, which includes broadcast groups Graham Media Group, Capitol Broadcasting Co. and Cox Media Group Inc.. The members are pooling 1 billion connected TV impressions per month as they look to extend their reach beyond their linear footprints. Scripps estimates there could be a $1.5 billion political market in the burgeoning connected TV platforms.

Lanzano said the consortium members want to expand their scale and presence beyond their stations' territories. "There has become an insatiable appetite for connected TV across all advertising," he added.

Leitzinger said connected TV could become a factor locally as campaigns tap back-end data to deliver messages to specific communities.

Kantar estimates political ad spending on connected TV platforms will reach $1.2 billion for the cycle, noting there is limited inventory. The rise in connected TV spending reflects budgetary shifts from TV stations, cable and digital. Passwaiter believes there will be incremental increases in spending across the board, "So I think all media still benefits."

Spending on cable and satellite distributors will increase to $1.4 billion from $1.2 billion in 2018, while digital outlays, largely on Facebook and Google, will jump to $1.2 billion from $900 million in the prior midterm frame, according to Kantar projections.