Listen: MediaTalk | Episode 27: US TV stations set for record midterm political ad spending

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Mike Reynolds

Hi. I'm Mike Reynolds, a senior reporter covering the media industry with S&P Global Market Intelligence's tech, media and telecom news teams. Welcome to MediaTalk, a podcast hosted by S&P Global, wherein news and research staff take a deep dive into the issues facing the ever-evolving media landscape.

With the November 8 Election Day fast approaching, this episode focuses on the political advertising arena. In addition to the conversations centering on key factors shaping what is expected to be a record midterm spending levels, we'll discuss some of the states and markets that will be home to hotly contested House and Senate races as well as gubernatorial confrontations. We'll also dive into the prospects for TV stations, which remain the primary recipient of candidate party and political action committee spending as well as political ad projections across other media vehicles, notably the burgeoning platform that is connected TV.

To address these issues, I'm lucky to be joined today by a trio of knowledgeable executives and good guys. We have Peter Leitzinger, Research Analyst with Kagan, a media research group within S&P Global Market Intelligence; Steve Passwaiter, Vice President and General Manager for North America at Kantar Media, the advertising data, analytics and consulting firm; and Steve Lanzano, President and CEO of the Television Bureau of Advertising, the trade association of America's local broadcast TV industry. Gentlemen, how are you all doing today?

Peter Leitzinger

Hi. This is Peter Leitzinger from S&P Global Market Intelligence. It's an honor to be here and to talk about such a timely topic with such well-respected industry experts in Steve and Steve.

Steve Passwaiter

Wow, I don't know, after that, Steve, I'm looking for my wallet here. So yes, good afternoon. This is Steve Passwaiter from Kantar. In all seriousness, great to be here and look forward to talking about what is going to be a record-setting year for political advertising.

Steve Lanzano

Hi. It's Steve Lanzano from the TVB. Mike, thanks for having me today, and looking forward to the discussion with you, Steve and Peter.

Question and Answer

Mike Reynolds

All righty then. Let's get right at it and we're going to start off hot. Will this 2022 election cycle set the midterm record for political ad spending, and in the process, perhaps surpass the 2020 presidential year? Steve P., could you go first?

Steve Passwaiter

Yes, sure can. The short answer and the long answer are about the same. Yes, it is going to break the record for midterms. We're not quite at the point where we believe that it's going to set the record for all-time spending that was set back in the 2020 election. There are some who very much do feel that way. But no matter what, it is going to be a great year for political ad spending. And if you happen to be one of those media outlets, you certainly would have your catcher's mitt out right about now, making sure you don't drop anything that comes your way.

Mike Reynolds

Steve, can you give us a sense for what Kantar is looking at in terms of some of the media, whether it's cable, radio, digital and the stations themselves?

Steve Passwaiter

Sure. At the moment, we just upgraded our projection not very long ago. We are currently standing at $8.4 billion. Of that, we estimate $4.2 billion goes to broadcast stations, another $1.5 billion or so going to cable TV and satellite and that's local cable TV and satellite. I think the real story of this cycle is how much money is going to connected TV.

And right now, we have connected TV finishing almost in a tie with cable at just about $1.5 billion. We figure another $1 billion gets split between the duopoly between Facebook and Google, another $250 million or so to radio. And of course, these are the things that we track. There are certainly a lot of other forms of advertising that we can't track that are going to contribute to this record-breaking total.

Mike Reynolds

It sounds like we might need a few catcher's mitts, Steve.

Steve Passwaiter

We might.

Mike Reynolds

Peter, what's Kagan's take from the station perspective and from the top TV station ownership groups?

Peter Leitzinger

Yes. So our estimates are pretty close to in line with Steve's, perhaps maybe a little bit more on the conservative end, but still a record. Our estimate for this election cycle is about $3.5 billion or about a 15% increase from a little over $3 billion in 2018, which was the last midterm election. But I would say that, obviously, most of the bigger broadcasters with the most station exposure in the swing states, where political advertising comes in heavy, they stand to benefit the most.

And just looking at our TV station database stations located in those states that were labeled as swing states for upcoming Senate races. Nexstar Media Group and Gray are tied. Both have 24 TV stations in those states. Sinclair is very close behind with 21. Sinclair reported its second quarter political category was up 100% from 2018 and up 20% from 2020. And we still have some of the heaviest political months ahead where the lion's share of political rolls in. So for the most part, all the broadcast TV groups are reporting exceptional growth in the category and the guidance is in line with or exceeding our estimates.

Mike Reynolds

All right. Steve L., TVB has a little bit more sanguine view. Can you kind of share what you guys are thinking about at this point for the stations?

Steve Lanzano

Yes. I think, obviously, it will be a record year versus 2018. And for some of the groups, they will rival, if not exceed their 2020 total depending upon, obviously, their footprint. I think Scripps has been the most vocal. They believe they will meet the 2020 numbers, which is basically unheard of. I at this point in time through July, we're pacing ahead in terms of political spending for both 2018 and 2020. So it's going to be, again, a record political year. And the predominant amount of dollars, which we're happy to see, is going to be in local broadcast TV.

Mike Reynolds

That's the way it should be, right, guys? Anyway, what are some of the factors that are driving what we'll all expect to be record growth here? A very charged political climate, a lot of fundraising? Peter, could you take the first swing here?

Peter Leitzinger

Yes. I mean I think you have just mentioned a couple of them, but just looking at some of the others, some things that I've seen over the last couple of elections are the fundraising, whether it be through -- by senatorial, gubernatorial, even presidential races is starting earlier than it has in the past cycles. The candidates and their PACs are fundraising well before the year of their election and well in advance of primary elections and in some cases, even a full year. So I think the overall pool is growing from a sheer length of the political ad season standpoint.

And then secondly, I would say that the overall political climate has been at the forefront of news lately with hot-button topics like inflation. Sports betting and gambling is another one. And of course, abortion laws with the striking down of Roe v. Wade, just to name a few. And I think these topics are just like very close to home. They're are topics of discussion which are driving voter decisions. And advertising candidates are probably likely to focus heavily on those topics. I also think that Biden's struggling approval ratings in states and across the country and rising inflation are some of the top concerns for voters, and ad dollars and campaigns will want to address those topics.

Mike Reynolds

Yes, there's all that and more. Steve P, I guess prices are down at the gas pumps a little bit recently. But for the most part -- or for a large part, it's still about G and G, gasoline and groceries, as we look at what's coming up in Nov. 8.

Steve Passwaiter

Those are certainly 2 of the big ones, for sure, Mike. But I think there's -- Peter alluded to it a bit about just the overall competitiveness considering the fact that we have a 50-50 Senate where the Vice President is having to come in and break ties like she did a few weeks ago when we had that large piece of legislation, the Inflation Reduction Act, that's enormously competitive. Look at the House. It's a handful of seats in the House.

With all of this in the mix, the parties have figured out how to get every dime they possibly can, whether it's grandma giving $2 out of social security or some multimillionaire trying to slide a couple of million dollars to a PAC. They have figured out how to get the spigots as wide open as they possibly can. And yes, they are starting earlier because, frankly, the campaigns are getting started earlier.

And to the point now this year with the striking down of Roe v. Wade, state legislatures are starting to take on a new importance. State Supreme Court races taking on additional importance because all of these are going to play a role in how states decide reproductive rights going forward. So now it's not just happening at the up-ballot levels. It's also starting to happen at the down-ballot levels. Very interesting change of kind of pace for what we would normally see in the state legislative races, which would normally be a little more sleepy. Not anymore.

Mike Reynolds

Steve L., as Steve P. just said, the state races becoming more important than the state's budgets have been crimped from the pandemic, and many of them are looking to bolster their coffers a little bit through sports betting. I think there's a couple of states on the ballot, and that could result in significant spending in those areas.

Steve Lanzano

Yes. I think one is obviously the big ballot measures out in California, where they're voting on two things: one, sports betting with; and one, sports betting without online betting. So I think that's really the big one, obviously, such a big state. And so that's really the big ballot measure that's on the ballot this year.

I think from what Peter and Steve said, it's all of the above. It's the political climate. It's fundraising. And Steve said it best. I mean now the fundraising online with just a few dollars from people has just really exploded in terms of how much money they have. And right now, it looks like fundraising is almost double what it was in 2018, and that money obviously will be spent. It's a category where there's -- being No. 2 market share doesn't help. You either win or you lose. So all that money is going to get spent.

And I think with the Supreme Court decision has emboldened -- quite frankly, has emboldened the Democrats. And now there's, I think, kind of change over the past few months where it looked like it was going to be a landslide election and a real red wave is -- now looks like it just might be a ripple. And I think the -- even the Democrats might have -- I think it's an outside chance of even getting close to keeping the House. So I think all of the above is why we're seeing such tremendous spending and expect such tremendous spending through the end of the year.

Mike Reynolds

Given all of those issues, the hotly contested races, what's at stake in both chambers of commerce and the state legislation? And for all of us who watch any NFL games last fall, there were so many sports betting ads. Is there going to be enough room, Steve L., for candidates, campaigns, PACs to express -- get their messages out there and miss what will likely be a very, very close situation for the stations?

Steve Lanzano

Yes. I think I would look at it reversed. I think the bottom line is obviously 60 days out from an election. We have to make sure that all federal candidates can get access to as many spots as they want to run. So I think it's actually the opposite. And I think the stations, obviously, everybody knows there's an election every even year, and the stations have been very good about getting out front of this a year in advance and making sure those advertisers that need inventory in the fourth quarter of this year have placed their dollars early and in dayparts that they consider to be -- that won't be as tight as others.

So the issue with sports betting is obviously -- it's the football season that really makes it explode. So they've already done a lot of work in terms of ensuring in those 20 states, especially that have online betting, there's 32 states that have betting legal and 20 that have online betting and are operational, that those states are being able to put down the money, especially between October and early November. And then, of course, the football season now going through February, there'll be a lot more inventory available after election day.

Mike Reynolds

I got you. Steve P., the hottest congressional and gubernatorial races are shaping up in what states and markets?

Steve Passwaiter

Let me just kind of put a nice bow on what we were talking about as far as California is concerned. To date, just with the commitments that have already been made, there is nearly $270 million in California from those ballot propositions. It is the largest expenditure going for any particular race election in the country. I mean it is massive. And again, we're not even to Labor Day. So you can almost imagine where that one is going to end up when things are all over with us.

So -- but as far as the hot races are concerned, I mean they're really kind of centering in a few states. And when you think about those, probably the first one that comes to mind is Georgia, where you've got a really competitive Senate race between the incumbent senator, Democrat Raphael Warnock, and his Republican challenger and Trump-endorsed, Herschel Walker. That one is an expensive and very noisy race. And if you live in Georgia, you probably had about enough of it by now.

And then on top of that, you also have a rematch of the 2018 gubernatorial race between Governor Kemp and Stacey Abrams. And that is also equally as noisy and as expensive as what's going on there. You look at Arizona, you have an open governor seat in Arizona with a Trump-endorsed gubernatorial candidate. You also have a very competitive Senate race in Arizona between Mark Kelly and Blake Masters, another Trump-endorsed candidate. Then there's a couple of decently competitive congressional House races also going on in Arizona.

Nevada is back this year. Again, you've got a governor's race between Lombardo, the Republican, and Sisolak, the Democratic incumbent governor. He is considered to be a little -- he might be a little wobbly. So there's some thought that there might be a flip there.

And then there has been some that have said they think the most vulnerable Democratic Senatorial seat is the one in Nevada that belongs to Senator Cortez Masto, and she's being opposed by the former Attorney General Adam Laxalt. And there's a couple -- again, a couple of House races in Nevada that are rather interesting to watch.

Pennsylvania would be another case, right? You have an open governor seat because Wolf is term-limited and you've got this intriguing Senate race between John Fetterman and Dr. Oz. I mean you can't make this stuff up if you tried. It's where Pennsylvania goes and that is a Senate seat that is going to have an awful lot to say about who controls that chamber come January 2023.

Mike Reynolds

Peter, what's Kagan and your lay of the landscape in the red, blue and maybe purple states as things [ go here ]?

Peter Leitzinger

Well, I have to agree with Steve on all his points made, but I don't know. We looked at Texas as it gained 2 seats in the redistricting. It's got a growing population, especially in the suburban areas. And over the last few elections, it's been a target for political advertising as it's been traditionally Republican. But we're seeing a more younger demographic moving in that direction, especially because it's a tech hub state.

And if you look at the last presidential election, Biden came pretty close to carrying 22 of the 36 districts. So we think that is sort of a hot area. But then you also have other states like Florida, North Carolina, Colorado, Oregon and even Montana, which gained a House seat in the redistricting. So those are some of the areas that we see a lot of political advertising coming in.

Mike Reynolds

Steve L., what's TVB's scorecard for a contested House, Senate and gubernatorial races? Already benefited your members' coffers and more to come as we get into the hard 8 weeks ahead.

Steve Lanzano

Yes. Certainly, obviously, the Pennsylvania race and the Ohio races, the monies that's already been spent on those Senate races are records already. And we expect there are going to be big money spent there. I agree with Steve and Peter in terms of the states. There may be more House races that become more competitive as we get through the next month or 2, and we'll have to keep an eye on that. But at this point, there are -- as you all know, there are 36 governorships that are up, of which we look at between 14 and 15 are competitive. And 8 to 10 Senate races of the 34 Senate races that are up are competitive.

And the other thing that we're seeing, as Steve brought it out before, are the down-ballot races where there's been so much money spent. We spent a lot of time with the RGA and the DGA. And the attorneys general money, which was almost not existent a few years ago, is probably close to $100 million this year going to be spent. So I think both parties have seen the power in terms of the states and being able to have -- a majority either have the governorship or a majority of the state legislature or in the attorneys general and how that's important in terms of getting any of their policies.

Mike Reynolds

All right. When it comes to election spending, news program is clearly the content of choice. What are some of the other dayparts and programming categories that are playing a more important role in housing political ads? Steve, Pete, you want to go first?

Steve Passwaiter

Yes, sure. Yes. Nothing's ever going to supplant news, but sports is -- also gets a lot of play. And pardon the pun. I just realized that was a really bad pun on my part, but I just can't help myself, I guess. There's also sports because it's high reach, a lot of -- especially when we're getting into football season here. And as we come down the stretch between college football and pro football, the World Series and all these sporting events that come about in the fall, we're going to see an awful lot of programming -- sports programming get used by the political set to make things happen. That one you can count on.

Mike Reynolds

I got you. Steve L., what are we looking at?

Steve Lanzano

And I think there are a couple of things. One is the importance of suburban women in this election. And so a lot of money now, we're seeing money being spent, and I'm going to say a lot of it news, as Steve said, is the 800-pound gorilla here. But we're seeing monies being spent in talk shows, any type of programming especially during the day that reached suburban women has become a priority. Court shows because during the midterms especially, you have an older voter that comes out to vote, and that's who they want to reach, and court shows are very good.

And finally, something that we've seen more and more over the past couple of election cycles is our digital subchannels, the antenna TVs, et cetera, because they do skew to an older voter and they're starting to get more and more money. And their ratings and their delivery rival some mid-cable ratings delivery. So those are the 3 areas we're starting to see more money being put into.

Mike Reynolds

Peter, where would you put your money? What's left if we need -- if you need to go there and the other dayparts are accounted for?

Peter Leitzinger

Well, I'm going to punt on this one and make another bad pun. But I have to agree that you have to look at the ratings, and the NFL football and other big events are probably the way to go. Things like the GRAMMYs and other live TV events like that will probably get a lot of the playing of political ads.

Mike Reynolds

I got you. All right. Yes.

Steve Passwaiter

Mike, we can't leave out, and Steve brought it back to my memory here, the hall of fame of programming for political advertising, which is Wheel and Jeopardy! I mean you can't ever look past those 2...

Mike Reynolds

Absolutely.

Steve Passwaiter

Syndication bloodhounds...

Mike Reynolds

7:00 every -- [indiscernible]. That's for sure.

Steve Passwaiter

When it comes to political advertising. And again, particularly being in a midterm like we are and having that older electorate, as Steve was talking about, you can't ever forget Wheel and Jeopardy! They always carry the ball for a lot of political campaigns.

Mike Reynolds

Steve P. mentioned earlier, talked about the rise of connected TV. What's its value? And again, it sounds like it's really growing this time and it should become more of a factor as we go forward into the years ahead.

Steve Passwaiter

Well, there's -- there are multiple reasons why this has become so popular. One of them is this is -- we're kind of in an era where reach is becoming a little bit of a challenge each and every year. One thing that CTV does is it helps balance out whatever losses in reach you might be able -- you might be suffering in where linear television is concerned. But then there's also the ability to target. That targeting ability is really something that the advertisers love and appreciate.

And then on top of it, you have the ability to follow people from device to device. So if they're consuming it on the big screen, if they're consuming it on a tablet or a laptop or a mobile phone, you can kind of follow them around from place to place as they go from device to device. So that is -- all of those attributes that this brings is something that really helps propel it forward and it's really been propelled forward in this cycle.

Mike Reynolds

Peter, if you were running a campaign, is connected TV a big part of your media mix?

Peter Leitzinger

I would say so. I mean if you look at the data of what's happening with cord cutting, and we have the data in-house that shows the amount of broadband-only homes is also growing, so you just really -- you really have to look at those virtual multichannel streaming services as very valuable mechanisms to get political advertising out. And as Steve said, the targeting data that is used on those platforms, campaigns really love to see that. I mean there's just a lot of value in targeting data there.

And I do think that the data from those streaming services can be used on the broadcast side even. So I think there could be even a little bit of a trickling up effect, if you will. But I also think that there's still some challenges on the connected TV. I think it's still a little bit largely unregulated in comparison to like other digital forms such as social media and search engines. There's still a little bit of a potential for fraud where services could mislead advertisers about where their ads are being shown in order to hike up pricing.

But I think targeting data is still a bit kind of all over the place. It's kind of the Wild West on a lot of those platforms, and it's just a little bit hard to sort through. But I would say that another problem is ad frequency. A lot of those services just run the same ad over and over and over. So I'm not sure. But I would say that there's still some things to iron out when it comes to political advertising on those streaming services.

Mike Reynolds

I got you. Yes, the frequency thing is certainly a consideration for anyone who does some of your CTV watching like we do here. Steve L., you mentioned E.W. Scripps, who's looking at a very strong political year. And I think to some extent, that's a contribution from its political consortium that it's formed with a couple of the other station groups. I guess it gives them the ability to maybe extend beyond their geographical footprint. So what do you make of what Scripps is doing?

Steve Lanzano

I think there's a couple of things. And I think Peter said it right. I mean there's still a little bit of a Wild West with OTT. But with what the stations do in terms of selling their OTT, there's certainly less fraud. You know you're in a premium environment. And what Scripps has put together in terms of the ability to extend reach, I mean we get to a point, as we spoke about earlier, where there's going to be less and less inventory on the linear product. But to be able to help a political candidate or a ballot measure in terms of extending their reach in premium content with less fraud is, quite frankly, a very attractive proposition. So I think it's terrific what Scripps is doing with some of the other members being able to find more inventory to sell to the political advertisers.

Mike Reynolds

I got you. All right, guys. So that's our latest installment of MediaTalk. I would like to thank our guests, Steve Passwaiter, Steve Lanzano and Peter Leitzinger, for sharing their time and acumen.

Steve Lanzano

Our pleasure.

Peter Leitzinger

Thank you very much.

Steve Passwaiter

Absolutely. Thank you.

Mike Reynolds

And thanks to all of you for listening to MediaTalk. Until next time. This is Mike Reynolds. Make your vote count on November 8. And to you and yours, please stay safe out there. Thanks.