MediaTalk | Season 3 | Ep. 9 - TVB Chief Shares How Local Broadcast is Winning the Ad Game

View Full Transcript

Mike Reynolds: Hi, I'm Mike Reynolds, a senior reporter covering the media industry with S&P Global Market Intelligence tech, media and telecom news team. Welcome to "MediaTalk," a podcast hosted by S&P Global, wherein the news and research staff explore issues in the ever-evolving media landscape. Today, we're lucky to be joined by Steve Lanzano, president and CEO of the Television Bureau Of Advertising Inc., the trade association for the US local broadcast television industry. Steve's going to talk about 2024, which saw the stations benefit from a record amount of political ad spending. He's also going to bring us up to speed on the key auto category and discuss a number of the other dynamics that will play in shaping station ad revenue in 2025. How are you doing, Steve?

Steve Lanzano: I'm doing great, Mike. Thank you for having me.

Reynolds: We're two months into the new year, a month into President Trump's second term in the White House. Steve, can you recap the presidential 2024 election cycle in terms of ad spending for TV stations, which remains the platform of choice for candidates and campaigns?

Lanzano: Absolutely. Depending upon which resource you look at, and we usually look at ad impact, the broadcasters got about 50% of the dollars, which is about $5.4 billion. And that's what we expected — that we would continue to be up. The real news was connected TV, which was basically — it wasn't really zero in 2020, it was probably about $700 million — but I think it was up to $2.2 billion this year. So, that's where it seems the growth is, but we continue to grow. So the pie is getting bigger. The fundraising continues to be there, which is the main thing, and 50% of that fundraising goes to media advertising; the other 50% obviously goes to field and other operational issues for the campaign. There was all this talk about the Dems spent way more than the Republicans, and it's true. But when you peel the onion back, Mike, if you look at the monies that were spent, the Dems spent almost 55% more in digital and connected TV, but only 15% more in broadcast. And in fact, if you look at just the presidential race, President Trump actually outspent Kamala Harris in broadcast TV. And that was the same thing that happened in 2016 when Trump won. Towards the end, he put all his money in key states and really outspent the Dems dramatically over the last three or four weeks of the campaign. And ultimately, he won the White House and did it again here in 2024. It wasn't as stark as some of the press has made it out to be. It was a record year, and another really good year for local broadcasters.

Reynolds: That's interesting that again, the 2024 replicated the last few weeks of spending from 2016. Were you surprised though, Steve? Obviously, Biden was there until he wasn't when Kamala came on board and then Trump wasn't really challenged, so there wasn't a lot of primary spending, but it still turned out to be a very robust year.

Lanzano: Yeah, I was a bit surprised. I'll tell you, Mike, because remember there was really no primary at all on either side.

Reynolds: Right.

Lanzano: And there was expectation there'd be a little bit more primary spending. And then when you look at it and you compare it to 2020 when you had a couple of billionaires in this race who spent hundreds of millions of dollars early up front, we were pleasantly surprised that still in 2024, the pie continued to grow and we actually had record spending again.

Reynolds: In terms of Senate and House races, were there any ones that really stood out in terms of where a lot of dollars were spent?

Lanzano: The big one, obviously, the dollars and what people saw was in Montana, which from the beginning of the year was getting a tremendous amount of spending. I think $250 million was being spent in Montana. One of the consultants, one of the political consultants, said it might have been cheaper if they bought a television station than bought television advertising.

Reynolds: (Laughs) Okay.

Lanzano: But, yeah, Montana was really the one where you just saw a tremendous amount of spending. And then, in the New York and California House races where the Democrats didn't see what they expected to see in the 2022 midterms in terms of they lost seats. And so we saw a lot more spending in those markets, especially in New York, Mike, which traditionally doesn't get a lot of political money.

Reynolds: Right.

Lanzano: And because of how expensive it is, it just saw a tremendous amount of actual dollar spending in the marketplace.

Reynolds: That's with Josh Riley and the Marc Molinaro contest, right?

Lanzano: Correct. So those were, I think, the two real highlights in terms of the House and senatorial races.

Reynolds: We're in an odd year now. I want to talk about displacement. Obviously, the politicians and the campaigns take a lot of inventory in the even years. As we got past election day in 2024, Steve, how did stations finish up the year? Return to a good amount of spending in terms of core categories?

Lanzano: Yeah, December we saw a pickup, and we saw a pickup in auto, but that's what we expect, especially between retail and Christmas being a tentpole event. And I think a lot of people and the expectation because it was Trump's victory, the expectation of tariffs and a lot of people in the marketplace for a car were very nervous about tariffs coming in place and the price of a car going up anywhere, or a new car, from $3,000 to $6,000. And, on top of that, Mike, there's not a lot of used car inventory out there because during the pandemic, there wasn't a lot of leasing going on. So there's not a lot of cars coming off lease into used car sales. So I think a lot of buying by the consumer was moved forward, and a lot of the manufacturers are putting incentives in the marketplace to do that. January was okay. It was actually not a bad month, but there's a lot of, I'm going to say trepidation in the marketplace because of the unknown. Will there be tariffs? How much of the tariffs will there be? It will hurt different manufacturers differently. Those that manufacture outside of the US will get really hit the hardest. Those that are manufactured within the US, not so much, but when you really look at it, Mike. On, I think, a general basis, the Asian car manufacturers and somewhat General Motors Co. will probably be hit worse if there are tariffs versus the others. So it's a real wait-and-see right now, but I think a lot of people are in the marketplace because they want to buy the cars before tariffs go into place and prices go up because affordability is the real issue in terms of automotive right now.

Reynolds: So, I think the industry wound up with 16 million unit sales last year. Given the variables you talked about, Steve, any sense for what this year could be, or is it way too early to tell?

Lanzano: Again, the wild card is tariffs. If everything stays the same, Mike, we should probably see unit sales up to about 16.3 million, probably. Retail sales is what obviously we look at because we don't look at any fleet sales. Retail sales should be up a couple of percentage points. If that should change and tariffs can come into place, we may have a flat year. It could cost almost 300,000 cars. Even I've seen some estimates of over a million cars. I think that's a little bit aggressive, but we could certainly see where we have basically a flat year this year.

Reynolds: What does all this potentially mean for the station, Steve? I don't know if stations get any real national money from the manufacturers per se, but the bulk, or if not all the business comes from the tier 2 and tier 3 aspects.

Lanzano: It's interesting when you look at the sales, still probably anywhere between 17% and 21% of their revenue in terms of the category is automotive. Now you'd be surprised about 25% is tier 2. Now, remember, manufacturers like Volkswagen AG got rid of their tier 2, so that's gone down. Some of them are replacing their tier 2. And tier 3 is probably around 25%. So when you look at it, actually, tier 1 manufacturer spending is in the 45% to 50% rating for local broadcasters.

Reynolds: Okay, gotcha.

Lanzano: So they actually do pretty well there. The one area that we're keeping our eye on is tier 2, although we did see Stellantis NV is now bringing tier 2 back in a big way. So we're hopeful on that because we get 90% of tier 2 dollars.

Reynolds: So tier 2 is the regional groups, for lack of better terms.

Lanzano: It's the co-op dollars, your local Tri-State Toyota Dealer Association, that's the tier 2 dollars. Tier 3 dollars is the actual, a local Tom's Toyota in Tom's River, if you will. Okay. And then the other dollars are obviously directly from the manufacturer.

Reynolds: Okay. All right. Let's turn away from auto to some of the other core categories. You've mentioned to me in the past, professional services, lawyers, medical offices, doctors, dentists. In many cases, this is now the top category for local station guys.

Lanzano: Yeah. In the services area. And again, it's very difficult because all the broadcasters seem to define services very differently. So I look at it basically as specific categories, but legal when I started 16 years ago, at TVB, was essentially non-existent. It's now the number two category.

Reynolds: Okay.

Lanzano: And it's probably about, I'm going to say anywhere between 8% and 10% of their revenue now. And then as you talked about, medical and health is probably getting even closer, a little behind, but a little closer to legal. Home improvement is still strong. Whether people buy a house or don't buy a house, right? If you buy a house, you do home improvement. If you don't buy a house, you look at your house and you go, we got to fix this. So home improvement still seems relatively flat. My wife always finds something in our house.

Reynolds: Sure, yes. I think that's common across the country, Steve.

Lanzano: And then when you look at it after that, you get into restaurants and [quick service restaurants], communication, insurance. We're starting to see, obviously, how you break out pharmaceutical. I think we could do better with pharma, especially with our news demographic. And I think that's one area that we're going to push for. Although now with RFK Jr. there were some questions in the marketplace whether he would limit pharmaceutical advertising. So it's something to keep your eye on. And then the other category I always get questions about, Mike, is sports betting. And sports betting was a panacea during the pandemic. Now, it's more of a national category. There are 39 states that have sports betting; 28 or 29 of them now have online sports betting. Where we make the money in sports betting now is when a state opens up. And of course, the three big ones, California, Texas, and Florida, are still in the courts. Texas is probably at least two years away if it even gets on the ballot in 2026. And California, I think, is in the same place as Texas, so I'm not sure that's going to open up anytime soon. I don't see Minnesota opening up anytime soon, or Georgia. Missouri is supposed to come on board this year. They're trying to get it on board prior to the March Madness, but I'm not sure it's going to make it in the time frame.

Reynolds: Yeah. So, that, again, that was a giant category as it started. Is there still some business there though, Steve?

Lanzano: Absolutely. I think it'll always be a 4% to 5% category in terms of revenue. And the reason being, Mike, is because when it first came out, 99% of the betting was who wins or who loses. Now you have those in-game betting, right? It's judge going to strike out. What's the next pitch going to be? That's all local. We start to see local to say, "Hey, the Yankees are playing the Mets today, put your parlay bets in now." That's local betting. It's not really national.

Reynolds: Right. Sure.

Lanzano: So that's how I come I think we'll still see it be a 3%, 4%, 5% category moving forward.

Reynolds: All right. Let's stay on sports a little bit. Obviously, the NFL is the king of all sports in all sports in the US. But we're going to see more games, NBA games under the new contract coming up next year with ABC (US) and NBC (US)'s back in the game after a 20-year hiatus. How important is our national sports to stations, Steve?

Lanzano: It's all about football right now, right? That's where football continues to grow. The numbers are staggering in terms of the amount of audience that we pull in and broadcast. Now we're hopeful we'll start seeing some of that same audience growth with the NBA. And we'll see what happens with NBC now that they're going to have it. And then ABC, as you talked about next year. The world as it comes from broadcast is, quite frankly, is a sports and news world, right? We have NFL football, basically almost exclusively, and we're really the local news game in town, right? Radio's kind of walked away from local news. Newspapers are non-existent. So we've got a monopoly on those two things. And as long as that continues, we're going to be okay.

Reynolds: One last quick thing on sports: the regional sports network business is in transition, the Diamond Sports bankruptcy, 20 months, it's now Main Street Sports Group LLC. There's been some pickup of some packages of MLB now from some of the stations as with hockey and basketball. Do you see more of that coming to pass, Steve?

Lanzano: Yeah, with my conversations with a variety of people and even some teams, it's become a broadcast/DTC world, direct-to-consumer world. And they've seen the tremendous amount of viewership — five to one — if they put their games on broadcast TV, and that's why you're seeing it in hockey, you're seeing it in basketball, now you're seeing it in baseball. It's almost like back to the future, Mike.

Reynolds: Exactly.

Lanzano: In New York, I'm being a New Yorker, the Mets were on WOR and the Yankees were on PIX. And I think you're coming back to that where, especially cable and people cutting the cord, you're limited in terms of your audience potential. Meanwhile, you can reach 100% on the market by being on local broadcast TV. So I think it's becoming a — and I think you'll see more and more of this, Mike — a broadcast/DTC combination for the individual teams.

Reynolds: With the new administration in D.C., some station groups, notably Nexstar Media Group Inc., anticipate that some of the ownership and cap rules will be relaxed. Your sense for that, Steve, and if, in fact, station groups are able to bulk up a little bit and/or within particular markets, what is that going to do for the advertising business?

Lanzano: Yeah, I think one is obviously with a new administration in place there, we're much more hopeful that there'll be deregulation, that they'll see that our hands are tied. Meanwhile, the tech guys' hands are not tied, and we're competing against them. I think one is obviously the cap at 39%, and we're hopeful that'll go away. Now that looks like it's going to take an act of Congress, Mike, and Congress has got a lot on its plate right now, so I'm not sure where that sits in their priority list. But I think it's important in the M&A area. The other area, and you picked up on it, Mike, is the ability to own multiple top four stations in a market, and that can be done by the FCC. And I think that's one of the things that Chairman [Brendan] Carr is looking at. And that would really help us out in terms of operational efficiencies and bringing bigger audiences to the marketplace. So, we're very hopeful there. I think that might be the first thing that happens, and then after that will be the cap, but that again takes an act of Congress. And then the third thing is sunsetting ATSC 1.0 so that we go to ATSC 3.0 or next-gen TV. Now that might be a little bit ways down the road.

Reynolds: Right.

Lanzano: But that'll really begin to get a lot of momentum behind it. The issue with next-gen TV, it's not coverage where you've got over 80% coverage, I think, in the United States now. It's building that install base of people having a TV that can get it and being able to be the signal that's in the marketplace by sunsetting 1.0. So that's another area that the broadcasters are looking at.

Reynolds: TVB recently commissioned a 2025 Media Comparison study conducted by GfK/NIQ. Steve, can you talk about some of the key findings there?

Lanzano: Yeah. I mean, it continues to show the reach of broadcast TV versus everything else, that within a weekly period, you can still reach 80% of your audience on broadcast TV. And a lot of the others can't reach that. We continue to see that everybody trusts their local broadcast TV news, and there's a lack of trust with social. And that's important, especially for political campaigns. And the other thing that's part of the study is, yes, people watch streaming, but local broadcast TV still reaches a lot of people that maybe stream but don't get or can't get a commercial message, and we reach over 80% of those people because it's not exclusive, right? We just look at our own media habits. I don't watch exclusively things that don't have commercials. We all watch different programs. We all want to watch the content that is relevant to us, and it goes across every distribution channel. So, that was some of the findings that we got out of the media comparison study.

Reynolds: Two more, Steve. Nielsen Holdings PLC is implementing a big data plus panel measurement system across the industry in 2025. Some agency executives have talked about preliminary runs suggesting that local station impressions could grow 15% to 20%. Your sense for that — will this be in play this year, or do we need to get a year of data before people start trading on that information?

Lanzano: I think it'll be in play this year. We're still looking at impact data, Mike, and seeing obviously numbers higher than we were getting prior to big data. The other thing with big data, Mike, is the basic elimination of zero cells or programs where Nielsen said they didn't get any impressions or ratings. We do basically 100% of our transactions are based on impressions now and not ratings. So something could say it didn't get a rating yet, but it still got impressions. And now we're starting to see those impressions. So that's going away. The other area on this, and that's part of Nielsen's gauge report, which shows the viewership of streaming versus cable versus broadcast and other out there. We've got Nielsen working on one that shows ad viewing, right? In other words, if you include all the viewership for streaming services, you're queuing viewership of people that can't get an ad or can't see an ad. For a marketer, that's irrelevant to them, right? And we're seeing the streaming number go from 40%, 45% down into the 25% and 30% range.

Reynolds: Right.

Lanzano: That's another area that we're working on with Nielsen as well as Comscore Inc. in terms of using that big data, but looking at it on ad viewing versus total viewing.

Reynolds: Right, it makes sense. There's definitely a push toward the streaming players wanting to add more ad subscribers, but they're still in the build mode. That's not there by any means at this juncture.

Lanzano: Yeah. You saw YouTube is coming out with a lower-tiered premium service, which doesn't have ads on it. So I think it'll take people out of the market going, okay, I'll buy that. I don't get the ads. And I think that'll take away some of the advertising revenue that they get.

Reynolds: Last, probably the hardest, 2025, Steve, what kind of year is it going to be for stations?

Lanzano: I think we're going back to traditional, what happens in off-political years and off-Olympic years, we'll probably be flat in terms of the core and down overall, 19% to 23%. And that's what we expect, right? I think we're going back to that kind of traditional spending patterns after the pandemic now, and the last couple of years, I think, have shown that. I think it's going to keep going that way over the next few years.

Reynolds: All right. That concludes this episode of "MediaTalk." I wanted to thank our guest, TVB President and CEO Steve Lanzano for sharing his thoughts on the year that was for local advertising in '24, and a number of things that could shape results in 2025. Appreciate you taking a lot of time, Steve.

Lanzano: My pleasure, Mike.

Reynolds: This is Mike Reynolds, and many thanks to all of you for listening. We'll catch up soon on the next installment of "MediaTalk."