Between the ongoing coronavirus pandemic and increased scrutiny against social media platforms, local broadcasters and media owners may be positioned to capture more federal advertising dollars, which media groups say are crucially needed given the current crisis.
The advertising market experienced a sharp decline as COVID-19 shuttered businesses, with local media organizations saying they expect to be hit especially hard. Given the downturn, local media groups are pushing the federal government to spend its advertising dollars on local platforms like broadcast television stations and newspapers, a motion that has received support from industry groups and hundreds of members of Congress. At the same time, President Donald Trump is urging federal agencies to restrict federal advertising on online platforms, which could also push ad dollars toward traditional print and media outlets.
Gordon Borrell, CEO of Borrell Associates, a media research and consulting firm that tracks local advertising, said in an interview that he believes there is a general acknowledgment within the federal government that local media needs to be supported as any other local business, which is a new trend.
Borrell also believes an uptick in federal advertising spending is possible this year.
"It makes a lot of sense and I do hope that it does occur and I suspect that it will, but there's a very strong part of me that says we're in such a charged political environment that I am not sure it will happen," he said. "I'm also a bit weary of any strings that would be attached to government involvement in media," added Borrell.
Recent Borrell Associates research found that traditional local media platforms are receiving an increasingly thinner slice of local advertising share as more and more dollars move online.
A 2020 analysis performed by Borrell Associates found that the share of local advertising expenditures going to out-of-market digital media companies doubled between 2013 and 2018.
"By 2023, no locally based media entity will have more than a 6% share of local advertising, while digital media — 70% of which is controlled by three companies — is likely to account for 63%," the organization found in its analysis.
A surge in federal ad dollars could help. While recent data on federal ad spending is hard to find, the U.S. Government Accountability Office said in a 2018 report that the federal government spends nearly $1 billion annually on advertising contracts.
Four national media organizations, including the National Association of Broadcasters and the National Newspaper Association, have urged Congress to spend federal ad dollars on local media amid the COVID-19 pandemic. Specifically, the groups called on Congress to equip the U.S. Department of Health and Human Services, the Small Business Administration and other agencies with $5 billion to $10 billion in additional funding for local media advertising.
"To the extent new and existing federal agency ad budgets can be directed to local broadcasting, it would provide badly needed funds to support local radio and television stations especially hard hit by declining ad revenues due to the pandemic," said a spokesperson for the National Association of Broadcasters, in an emailed statement to S&P Global Market Intelligence.
NAB members include TV broadcast giants Sinclair Broadcast Group Inc., Nexstar Media Group Inc. and Fox Corp., as well as radio broadcasters iHeartMedia Inc. and Cumulus Media Inc.
Hundreds of members of the U.S. House and Senate, from both parties, have similarly urged the Trump administration to direct federal advertising dollars toward local media.
"We believe that Executive Branch agencies have a powerful opportunity to support local media and promote public awareness by directing that federal spending on advertising be prioritized for local media outlets," wrote more than 240 members of Congress in an April letter to Trump.
The push in Washington to allocate more federal ad dollars to local platforms come as Trump recently signed an executive order directing the head of each agency and executive department to explore restricting federal advertising on certain online platforms.
Specifically, the executive order states that each agency head should review agency federal spending on advertising and marketing to online platforms and review "the statutory authorities available to restrict their receipt of advertising dollars."
The Internet Association, a trade group representing online platforms such as Twitter Inc. and Facebook Inc. did not respond to a request for comment on whether it has concerns that federal advertising dollars could be shifted elsewhere as a result of the order.
Even without federal ad dollars, however, some analysts believe advertising on local television could pick up in the months ahead.
"We could see more advertisers spending on local TV as opposed to other mediums given their influence and increased viewership during the crisis," said Justin Nielson, an analyst with Kagan, a research group within S&P Global Market Intelligence, in an email.
Nielson estimated earlier this month that because of their community focus and essential local news, U.S. TV stations "could see advertising rebound in the second half of 2020 as states and municipalities reopen businesses and political campaigns boost their ad spend."