? Stations ringing up digital gains, despite Google and Facebook
? Broadcasters are expected to get a large share of the midterm political dollars
?
? ATSC 3.0 will boost addressable advertising, albeit several years down the road
With 2018 approaching its halfway point, S&P Global Market Intelligence recently caught up with Steve Lanzano, president and CEO of the Television Bureau of Advertising, the not-for-profit trade association of America's local broadcast television industry, to size up the prospects for stations, relative to autos, the segment accounting for one-quarter of advertising revenues, and the midterm election.
He also discussed stations’ digital efforts and the potential impact of the new broadcast standard, ATSC 3.0. What follows is an edited version of that interview.
Television Bureau of Advertising president and CEO Steve Lanzano Source: Television Bureau of Advertising |
S&P Global Market Intelligence:
There are a lot more places and races. We’ll get a large share of the dollars. It depends on the stations and the markets. I was in [Washington] D.C. [two weeks ago]; cash on hand is up 40%. Another super [political action committee] made a buy, which is unusual this early. What they don’t want to do is get to the point where there isn’t any inventory left for their candidates. Super PACs also pay what the market will bear — they don’t get the lowest unit rates — so they also may want to get in early and save a few dollars.
There are more seats up for grabs, the Trumpian factor?
The Trumpian factor changes every day. Democrats over the last six or seven cycles have skewed their spending more nationally and to the presidential races. They haven’t been as involved at the local level.
There are 36 gubernatorial races?
Yes, 27 with control over congressional redistricting. There is a lot of action from the [Democratic] Governors Association and the Republican Governors Association. They are well-funded. In Illinois, the two billionaires [Democrat challenger J.B. Pritzker and incumbent Republican Gov. Bruce Rauner] already spent $65 million apiece on the primaries. How much are they going to spend on the general election? There is activity in Florida and California — big races, big markets. I’ve seen forecasts of 12% to 17%. I don’t think it’s going to be that high, but it’s not crazy to think it could be above 10%.
Are the stations worried about other media grabbing political dollars?
The pie is getting bigger. Digital and local cable are taking money from radio and newspapers, and to some degree out of home, and a bit from direct mail.
How about digital in general?
We’re getting better, up midteens. For mobile, it’s 30% to 40% growth. But these are small bases. It’s 7% to 8% of [ad dollars]; digital needs to be 15% to 20%.
What impact are the big digital players having on stations' revenue?
When it comes to digital, the growth has been massive, mostly driven by Google Inc. and Facebook Inc. That spending is coming from below the line, from promotional budgets. It’s also coming from direct mail, radio, newspapers and yellow pages. Would we be growing faster with digital without Facebook and Google? Yes, but the money is not coming from us.
The big advertisers ... went too far with digital a few years back, and many are now returning more of their budgets to TV. Now, it’s a video world, whether with linear video or a digital video. We can have the best of both. But we need to work harder on digital, we have to focus there, because that’s where the growth is.
ATSC 3.0, the new broadcast standard is being tested in Phoenix, Dallas and other markets, will provide an assist on the ad side?
We’re going to get help from ATSC 3.0 with digital, with mobile, with targeted advertising. It’s an almost drop-the-mic moment for stations: premium content at scale, with data and fully addressable. It's a perfect storm. [But] it's four or five years down the road, at least.
Stations will also benefit from datacasting, leasing spectrum for connected cars, from streaming services, from enhanced audio channels. There can be multiple sub channels, in terms of foreign language programming. You could do very specific local newscasts, but that costs money. What are the right business models? Stations will figure out the best things to do with the spectrum.
Last year was a good one for auto sales.
We were off 3.6% with auto ad sales in 2017, but that compared with a 6% decline in the entire media market.
It was a soft first quarter. We’re doing better — not significantly, but better. There are a lot more incentives in the market. Dealers have more inventory coming off lease, and it’s a mix of trucks, [sports utility vehicles] and [cross utility vehicles], not just sedans, as had been the case in prior years.
Domestic dealers make more profit on used cars, but they don’t advertise lightly owned, or certified pre-owned cars. We’ve been talking to stations about that as maybe something they could push.
Can you break things down by tier?
Tier 1 [the manufacturers] is doing better, but still holding us back. There is pressure from manufacturers to move new cars, particularly sedans. You can get a sedan for a song now.
We’re improving with tier 2 [regional groups] and tier 3 [local dealers]. Last year, tier 2 was our Achilles heel.
Gas prices could be a factor. Last time, the offshoot of gas hitting the $4 per gallon mark was people actually did more one-stop shopping at Costco or Sam’s Club, rather than going to different stores to save money on gas. It could place more demand for sedans. Although with some CUVs getting mileage similar to sedans, it may not have that big of an impact. The tipping point may be above $4 this time.
What about the market in general?
The core has been soft because of auto. We’re seeing some pickup with retail and telecom. DIY/home improvement jumps up at this time of year, but that was a little slow to develop because of the weather. The Olympics always throw things out of whack a bit. There has been incremental improvement in the second quarter.
How are some of the other categories performing?
Legal is still killing. It went from an afterthought to a top-five category. It’s been incredible and still growing in the low single digits.
There is strength with medical?
Local hospital groups associations, as well as health and dental insurance.
Fast-food restaurants?
We are still having problems with [quick-service restaurants]. Spending is down 3% to 4% and will continue to shift to national cable until we really have automated buying structures/protocols in place. The cable operators, the MVPDs, are losing subscribers and they’re spending less. Colleges and universities slowed, but they are coming back a bit.
So, if the core business was down 3.7% in 2017, what's your outlook for 2018?
We were down 3.7% in first quarter. It will be less in the second quarter. Then you get into political in the third and fourth quarters. I think the core will be down low single digits.

