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Political Advertising|By Elizabeth Wilner, July 20, 2015

Projecting total political ad spending on television is where Main Street politicking meets Wall Street finance. As noted in this space before, after retransmission fees, broadcast groups count on political advertising as their second biggest source of incremental new revenue. Cable companies eye political advertising as a similarly crucial source of cash. This is why Wall Street analysts have begun tabulating their own projections for 2016 TV ad spending—and asking us for ours.

The following two assertions are squarely at odds. First, CMAG’s over-under on total TV ad spending on 2016 races is $4.4 billion. Second, trying to project total 2016 TV ad spend before the end of the Republican presidential primary may just be a fool’s errand.

Timing of GOP primary verdict key

Let’s start with the latter point. The conventional wisdom is that a “more, more, more” Republican presidential primary—more candidates with more money to spend, more candidate-specific outside groups paying premiums to advertise, and more states potentially seeing at least some advertising before the nomination is settled—is better for those who sell the ads.

Not necessarily. Michael O’Brien, Scripps vice president and as astute an observer of political ad sales trends as they come, points out that the longer the Republican primary lasts, the longer candidates and their supporting groups are advertising in just one or a few states at a time as opposed to 10 or more states every day. A presidential bout that engages in the spring is key “because we need the three months of inventory in the general election swing states to drive the number” for the second quarter. “If Republican candidates run out the primary until June, we have lost the opportunity to max out revenue” for the quarter, he says.

O’Brien also points out that during the second quarter, Americans are still watching TV. Once June and July set in, people tune out. Higher viewership means higher rates; fewer viewers, lower rates. Then comes the Summer Olympics when the best-funded political advertisers typically divert some of their ad dollars to network TV.

The absence of Q2 presidential general election advertising could affect the overall total by as much as $100 million (O’Brien’s estimate) or even more (our hunch).

Getting to $4.4 billion

Now here we are with our caveated $4.4 billion. We arrived at this figure using a spend-estimating methodology developed for CMAG by the University of San Francisco’s Ken Goldstein. The methodology accounts for a range of factors including the number and location of likely competitive congressional races; the number and location of presidential battleground states; the total amount of money likely to be raised and spent in all races, including for governor; the proportion of total spending likely to go to TV; and how that TV ad spending is likely to be split between local and national, broadcast and cable.

Spotting the impact of Citizens United on congressional election spending is like spotting the Great Wall of China from space. According to OpenSecrets, $2.8 billion was spent on U.S. Senate and House races in 2006, $2.5 billion in 2008—contrasted with $3.6 billion in 2010 and 2012, followed by $3.8 billion in 2014.

Presidential spending, on the other hand, stayed flat across the Citizens United divide: $2.8 billion in 2008 followed by $2.6 billion in 2012. This presumably was due to the absence of a Democratic primary, a less competitive Republican primary than in 2008, and a battleground that shrank by half. The Cook Political Report listed 18 states as Leans or Toss-Ups in October 2008 and only nine in October 2012.

There’s no reason to think the presidential battleground will be any larger in 2016. Four years ago, as Charlie Cook calculated off our spending estimates, seven states saw 84% of the TV ad spend (at least on broadcast, but cable probably looked about the same).

Even so, we think the first post-Citizens United open presidential race is worth an increase of $500 million, maybe even more. Beyond the timing of the end of the GOP primary, the other big question mark is the intensity of outside group ad spending in support of likely Democratic nominee Hillary Clinton. There just aren’t that many politically active Democratic billionaires out there. While Hollywood donors may max out to the party and to candidates, few of them have hundreds of millions or billions to fuel outside groups. If billionaires really step up for Clinton, we could see a bigger increase than $500 million.

While we expect a jump in presidential spending, we see little or no growth in spending on statewide and House races. Today’s list of competitive House races is short: 30 Leans and Toss-Ups compared to 48 at this point in the 2012 cycle. With control of the chamber not in doubt, donors’ attention will focus on the races where party control is at stake.

Today’s list of competitive Senate seats also is short, with nine seats listed by The Cook Political Report as Leans or Toss-Ups compared to 11 seats four years ago. That said, the latest battle for Senate control will be waged in some expensive airspace: Florida (which now has two contested primaries), Illinois, North Carolina (host of by far the most expensive Senate race in 2014), Ohio and Pennsylvania. TV ads already have aired by, or on behalf of weak Republican incumbents in Illinois, Ohio and Pennsylvania. Plus, California’s new top-two rule means the state finally may host a contested fall race, albeit between two Democrats.

But among the 12 governors’ races, only three look competitive right now, compared to more than twice as many—seven—four years ago. Per the Council of State Governments, $190 million was spent on 2012 governors’ races.

We could see less than $4.4 billion on TV if the GOP primary drags on, or more than $4.4 billion if it wraps up fast. We could see less than $4.4 billion if Democratic billionaires don’t bring their A-game for Clinton, or more than $4.4 billion if they do. We also could see more than $4.4 billion if California produces a juicy slate of ballot initiatives. Overall, we see slightly more upside than downside in this early estimate of 2016 political TV ad spend.

Broadcast versus cable, local versus national

Of this $4.4 billion, we expect $3.3 billion to go to local broadcast TV. We also assume $800 million in local cable TV ad spending for a share of 20 percent of all local buys. Local cable industry reps themselves are projecting 30 percent; our survey of several heads of large media-buying shops yielded estimates of between 18 and 24 percent.

Despite the size of the battleground seemingly arguing for local buying, we expect to see more national network and cable advertising this time around. In 2012, the Obama re-elect pitted national and local cable against each other to get lower ad rates. That tactic may become more widespread in 2016 and may apply to broadcast, as well, to the tune of around $300 million altogether.

There’s significant overlap between competitive presidential and statewide media markets, and only so much ad inventory to sell. Stations and systems in Boston, DC, Colorado, Florida, Nevada, New Hampshire, North Carolina, Ohio and West Virginia will be flooded with orders from some combination of presidential, Senate and governor advertisers. Remember: there’s no such thing as “running out of inventory” because a spot is never sold until it actually airs. But skyrocketing rates in this handful of states ultimately may mean that the tipping point to see a return with national advertising is reached quicker.

Which could make this presidential race a more genuinely national event, even with the smallest actual battleground in history.

CMAG’s Madeline Meininger and Mitchell West contributed to this article.