Nearly $8.9 bil­lion was laid out to pro­mote can­di­dates through ad­ver­tis­ing for Tues­day’s races.

More than half spent on tra­di­tional TV ad­ver­tis­ing

The Mercury News - - Front Page - By Steven Zeitchik The Wash­ing­ton Post

The midterm elec­tions that saw the Democrats re­take the House and Repub­li­cans widen their lead in the Se­nate was a boon to tra­di­tional me­dia com­pa­nies, who raked in huge sums of money on po­lit­i­cal ad­ver­tis­ing.

That could have an ef­fect on cor­po­rate bot­tom lines and on a dis­tant realm deep in the en­ter­tain­ment land­scape.

The to­tals spent by cam­paigns and in­ter­est groups on ad­ver­tis­ing in 2018 were stag­ger­ing. If a few com­mer­cial breaks worth of tele­vi­sion-view­ing this fall didn’t al­ready tell you how open the wal­lets were, the pro­fes­sion­als laid it out. The ad­ver­tis­ing-re­search firm Bor­rell As­so­ciates es­ti­mates that as much as $8.9 bil­lion was laid out to pro­mote can­di­dates in Tues­day’s races.

More than half that, the group says, lay in the area of tra­di­tional tele­vi­sion ad­ver­tis­ing, which re­mains the

most ef­fec­tive way to reach the most peo­ple at once, es­pe­cially older de­mo­graph­ics most likely to vote. “Broad­cast TV is reap­ing the big­gest bounty of this year’s hotly con­tested elec­tions,” the com­pany said in its re­port.

That means a whole lot of cash went to the bot­tom lines of the coun­try’s large en­ter­tain­ment con­glom­er­ates.

In the quar­ter lead­ing up to the elec­tion, Com­cast Uni­ver­sal re­ported a gain in ad­ver­tis­ing rev­enue of $380 mil­lion com­pared with the pre­vi­ous year, much of it from po­lit­i­cal spend­ing.

CBS took in nearly $400 mil­lion in ad­di­tional ad rev­enue in its most re­cent quar­ter, also, it said, largely be­cause of po­lit­i­cal ad spend­ing.

21st Cen­tury Fox, mean­while saw ad­ver­tis­ing rev­enue climb 38 per­cent to $168 mil­lion, driven by “higher po­lit­i­cal ad­ver­tis­ing rev­enue re­lated to the midterm U.S. elec­tions at the TV sta­tions,” it said in its quar­terly earn­ings re­port Wed­nes­day. Dis­ney which will re­port its quar­terly earn­ings Thurs­day, is ex­pected to see a ma­jor bump as well.

The con­glom­er­ates still hold sig­nif­i­cant stakes in this sec­tor via the so-called “O&O’s”— owned-and-op­er­ated TV sta­tions, re­la­tion­ships that dates all the way back to the mid­dle of the 20th cen­tury.

Fox is, by sta­tion, the big­gest player in this game, with 17 such O&O’s. That al­lowed the com­pany to ben­e­fit hand­somely in re­cent months. The Rupert Mur­doch con­glom­er­ate owns sta­tions in three mar­kets in Florida, which saw a flurry of ad­ver­tis­ing in con­tested gu­ber­na­to­rial and Se­nate races, as well as sta­tions in Dal­las and Hous­ton, key sites in the bat­tle be­tween in­cum­bent Texas sen­a­tor Ted Cruz, R, and Demo­cratic chal­lenger Beto O’Rourke, which Cruz won.

Many of the other con­glom­er­ates aren’t far be­hind. Dis­ney owns sta­tions in the coun­try’s three largest cities; its prop­er­ties in­cludes mar­kets in Illi­nois and Penn­syl­va­nia, which fea­tured a bevy of hot races. CBS has sta­tions in the two big­gest Penn­syl­va­nia mar­kets, as well as in South Florida and New York, all places with in­tense elec­toral fights. Com­cast has a sim­i­lar mix with its NBC O&O’s.

(It may seem sur­pris­ing that th­ese giant com­pa­nies are still in game of own­ing the lo­cal tele­vi­sion sta­tion. Out­fits with such scale wouldn’t seem­ingly want to bother with a busi­ness so seem­ingly parochial; WVIT Hart­ford isn’t ex­actly a global su­per­hero fran­chise. But th­ese re­la­tion­ships and the re­li­able ad dol­lars they pro­vide have proved re­mark­ably durable — and rev­enue-yield­ing — in a time of so much dig­i­tal com­pe­ti­tion. WVIT is owned by Com­cast-NBC Uni­ver­sal, a re­la­tion­ship that be­gan when Eisen­hower was coast­ing to a sec­ond term.)

This means the con­glom­er­ates took in sacks of cash they rarely col­lect in non­pres­i­den­tial years. In the midterms four years ago the to­tal out­lay, ac­cord­ing to one tally, was just $1.9 bil­lion. This came in at more than quadru­ple that.

The ques­tion now is what they’ll do with all th­ese new­found riches.

While com­pa­nies don’t break out where they in­vest prof­its, one area they’ve been des­per­ately hun­gry for cash is in tele­vi­sion con­tent. Con­tent costs have risen greatly in the past sev­eral years, pow­ered by the in­flux of free-spend­ing tech­nol­ogy play­ers such as Net­flix and Ama­zon, and the con­sumer ex­pec­ta­tion for more and bet­ter shows that comes with them. (Ama­zon’s chief ex­ec­u­tive, Jeff Be­zos, owns The Wash­ing­ton Post.)

Net­flix backed up the truck for “The Crown” ($10 mil­lion/episode) and “Stranger Things” ($8 mil­lion), ac­cord­ing to a re­port last year in the trade pub­li­ca­tion Va­ri­ety.

In re­sponse, broad­cast net­works and the stu­dios that feed them have been spend­ing more to com­pete so that th­ese pro­duc­tions can look a lot closer to Net­flix and a lot less like the usual broad­cast fare, which in the past cost just a few hun­dred thou­sand dol­lars per episode. Af­ter all, con­sumer eye­balls make no dis­tinc­tion be­tween th­ese plat­forms.

So spend they have. Sit­coms on broad­cast have climbed as high as $3 mil­lion per episode, ac­cord­ing to the Va­ri­ety re­port. Net­work dra­mas like “Chicago Fire” (NBC’s Uni­ver­sal Tele­vi­sion) and “This Is Us” (Twen­ti­eth Cen­tury Fox Tele­vi­sion) look as slick as they do be­cause their bud­gets are higher - used to hire big­ger-name di­rec­tors, em­ploy more so­phis­ti­cated cam­eras- shoot­ing tech­niques and gen­er­ally up­ping the pol­ish.

This is true on ca­ble too - TNT’s “The Alienist” ear­lier this year ran to a belt-pop­ping $7.5 mil­lion per episode, as pro­duc­ers didn’t stint on re-cre­at­ing the 18th-cen­tury sets.

While con­glom­er­ates can use an in­jec­tion of sev­eral hun­dred mil­lion dol­lars in mul­ti­ple ways — dif­fer­ent “cap­i­tal al­lo­ca­tion pri­or­i­ties for ev­ery owner,” as Bryan Wieser of an­a­lyst at New York-based an­a­lyst firm Piv­otal put it — spend­ing more on con­tent is widely re­garded as the great­est pri­or­ity for th­ese com­pa­nies, as they look not to be left be­hind in the era of Peak TV. And thanks to po­lit­i­cal ad­ver­tis­ing, they now have a lot more cash with which to do it. The in­fu­sion will al­low them to pour more money into al­ready-ex­pen­sive shows and up­ping their in­vest­ment in low­er­cost ones.

As midterms fade and a lull sets in be­fore pres­i­den­tial cam­paign­ing, view­ers will get a break from po­lit­i­cal ad­ver­tis­ing. But when they turn on their TV’s, they’ll cer­tainly see its ef­fects.

WASH­ING­TON POST PHOTO BY MICHAEL ROBIN­SON CHAVEZ

Demo­cratic Se­nate can­di­date Beto O’Rourke, fol­low­ing his de­feat to in­cum­bent Repub­li­can Ted Cruz, takes the stage at a rally Tues­day.

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