Electronic Retailer - June 2012 - 45

BY ROBERT YALLEN

Election and Politics Are Shaping the DR Landscape in 2012
CHANNEL CROSSING: DRTV
Created during the era of the New Deal, the Federal Communications Commission was established by an act of Congress in 1934 and given broad latitude in its powers to regulate broadcast communications. One of the key regulations that advertisers contend with is the FCC’s attempt to level the playing field for political candidates who run broadcast advertising by providing them with rate protection during a specific window of time. The definition of “broadcast” as used by the FCC to provide political rate protection for candidates was extended to include cable advertising. The rule reads: “A cable operator who sells political advertising on its own cablecast channels must charge federal candidates the ‘lowest unit charge’ for the same class and amount of time for the same period, during the 45 days preceding the date of a primary or primary runoff election and during the 60 days preceding the date of a general or special election.” The original rationale for the political rate protection was to allow fair access for political candidates to the limited airwaves. Now, many years later, with the addition of seemingly unlimited channels and other significant media, such as the internet, the need to regulate the full scope of broadcast advertising is long gone. The impact of political advertising on the television industry is problematic from two standpoints: First, the challenges that surround the government imposed political rate structure. The second is the actual expenditures that seem to create a black hole that ostensibly sucks the inventory out of the marketplace. that political advertising will account for more than 45 percent of the spots during the news dayparts. Other dayparts such as prime access, early fringe and late news will also see much of their inventory taken by political advertising. The bulk of the Super PAC money will be spent locally. Remember, the presidential race does not elect the president, but rather elect a number of electors who do. So dollars will flow to key geographies based on their ability to defend or capture votes in the Electoral College. For categories such as cable news and top-tier networks, inventory will be very tight. In states perceived to be key (Florida and Ohio, for example), there will be very high demand for inventory. Local cable also will be impacted by the expected increased spending in spot TV, forcing some local advertisers to turn to local cable as an alternative for their general advertising needs.

Strategies DR Advertisers Can Use to Combat Political Advertising
In the DR industry, a complete advertising hiatus during heavy political advertising periods is not an option. To combat the barrage of political advertising, first negotiate the lowest rates and added value by booking as far in advance as possible. Next, look for media opportunities that are less affected by political advertising from an inventory and efficiency standpoint. Remember, not all stations will be as heavily affected; the news formatted stations for all media will be the most impacted and should be avoided close to election dates not only for rate impact. Also, because the level of political advertising could be as high as 80 percent to 90 percent, advertiser message will be lost. Another key element will be to know which individual elections are still in play. Selecting local markets not in contention could create an opportunity for efficient schedules. Many markets will not see national election dollars because the Republican or Democratic parties assess that advertising will not alter a projected outcome – for example, Los Angeles, Miami, most markets in the South and many markets in Texas. On the national cable side, the larger, higher profile national networks will be the most problematic. During this timeframe, we have typically leveraged the lifestyle, entertainment and smaller sports networks where most direct response can air with higher frequency and less competition from political ads. Robert Yallen is the president and CEO of the Inter/ Media Group of Companies. He can be reached at (818) 995-1455 or ryallen@intermedia-advertising.com. 45

Forecasting 2012 Political Spending
In 2008, Republican nominee John McCain took federal funds on the Republican side, so that capped his spending. This time around, both Barack Obama and Mitt Romney likely will decline the federal spending cap and spend at much higher levels. A research report by Borrell Associates projects that election spending in 2012 will reach an unprecedented $9.8 billion. Spending by PACs, national political party committees and Super PACs is projected to be almost $5 billion dollars. Cable advertising is projected to increase by more than 100 percent, topping off at more than $900 million, with broadcast television and radio anticipating a large increase as well – projected at 30.6 percent and 48.3 percent, respectively. Because of the Electoral College, presidential ad spending will continue to be focused on individual states that are in play rather than be spent nationally. On the national side, most of the big spending will begin in August extending through the November election.

What Will the Political Impact Be on DR?
Dayparts are impacted differently in each spot market. In the final weeks before the general election, we will see

June 2012 | electronicRETAILER

Electronic Retailer - June 2012

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