Doesn’t that violate a Newtonian law that compels spending on political ads to grow into infinity? You might think so considering that the total has increased every two years since 2002, and only fell in three years since 1980 (that would be 1990, 1998, and 2002). But 2014 will change the recent trajectory, with the total for local market U.S. TV broadcasters probably topping out at $2.6B, down 10% from the record $2.9B set in 2012, Moody’s Investors Service says this morning. There’s no presidential campaign this year; that accounted for about 31% of the spending in 2012. And, unlike in recent off-years, issue ads, and local and state races, won’t make up the difference. “We will see fewer heated political races in 2014 than in 2012,” the report says. That could be a problem for broadcasters because political ads offer them “premium pricing, especially as election day approaches and inventory grows scarce,” the debt rating firm says. The decline “will cut into the odd-year/even-year average EBITDA [cash flow] levels, which we use to assess credit metrics.” Station groups most affected could include E.W. Scripps (where 22% of TV revenues came from political ads in 2012) and Gray TV (with 21%). They “will experience a notable decrease in political advertising revenue in 2014 on a same-station basis, having led the industry in revenue percentages in 2012.” Allbritton Communications and Media General also could take a hit. But the broader upward trend will re-emerge in 2016, which will be “the first presidential election year featuring heavy primary-election campaigning for both major political parties since 2010, when the U.S. Supreme Court removed limits on campaign financing.” With recent station group refinancings to take advantage of low interest rates, major mergers, and increasing retransmission consent revenues, Moody’s isn’t worried. “We expect that the broadcasters will maintain generally good liquidity, including comfortable EBITDA cushion to their financial covenants.”
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.