In the year 2000, what percentage did expenses for media advertising -
TV, radio - bear to the total profits of local television and radio
stations. The media expenses of campaigns should be available through
the Federal Election Commission; the profits of local stations should
be available through the Federal Communications Commission.

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Request for Question Clarification by jbf777-ga on 24 Jul 2003 09:39 PDT

Hello -

Are you looking for case study-type examples, or an industry-wide estimate?

jbf777-ga

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Request for Question Clarification by jbf777-ga on 28 Jul 2003 11:05 PDT

When you say:

"The profits of local stations" are you looking for some aggregate
estimation of all local stations or individualized local stations?

Any info you can supply would be appreciated..

jbf77-

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Request for Question Clarification by jbf777-ga on 28 Jul 2003 11:48 PDT

Update: Seems like those two organizations don't have that
information, but I have managed to track down the total amount spent
on advertising for radio/TV in the year 2000.  However, it's not
really "local."  It's a total number.  Can you clarify what you mean
by local?

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Clarification of Question by ragmop-ga on 02 Aug 2003 09:24 PDT

I am trying to quantify the financial importance of political
advertising material to local television stations. It is my instinct
that this is very profitable business and is an important component of
over all profit. This is the reason why campaign reform can -
seemingly - never be effective. The local TV stations are making too
much money and they are too important to individual congressman.
My question tries to aggregate all expenses for TV with the earnings
of the local stations. Unhappily, it is likely that this data is not
sufficiently disaggregated to permit an answer to my question. Thanks
for the insight.

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Request for Question Clarification by markj-ga on 02 Aug 2003 14:18 PDT

ragmop --

After considerable research, I don't believe I would be able to give
you what you originally asked for, because I haven't found a reliable
number for total local television station advertising revenue in
2000(as opposed to a number that seems to include television network
advertising).  I expect that such an estimate exists somewhere in a
proprietary study, but I have not been able to locate the information
online.

What I have found is a sourced estimate of the total advertising
revenue in 2000 of the local stations that make up each of the top ten
television station groups (for example, the total ad revenues for the
13 NBC-owned local television stations combined.)

From a separate source, I have also found reliable information on the
total political ad revenue in 2000 for each of these top station
groups (except one).  Of course, it is a simple matter to express the
latter number as a percentage of the former for each of these groups.

I could also supply a projected estimate -- made in the middle of the
2000 campaign by a very reliable financial industry source -- of the
percentage of overall local television station ad revenue in 2000 that
would be attributable to political advertising.  This source compares
that number to estimates for other years.

Thus, my answer would not include radio station advertising
information, and I do not expect to be able to give you a reliable
revenue comparison that includes all local television stations.  (Of
course, if that information is essential to you, you might consider
posting separate questions asking for it.)

Would the information I could provide be the core of a completely
satisfactory answer to your question?


markj-ga

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Clarification of Question by ragmop-ga on 02 Aug 2003 15:39 PDT

The answers that you outline would be entirely satisfactory and I
would feel that you had entirely earned your fee ( and more).
This will be most interesting and most helpful.
As an ironic aside, my particular interest is in the smallest TV
markets - like Portland Maine from whence I come - where I intuit that
the TV stations cruelly use their monopoly position (I was an
unsuccessful candidate for federal office) to extract very large
payments which supplement their not very exciting add revenues.

ragmop --

Thanks for the opportunity to answer your question.  First, I will
give you the best online information I have found on the specific
revenue comparison you have asked for, including some explanation of
the numbers.  Then, I will offer some other anecdotal information that
is relevant to your question.  Next, I hope to give you some "added
value" with a discussion of a background issue that is closely related
to your question.  I will then list some links that should help you to
easily locate the most basic information on this subject, along with
an explanation of my search strategy.

I.   For most television stations, political advertising revenue in
2000 ranged between 5% and 8% of total advertising revenues.

A very useful document that bears on your question and the concern
that underlies it is called "Gouging Democracy: How the Television
Industry Profiteered on Campaign 2000."  It was prepared by the
Alliance for Better Campaigns, an organization founded by Paul Taylor,
a respected former journalist who has long been a fervent and
effective advocate for political campaign reform, especially that
related to the role of broadcasting in the political process.  Here is
a link to the home page of the Alliance's web site:
Alliance for Better Camapigns
http://bettercampaigns.org/   

The introduction to Appendix I to the "Gouging Democracy" report
asserts that for television stations owned by ABC, CBS and NBC,
political advertising revenue "represents about 8 percent of  total
2000 ad revenue."  Here is the complete quote in context:

"Although candidates rarely buy political ads on national network
television, the same corporations that own the networks took in the
most political ad money because they also own the most profitable
local television stations in the nation’s largest local markets. ABC,
CBS and NBC combined took in almost $234 million from about 180,000
ads on local stations – nearly one-third of all political ad revenues.
For these network-owned stations, that represents about 8 percent of
total 2000 ad revenue."
Alliance for Better Campaigns: Gouging Democracy: Appendix I: TV's
Political Fortunes in 2000:
http://bettercampaigns.org/reports/display.php?PageID=41


Unfortunately, the derivation of Taylor's "8%" number for these
network-owned stations is not included in the report.  Political
advertising expenditures/revenues for local television station ads --
nationally, state-by-state, market-by-market -- are calculable and
much of this information is provided in detail in the "Gouging
Democracy" report.  But total station revenues are not "officially"
reported to the SEC, the FCC or anyone else and are
generally available except in proprietary research.  Even then, they
may be calculated in different ways.

Since Taylor and his organization are advocates, it would not be
surprising if the "8%" figure was calculated using data or assumptions
about total station revenues that result in as high a percentage as is
reasonably defensible.  The Alliance for Better Campaigns does have
substantial credibility, so I expect that the figure is indeed
defensible.

In any case, I was able to find a sourced chart prepared for another
campaign reform advocacy group that contains estimates of total
advertising revenues of some major station groups for 2000.   Here is
a link to the page that contains it:
Oregon Follow the Money: Broadcast Industry Economics: Top Ten Station
Groups by Total Revenues, 2000
http://www.oregonfollowthemoney.org/FreeAirTime/Broadcast%20Industry%20Economics%20Factsheet.html

Here is a link to the home page of the sponsoring organization:
Oregon Follow the Money: Money in Politics Research Action Project
http://www.oregonfollowthemoney.org/

The source for the proprietary television revenue data in this chart
is BIA Financial Network, Inc., "a merchant banking and investment
firm specializing in broadcasting, telecommunications and related
industries":
BIA Financial Network, Inc.
http://www.bia.com/

By matching the station-group revenue data on the BIA chart with the
"Gouging Democracy" chart showing 2000 political advertising revenue
for major station groups, I was able to do my own calculations of the
percentages in which you are interested.   Here they are:

NBC Television Stations
Political Advertising Revenues, 2000:  $83 million
Total Advertising Revenue, 2000: $1.480 million
Revenue Percentage from Political Ads:  6%

CBS Television Stations
Political Advertising Revenues, 2000:  $68 million
Total Advertising Revenue, 2000: $1.807 million
Revenue Percentage from Political Ads:  4%*
* The relatively low percentage very likely results from the inclusion
of the 2000 consolidation with the Paramount station group in the
total revenue chart, but not in the political ad revenue chart.

ABC Television Stations 
Political Advertising Revenues, 2000:  $82 million
Total Advertising Revenue, 2000: $1.344 million
Revenue Percentage from Political Ads:  6%

Gannett Television Stations 
Political Advertising Revenues, 2000:  $50 million
Total Advertising Revenue, 2000: $891 million
Revenue Percentage from Political Ads:  6%

Fox Television Stations 
Political Advertising Revenues, 2000:  $47 million
Total Advertising Revenue, 2000: $2319 million
Revenue Percentage from Political Ads:  2%*
* This low percentage may explain why the "Gouging Democracy" report
did not include Fox-owned stations in computing its estimate (quoted
above) that "8%" of  "network-owned" stations' ad revenues in 2000
were from political ads.  More likely, the total ad revenue number
here seems to be unexplainably high compared to the other network
groups, so it is probably unreliable.

Hearst Argyle Television Stations 
Political Advertising Revenues, 2000:  $42 million
Total Advertising Revenue, 2000: $829 million
Revenue Percentage from Political Ads:  5%

Belo Television Stations 
Political Advertising Revenues, 2000:  $38 million
Total Advertising Revenue, 2000: $718 million
Revenue Percentage from Political Ads:  5%

Cox Television Stations 
Political Advertising Revenues, 2000:  $28 million
Total Advertising Revenue, 2000: $579 million
Revenue Percentage from Political Ads:  5%


Interestingly, with regard to the entire local television advertising
market, Paul Taylor  wrote an article in September 2000 that contains
the following excerpt, based on a proprietary report by a prominent
investment banking firm:

"As recently as 1992, political ads accounted for just 3.8 percent of
the annual ad revenue of the typical local station, according to an
analysis of the industry by Bear, Stearns and Co. This year[2000],
that figure is projected to rise to 9.2 percent."
Washington Monthly: Too Little Time (4th paragraph)
http://www.washingtonmonthly.com/features/2000/0009.taylor.html
 

Since the underlying data is not available, one can only guess why the
"Gouging Democracy" report asserts that 8% is a defensible figure for
the ABC, CBS and NBC owned stations, or on what basis Bear, Stearns
projected 9.2% on a nationwide basis,  while my calculations show
about 6% for the network-owned stations (after allowing for the CBS
discrepancy).

As noted above, station revenues can be unofficially "estimated" in
various and inconsistent ways, and they are not typically broken out
for public consumption by the group owners themselves.  In any case, I
believe the data available online show that most large stations earned
political ad revenues in 2000 that ranged from about 5% to 8% of their
total revenues -- a substantial chunk.


II.  Other anecdotal information that supports this conclusion:

This 2001 article, from the Advertising Educational Foundation, quotes
the manager of an NBC affiliate in Tampa, as follows:

"Eric Land, vp/gm of NBC affiliate WFLA in Tampa, notes, "Olympics and
elections dollars represent incremental funds to the market. Political
dollars at their height in a presidential year might represent 4 to 5
percent of a market's total revenue."


The same article cites a New York City broadcaster on the 2000
election:

"In New York, for example, one broadcaster noted that the six top
stations there bring in about $1.6 billion annually. But political
advertising only accounts for roughly $45 million of that -- unless
another wealthy candidate such as Jon Corzine drops in. Last year, the
Democrat spent $60 million in New York markets, $10 million alone at
WNBC, to become a senator from New Jersey."
Advertising Educational Foundation: Has Everything Changed? (about 3/4
down the page)
http://www.aef.com/channel.asp?ChannelID=7&DocID=1803&location=Trends


In its 1996 annual report, Scripps, then the owner of ten television
stations in medium to large markets had this to say about political
advertising:

"… [M]ore and more, the local television station business operates in
two- and four-year cycles, driven by an explosion of political dollars
in election years. In 1988, just two presidential elections ago,
Scripps took in $6.6 million in political dollars. In 1996 the revenue
from candidates and issues grew to $19.5 million. It's important to
note that the Scripps stations took in more than their share of
political advertising due to favorable geography and strong ratings
for local news. Political advertising accounted for 6 percent of the
group's revenues, versus about 2 percent for the broader industry."*
Scripps: 1996 Annual Report: Television
http://www.scripps.com/annrpt/96/Televisionmain.html
* I believe that the self-serving "2%" reference to the "broader
industry" must include at least television network revenues and so is
not relevant to your question.


In this smaller market in Ohio, 2000 was apparently a banner year for
political advertising, or maybe a particular poor year for commercial
advertising:
"…[P]olitical advertising was 10.6 percent of the total TV ad revenue
in the Youngs-town market during 2000, which is estimated at $37.5
million by BIA Financial Network."
Daily Business Journal: Politics is Big Bucks (April 2001)
http://www.business-journal.com/mediascope/01045mediascope.html


Since Portland, ME is not among the top 75 television markets,
detailed data on political advertising expenditures there were not
included the "Gouging Democracy" report.  However, you might be
interested in this quote from the final report on the 2002 election
from the Wisconsin Advertising Project.  It seems likely that the
Portland stations were
well above the national average in political advertising revenues (and
their percentage of overall ad revenues) in 2002, at least:

"The busiest market for political advertising was by far the Boston
metropolitan area, which saw an astounding 41,000 ads this cycle, far
outpacing its closest competitors. Atlanta (GA), Austin (TX), Houston
(TX), and Portland (ME) all saw over 25,000 ads."
Wiscpolitics.com: Press Releases: Final Report on the 2002 Election by
the Wisconsin Advertising Project
http://www.wiscpolitics.com/freeser/pr/pr0212/dec05/pr02120504.html


The following quote is from Paul Taylor (citing Bear, Stearns), on the
overall size of the political advertising marketplace:

"In election years, political campaigns are now the third-best
advertising client for the typical network-affiliated local television
stations, trailing only automobiles and retail stores."
Washington Monthly: Too Little Time (4th paragraph)
http://www.washingtonmonthly.com/features/2000/0009.taylor.html


III.  The controversial related issue of "Lowest Unit Charge:"

The so-called "Lowest Unit Charge" ("LUC") provision was adopted as
Section 315(b) of the Communications of 1934 in 1971.  This provision
was intended to lower the cost of political campaigns by requiring
political ad buyers to be treated the same way as "most favored
commercial advertisers" with regard to "the same class and amount of
time for the same time period."  Here is a link to the text of the
revised Section 315:
Legal Information Institute: U.S. Code Collection
http://www4.law.cornell.edu/uscode/47/315.html

However, because of the complexity of broadcast advertising rate
structures, and the fast-changing market conditions under which
broadcast advertising is sold, this somewhat vague provision has
become extremely difficult to implement and enforce.  This situation
has caused campaign reform advocates like Paul Taylor to accuse
broadcasters of flagrant price-gouging of candidates (thus the title
of the 2000 "Gouging Democracy" report).

On the other hand, broadcasters have urged that they have been
unfairly pressured under threat of legal action to sell
"non-preemptible" time, which political ad buyers typically want, at
an artificially low price that is comparable to rates for the
"preemptible" time typically sold to commercial advertisers. 
("Preemptible" commercials can be bumped for other buyers who
subsequently offer a higher price for the same time.)

The 2000 election brought this situation to a head and led to a
legislative proposal (which ultimately failed) to explicitly require
such "nonpreemptible" time to be sold at "preemptible" prices.

Here is the way that Paul Taylor's Alliance for Better Campaigns
frames the issue:

"Television stations made their lowest candidate rate unattractive to
candidates by selling ads at that rate with the proviso that they
could be bumped to another time if another advertiser came forward
with an offer to pay more. The LUC system is supposed to ensure that
candidates are treated as well as a station’s most favored product
advertisers (e.g., the year-round advertiser who buys time in bulk and
receives a volume discount). But unlike most product advertisers,
candidates operate in a fast-changing tactical environment and need
assurance that their ads will run in a specified time slot. During the
height of the 2000 campaign, station ad salesmen routinely took
advantage of these special needs and steered candidates toward paying
high premiums for “non-preemptible” ad time."
Gouging Democracy: Executive Summary
http://bettercampaigns.org/reports/display.php?ReportID=4


For the other side of the story, I refer you to the statement of House
Commerce Committee Chairman Billy Tauzin at a hearing on the
legislative proposal to "clarify" the LUC provision to make explicit
that broadcasters must provide candidates nonpreemptible time at
premptible rates.  Here is an excerpt from that statement:

"Proponents of the Torricelli Amendment advocate that it merely
clarifies existing law and ensures that Congress’ original intent
regarding the lowest unit charge is fulfilled. The intent of Congress
in enacting the lowest unit charge provisions was to ensure that
political candidates were treated the same as a broadcasters’ (and now
cables’ and DBS providers’) most-favored commercial advertiser.
However, by requiring these companies to provide candidates with rates
equivalent to the least expensive spot in the same time period over
the last year and making those spots non-preemptible, the Torricelli
Amendment goes way beyond merely clarifying existing law and
fulfilling its original intent.

"Rather, it puts political candidates ahead of commercial advertisers.
I, for one, as a candidate who runs for a Federal office every two
years, vigorously oppose such a result. Indeed, why should a
politician receive a lower rate for ad slots than the local car
dealer, mom-and-pop storeowner or local restaurant? One of the policy
goals of the Federal Election Campaign Act of 1971 was to ensure that
candidates are treated on par with the most favored commercial
advertisers during the pre-election period not better. "
House Committee on Energy and Commerce: Committee News: June 20, 2001
http://energycommerce.house.gov/107/news/06202001_293.htm


I have included this discussion in my answer because the policy
question raised by this obscure and arcane, but very important,
provision of the Communications Act has  substantial relevance to the
cost of past and future campaigns and the impact of political
advertising on television station revenues.


IV.  Additional sites:

You can easily navigate to all sections of the "Gouging Democracy"
report on the 2000 election from this link:
Alliance for Better Campaigns: 
http://bettercampaigns.org/reports/display.php?ReportID=4

From this link you can go directly to all the research and reports
published by the Alliance for Better Campaigns:
Alliance for Better Campaigns: Research and Reports
http://bettercampaigns.org/reports/

Here is a link to historical information on total political
advertising expenditures in the top 75 television markets:
TB Bureau of Advertising: TV Basics: Political Ads on Broadcast
Television
http://www.tvb.org/rcentral/MediaTrendsTrack/tvbasics/31_Political.asp

Here is a link to Paul Taylor's June 2001 testimony before the House
Committee on Energy and Commerce on Lowest Unit Charge legislation:
House Committee on Energy and Commerce: Prepared Witness Testimony
http://energycommerce.house.gov/107new/hearings/06202001Hearing290/Taylor448.htm



Search strategy:

I used many Google searches to find the most relevant information
among the very large online trove of material related to campaign
reform and political advertising.  Here are just some of them:

"political advertising" "local television stations"
://www.google.com/search?sourceid=navclient&q=%22political+advertising%22+%22local+television+stations%22

"political advertising" "local television stations" percent OR
percentage "total revenues"
://www.google.com/search?sourceid=navclient&q=%22political+advertising%22+%22local+television+stations%22+%22percent+OR+percentage%22+total+revenues%22

"political advertising" "local television stations" 2000
://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22political+advertising%22+%22local+television+stations%22+2000

"portland maine OR me" "political advertising"
://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22portland+maine+OR+me%22+%22political+advertising%22


I have tried to provide you with the most relevant and reliable online
information and to organize and format it in a way that will be useful
and convenient for you.  If any of the information is unclear, please
ask for clarification before rating this answer.



markj-ga

I had the great pleasure this week of meeting one of the Google
principals at Aspen and told him of the great value of this
exceptional service. I believe that this Researcher has performed
WORLD CLASS search and analysis for me.

ragmop --

Thanks for your clarification.  I will work on this tomorrow, and I
expect to have the answer to you by Monday.  I hope to be able to
supplement the direct answer with some useful context for you.

markj-ga

thank you

ragmop --

Thanks very much for the very kind words, the five-star rating and the
"world class" tip.  It was a pleasure

markj-ga