After record election revenues, TV ad income may hit 10-year low

Bolstered by this year’s elections, local television ad revenue is projected to be near a record high. But with the economic
swoon and no political ad campaigns in 2009, TV ad revenue could hit a 10-year low next year.

Historically, there’s no mass medium that benefits more from an election year than TV, and this year’s tight primary and general
election races—along with a boost from the Summer Olympics—are pushing ad revenue even higher than previously projected
industry experts.

The latest projections have 2008 TV ad revenue for all local stations edging toward $205 million, according to BIA Financial
Network Inc., a Virginia-based financial and strategic consultancy for the TV and communications industries. That’s up from
$192.4 million a year ago.

The market’s TV revenue record came in 2006, when the economy was still robust. That year, advertisers bought $203 million
in advertising. This year’s record number comes as the economy unravels.

"Political advertising has absolutely saved the broadcasters in the Indianapolis market," said BIA Vice President
Mark Fratrik,
an economist who closely tracks TV ad revenue nationwide. "The revenue has been pushed up substantially by the Obama-Clinton
primary battle and the Obama-McCain general election. Indiana is benefiting from the type of spending usually reserved for
swing states."

Obama has spent $11 million and counting on advertising in this market, industry experts said. That number could easily hit
$12 million by the Nov. 4 election. Gov. Mitch Daniels, who is running against Democrat Jill Long Thompson, has spent $11
million statewide, with a good deal of that in the Indianapolis market, industry experts said. McCain, who has chosen to focus
on other states, has spent $3 million in this market, and Thompson, who isn’t as well-funded as Daniels, has spent $2 million.

Overall, industry experts estimate that political campaigns bought $30 million worth of advertising in central Indiana during

"There has never been a political buy in this state of this size … never, ever, ever," said Bill Perkins, a longtime
media buyer and president of Perkins Nichols Media.

It could have been even better if not for weak spending in the 7th Congressional District race between Democrat Andre Carson
and Republican Gabrielle Campo and in the 9th District where Republican Mike Sodrel and Democrat Baron Hill have been unusually

"In several cases, the spending on local races just didn’t rise to the level it has in the past," said Jim Tellus,
manager at WTHR-TV Channel 13.

The Olympics, which industry experts estimated added $4 million to $5 million in TV advertising to the market, also helped
bolster the year. Much of that went to WTHR, an NBC affiliate that broadcast the Summer Games. Tellus said WTHR beat revenue

"The Olympics were phenomenal for us," Tellus said. "This market had the highest ratings in the Eastern time

Without political and Olympics ads to lean on, the economic downturn is expected to take TV advertising—locally and nationally—to
new lows. The 2009 projections are startling, BIA’s Fratrik said, because TV has so far not bent to many of the forces that
have plagued radio, newspapers and other print publications.

"TV has been more Web-proof," Fratrik said. "It’s remained a place where people continue to go for information
and entertainment
despite all the technological advancements we’ve seen."

BIA earlier this year projected the local market would bring in $190.8 million in 2009 ad revenue. Fratrik has since revised
that to $185 million. "That might be optimistic," he said. "We just don’t yet know the depth of this downturn."

It’s a particularly critical time for broadcasters, with the stations’ conversion to digital and high-definition in full swing.
Capital needed to make the leap from analog to digital has reached into the millions for most local broadcasters.

"Luckily, our transmitters, our editing equipment, our cameras have all been switched to digital," said Don Lundy,
Channel 6 general manager. "That puts us in a much better position to weather whatever the future brings. If this economic
downturn had happened a year or two ago, it would have been much worse."

Still, the demands of keeping up with technology are intense.

"This is an acutely competitive industry, so there’s always pressure to push forward with technology," said Robert
principal of iN3 Partners Inc., a Nashville, Tenn.-based media and investment banking consultancy. Unmacht said stations have
spent heavily to keep up with the demands of streaming video and other Web technology.

One of the biggest concerns for 2009 is that falling demand for advertising will start a pricing war.

"In some cases this year, broadcasters have completely sold out their inventory, especially in the last half of October,
to the demand of political advertisers," Perkins said. "That has kept rates inflated."

Local media buyers reported that 30-second spots on some local TV stations in the last month are going for 50 percent higher
than the norm. For instance, a 30-second ad during some local newscasts, media buyers said, is going for $1,200 to $1,800.
Normally, those rates would be $700 to $1,200, depending on the time and station.

BIA’s Fratrik said next year will be a switch from a seller’s market to a buyer’s market. Already, TV stations are seeing
a dramatic drop-up to 40 percent over the last three months—in automotive advertising, typically TV’s biggest ad category.
Advertising by entertainment outlets, restaurants, hotel and travel-related businesses is also down double-digit percentages,
according to BIA figures. Those trends are expected to continue in 2009.

"There are indications that the softness in 2009 could lead to an ad rate war," Perkins said. "I think TV ad
revenue next
year could sink lower than it’s been in a decade."

WISH-TV Channel 8 General Manager Jeff White has little doubt the industry will bounce back. He points to data from New York-based
Nielsen Media Research that shows local TV viewership in the last seven years has increased 7 percent to 21 percent, depending
on the time of day.

Fratrik thinks the economy will rebound in time to push TV advertising to a double-digit percentage increase in 2010 over

"We are not seeing an erosion of viewers," White said. "The reason TV ad revenue is going down is, the economy
is going down.
This is a situational change, and not a paradigm shift of viewers away from television."

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.