Moody's bullish on television in 2012 election


“Political advertising centered on the 2012 presidential and statewide election contests are all but certain to break new records next year,” said Moody’s Investors Service in a commentary on the outlook for US television broadcasters. And while nearly all will benefit, the report singles out a few that are particularly hot for political ad sales.

Political ad revenues, which broke new records during 2010’s midterm election contests, will grow by 9-18% in 2012 above 2010 levels, Moody’s predicted. Not only will there be a presidential contest, along with many hotly contested House, Senate, and Governor races, but Moody’s noted that the broadcast television industry benefited strongly from the January 2010 Supreme Court decision that effectively ended spending caps for political advertising that had been central to legislation enacted in 2002. “Unlike in 2004 and 2008, the presidential election in 2012 will be conducted without limits on campaign spending by corporations or unions,” the ratings agency said.

“Virtually all US broadcasters will benefit from spending on political ads in 2012 but especially those speculative-grade operators that saw the biggest percentage increases in total revenues from political ads in 2010,” said Moody’s Vice President-Senior Analyst Carl Salas, principal author of the report. These include, he said, Barrington Broadcasting Group, Gray Television, Local TV, Nexstar and NVT Networks/New Vision.

The report said certain companies will also benefit from their positions in particular states that look set for heated political contests in 2012, whether for the state’s share of electoral votes for president, a Senate seat, or the governorship. Barrington, Local TV and Nexstar all own broadcast operations in Missouri, a state that could see close contests for all three offices in 2012, the report says. Barrington and Local TV, meanwhile, both own broadcasting in Iowa, which is set to be the first state to vote in the Republican presidential selection process.

Salas said he expects lower percentage increases in total revenues from political ads in 2012 for other broadcasters, including Belo and Sinclair Broadcast Group — companies with large geographic footprints and relatively diversified revenue streams that tend to rely less on political advertising.
“The boost in revenues in 2012 will not, by itself, shift our stable outlook for the pure play US broadcast television sector, as political advertising will account for less than 7% of all television broadcast advertising revenues for these operators over the course of the two-year political cycle. But speculative-grade broadcasters that use the 2012 cash windfalls to reduce debt will improve the credit quality of their bonds and bank facilities,” noted the credit analyst.