80 Days and Counting

The words "Countdown 2016" with American flag.

That is how close we are to electing the next president of the United States.  As much as this cycle has been filled with controversy, one thing is true: This election year has been like no other in its imbalance of earned media versus paid media by both presidential candidates.

With Election Day just 80 days away, we asked Leo Kivijarv, Ph.D., Executive Vice President & Director of Research of PQ Media, to provide us with a perspective on the current state of political advertising and what it can mean for radio.  Before we share those insights, here are just a few simple reminders about radio:

  • According to Nielsen’s Q1 2016 Comparable Metrics Report, over 90% of voting aged adults listen to radio each week.
  • Radio delivers messages, content and information.
  • It is an especially important communication medium for political candidates because of its incredible reach.
  • Radio, with its varied formats, can reach potential voters according to their language, lifestyle – at home, in-car or on the go.

PQ Media

Flash back more than a year, before any candidates officially announced they were entering the Republican presidential race. Las Vegas had Chris Christie and Marco Rubio as the prohibitive favorites by a 12-to-1 margin, followed by Jeb Bush and Paul Ryan at 15-to-1, Ted Cruz fifth at 25-to-1, with no odds yet set for a Donald Trump run. (In comparison, Hillary Clinton was already a 2-to-1 favorite to be the Democratic candidate, followed by Joe Biden at 20-to-1 and Elizabeth Warren at 25-to-1, with Bernie Sanders not yet on the radar.) A few months later, but before the first primary, numerous prediction sites, such as PredictWise, Betfair, and Huffington Post’s Pollster, had Jeb Bush winning the nomination with a 45% share of the votes among the 17 candidates, followed by Scott Walker with a 20% share, Donald Trump at 10%, Marco Rubio with 8%, and no other candidate exceeding a 3% share. As a result, the first predictions of political media buying by other research companies provided a landscape similar to previous campaigns, increasing by double-digit rates across most media to more than $10 billion, although fundraising would barely reach that level, thus no monies would be left over for travel, hotel, food, salaries, and campaign headquarters.

Fast forward to the present, and we find an unconventional Republican candidate, Donald Trump, who currently has a meager media budget compared with past candidates. For example, during the primaries Trump, and organizations that supported him, spent about $20 million on TV ads, compared with $80 million by Bush, $70 million by Rubio and $35 million by Cruz. On the Democratic side, the Sanders team spent $70 million, while Clinton spent $50 million, bringing the aggregated total during the primaries to approximately $350 million for television when all the other candidates are included. (Note: Since the primaries Clinton has spent an additional $120 million.) This total lags the 2012 primary season when there were fewer candidates, but almost $500 million was spent on TV ads during the primaries. Furthermore, Advertising Age estimated in late July that the Clinton campaign had already booked another $100 million in TV ads for the remainder of the campaign compared to a measly $650,000 by Trump. Additionally, in mid-August more than 75 Republican leaders sent a letter to the RNC to request that they stop providing financial aid to Trump’s ad campaign, although Trump shot back that he would stop funding the RNC.

What also makes this election different from all previous campaigns is Trump’s high reliance on free social media, also known as “earned media,” an arbitrary value that is estimated based on advertising CPMs, such as Twitter’s ad rate applied to a Trump post and the subsequent CNN CMP when reporters discuss the tweet. Research released in March estimated that Trump had already amassed nearly $2 billion in free earned media, compared with Clinton at about $750 million and Cruz with slightly over $300 million. However, there is a major flaw with this methodology in that it doesn’t take into account the quality of the free coverage, vis-a-vis whether the social media post generated positive or negative feedback. In comparison, comScore uses a similar CPM methodology, developed by iTVX, for valuing free TV product placements using 65 different variables to determine the quality of the placement. It uses the full CPM when there is a positive outcome for brands via full integrations into plots (e.g., actor feels better after using the product) versus almost no CPM for a brand cameo (e.g., product in the background, no reference made).

How does this impact media operators? Trump continues to seek earned media while dismissing traditional media channels. In late 2015, PQ Media estimated that total political media buying would reach a more realistic $8 billion during the 2016 campaign. In comparison, slightly over $6 billion was spent during the 2012 elections. (Media included: advertising on terrestrial broadcast stations & networks, local MSOs & cable networks, radio stations & syndication, newspapers, out-of-home media, internet & mobile media; and marketing media such as direct mail, telemarketing, public relations, promotional products, consumer events, and marketing research.) However, due to Donald Trump winning the Republican nomination, PQ Media has revised the 2016 media buying estimate downwards to approximately $7.55 billion, which is reverse from conventional wisdom when there is an affluent candidate. That is, rich candidates historically have contributed significantly to their own campaigns, such as Mitt Romney (2002, 2012), Linda McMahon (2010, 2012), and Jon Corzine (2000, 2006). We don’t believe that Trump will aggressively support his own campaign using his personal fortune, as much of his reported wealth is tied up in real estate rather than cash. In addition, a number of political forecasters, such as Five Thirty-Eight, are predicting a strong Clinton landslide in electoral votes, 374 to 164, with only a handful of states up for grabs, mainly former Republican strongholds such as the two Carolinas, Arizona and Georgia. However, other predictors, like Real Clear Politics, believe it will be a much closer race with 10 states up for grab with 128 electoral votes, although a week previously it was 15 states and 182 electoral votes in question with New Hampshire, Oregon, Pennsylvania, Virginia and Wisconsin now leaning Democratic. If the latter scenario proves closer to reality as the election date nears, PQ Media would lean once again towards the original $8 billion in political media buying. However, since the conventions the polls indicate that the former scenario is more likely to be accurate with Clinton’s lead strengthening, such as the Real Clear Politics example. The final test of where the race stands will occur after Labor Day and the first debate, but it should be noted that no candidate has ever won the election when trailing after the two conventions.

That said, there is a possibility that some monies originally postmarked for the presidential election by the RNC and/or SuperPacs will be funneled to other contentious races, thereby keeping media buying growth high. We agree that contentious Senate races will most likely see an influx of dollars because the Republican Party’s majority is in serious jeopardy. Prediction sites believe there are between three to nine extremely close races that hypothetically could result in a 50-50 tie after the election, whereby the new Vice President would cast tiebreaking votes. However, PQ Media doesn’t believe much money will be funneled to House races as the number of current safe Republican seats is 217, one below the majority benchmark, with another 16 races in which the Republican candidate is favored. Rather, the House races that might see an uptick in financial support will primarily be in presidential swing states, like Nevada where there are two toss-up House seats (3rd & 4th near Las Vegas). By de facto, the party’s presidential candidate gets a vote when loyal party members go to the polls for the contentious House races.

What does this mean for radio stations? Historically, radio does better in non-presidential elections as there are three times as many gubernatorial races (36 in 2014 versus 12 in 2016). Additionally, presidential candidates rarely use radio, earmarking about 3% of all media buying, which was confirmed during the 2016 primaries. In comparison, the share of radio in media buying for Senate and House candidates is 6%, while the share rises to 8%-to-10% for gubernatorial, state and local candidates, as well as ballot initiatives. However, this election might  create a shift for the radio industry in swing state markets that also are home to two or more contentious Senate, House, and/or gubernatorial races, such as the aforementioned Las Vegas market. The few millions that radio might lose from the Trump campaign might be offset by an increase in radio buys by other candidates when television ad inventory becomes tight and difficult to purchase in the weeks leading up to the November election. PQ Media estimates that about 50 DMAs fall into this category, like Ottumwa/Kirksville, Miami, and Raleigh.

As a result of all these factors, PQ Media currently estimates that radio will generate approximately $410 million in 2016, compared with $430 million in 2014 (when there were more gubernatorial races), and $335 million in 2012 (during the last presidential election).      

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