By Tony Lenoir
The final advertising blitz for the 2012 presidential election can be expected to further bolster ad revenue for U.S. cable operators, and according to a survey of cable footprints, Comcast Corp. and Time Warner Cable Inc. are positioned to carry the day.
With an estimated 6.8 million video subscribers at the end of the second quarter, Comcast has the greatest exposure to battleground states in our study, but Time Warner Cable has the highest concentration of subs in hotly contested Ohio, Iowa and Wisconsin.
In highly prized Ohio — John F. Kennedy in 1960 was the last candidate to win the presidency without carrying Ohio — Time Warner Cable counted an estimated 2 million subscribers in the second quarter, representing about 90% of the top 10 U.S. cable operators' video market in the state. WOW! was a distant second, with approximately 123,000 subs.
For our survey, we looked at Real Clear Politics polling averages and the eleven states targeted for campaign stops by the two presidential candidates in the five days leading to Election Day. This includes Colorado, Florida, Iowa, Michigan, New Hampshire, Nevada, North Carolina, Ohio, Pennsylvania, Virginia and Wisconsin.
We note that polls do not necessarily point to highly competitive races in Michigan and Pennsylvania. But we included them in our analysis as reports have surfaced that groups supporting former Massachusetts governor Mitt Romney for president on Nov. 1 will launch ad offensives in both states, with ad buys totaling $5 million.
The Romney campaign itself decided to run TV ads again in the Keystone State after a six-month hiatus. Officially the campaign has yet to run spots in Michigan. On the other hand, the Obama campaign on Oct. 31 unveiled its first spots in the state.
Although the bulk of political ad dollars — which have soared since the 2010 Citizens United Supreme Court decision removing restrictions on corporate and labor political contributions — typically go to broadcasters, broadcast's share of the political pie has stayed relatively flat in recent election cycles, oscillating between 50% and 60% of total political ad spending from 2004 to 2010.
And while much has been made of online campaigning, cable has seen its share grow at the expense of newspapers and radio, from roughly 4% in 2004 and 2006 to 8% in 2008 and 2010. The 10% mark could be broken in 2012. In other words, cable operators are getting a larger slice of a growing political advertising budget pie.
Several factors explain cable's success on that front. First, newspaper readership continues to erode and political campaigns favor visual ads to sway voters. This is somewhat detrimental to radio. Second, aside from the presidential election, cable is uniquely positioned to benefit from local politics (congressional races, state legislature, referendums, etc.).
With the exception of gubernatorial and senatorial races and statewide referendums, all those elections take place at the district level. And when it comes to TV viewers, it is difficult to match the kind of geographical targeting cable operators have to offer.
Taking these trends into consideration, we expect fourth quarter cable political ad revenue to be substantially higher than in the last presidential election cycle, pushing the annual total up to a new record high. At 10% of projected total advertising for 2012, cable operators would generate over $500 million.
We note that political advertising remains notoriously difficult to project, however. Asked to comment on the political ad picture in the fourth quarter, Comcast executive vice president, president and CEO Neil Smit in the company's third quarter earnings call on Oct. 26 said, "I would expect it to be higher than the third quarter, but I wouldn't venture to say how much."
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