Stark political divisions in the U.S. have caused a surge in TV ad spending, with primary races in Ohio, Pennsylvania and other key states pointing to a massive haul in the upcoming fall midterms.
One key beneficiary of that influx of cash is Sinclair Broadcast Group, the No. 2 owner of local TV stations in the U.S. The company’s CEO, Chris Ripley offered his outlook on political ads and other topics in an appearance at the MoffettNathanson 9th Annual Media and Communications Summit.
“Some of these primary races are crazy,” Ripley said. He cited Ohio, where Donald Trump-backed U.S. Senate candidate J.D. Vance prevailed in a hard-fought contest. The $75 million spent on TV ads for the primary was 40 times more than what was spent on the primary in the last election, Ripley said, and four times more than the last general election.
“On the one hand, I lament that we’re in the political environment that we are,” Ripley said. “On the other hand, it’s very good for our business.”
The surge in primary spending points to a record midterm in the fall, with what Ripley called the “big money” kicking in during the third and fourth quarter.
Ripley took care not to make any endorsements, but his company’s local TV operation has been known for its highly partisan commentaries. It decided at the end of 2019 to end its controversial “must-run” opinion segments featuring personalities like former Trump Administration official Boris Epshteyn.
Among the states where important gubernatorial and Congressional races will unfold through November are Ohio, Pennsylvania, Wisconsin, Arizona. “There’s so much at stake here,” Ripley said, noting other states with significant Sinclair station presence like Georgia, Kansas, Michigan, Nevada, Maryland and Maine.
Spending on issue-related TV ads is another emerging growth area, Ripley noted. “More and more issues are going on direct ballots,” he said. “With what’s going on with abortion rights, that’s going to just even add to that category.” Legalizing sports betting or cannabis are other issues generating significant ad spending.
Ripley covered a number of other subjects besides politics during the 45-minute conversation. Sports streaming was a key theme, as the Sinclair-controlled Diamond Sports Group is poised to soft-launch a direct-to-consumer set of regional sports networks.
Asked by moderator Michael Nathanson about the opportunity that sports represent, Ripley said, “We hit about 80 million homes in our footprint. We know that around half of them are not getting an RSN. That’s a huge [total available market] right there that we can address.”
The prospect of taking regional sports networks — hugely profitable enterprises born of the cable TV bundle era — into streaming is an untested one. While NBCUniversal has hinted it is exploring streaming versions of its RSNs, the economics are different both on an industry and consumer level.
Ripley said the overall climate for streaming is helpful to the prospects of Diamond, which is going to need to charge a fairly hefty monthly fee. Pricing hasn’t been finalized, but recent projections by Sinclair put the number at about $225 a year, which works out to $18.75 a month. Given the rabid enthusiasm of fans for their local teams, Ripley during a recent earnings call described that as “an attractive price point.”
In the MoffettNathanson session, he expanded on that view. The overall streaming environment “is rationalizing, which was inevitable,” he said, alluding to recent stumbles by Netflix and signs of a throttling back by some other players. “That means they’re going to be more focused on profit, which means they’re going to be raising prices. Netflix has already been pretty aggressive about raising price. Well, that means the relative value equation is also going to get better” for regional sports outlets.
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