COMMENTARY

TV Stations' Competitive Pricing Just Became A Bigger Deal

• by Wayne Friedman , Staff Writer, November 15, 2018

Getting competitive TV advertising information has always been a big deal for TV sales executives. Now, in a demanding competitive environment, it's even more pressing. But did some go too far?

The Department of Justice has struck an agreement with six TV station groups -- Sinclair Broadcast Group, Raycom Media, Tribune Media, Meredith Corp., Griffin Communications and Dreamcatcher Broadcasting (a company aligned with Tribune Media) -- to settle a DOJ lawsuit about sharing advertising information.

The lawsuit alleged companies engaged in unlawful agreements with third-party firms to illegally coordinate sales of local advertising spots, sharing non-public, competitively sensitive information with broadcast TV competitors.

The DOJ said TV stations shared “pacing” of advertising information. Typically, pacing involves how advertising revenues are trending during a certain period -- including the trending of pricing/CPM hikes (or drops), as well as total ad-revenue dollar volume.

It can give TV stations specific information into how much their competitors intend to raise -- or lower -- pricing during a particular month or quarter. From this, participating TV station groups can adjust their pricing accordingly.

So now what? Higher pricing? Lower pricing? A combination?

Media agencies and local TV advertisers might have seen higher pricing with many of their campaigns -- especially by smaller advertising/media buying companies that don’t have access or the wherewithal to deep analytic data. Is that good news?

For TV station groups, this decision might yield tougher ongoing results -- especially from core TV advertisers, where local TV station owners haven’t seen much, if any, big growth recently.

That said, there has been higher revenue from political advertisers -- candidates, super-PAC marketers and others. This is something TV stations have increasingly relied on in recent years.

Still, for many of these political advertisers, TV stations are legally required to offer marketers the lowest rate for this inventory. Big volume revenue gains make up for this — coming against some collateral damage of pushing out core advertisers' media schedules.

In addition to every-other-year big gains for political advertising, TV also relies on steady, increasing retransmission fee revenue.

Total U.S. local TV station advertising revenues have generally been stuck around the $20 billion-per-year level for some time. Digital advertising growth for TV stations hasn’t picked up the slack. Many TV stations' ad executives admit to their slow efforts.

For that reason, we can see why some TV stations increasingly may be looking at other ways to make up ground.