Citizens United is making local TV rich. Here’s why.

Five Years Later, One Group Has Gotten Very Rich Because of Citizens United: Local TV Stations

Five Years Later, One Group Has Gotten Very Rich Because of Citizens United: Local TV Stations

Moneybox
Commentary about business and finance.
June 5 2015 4:42 PM

Not Everyone Hates Citizens United

The landmark campaign finance ruling made local TV stations very, very rich.

political PAC local ad.
Local TV stations are privately grateful for the Citizens United cash cow.

Photo illustration by Slate. Photos by Thinkstock.

Remember the outrage over Citizens United v. Federal Election Commission? The 2010 Supreme Court decision allowed corporations and other entities to expend unlimited funds on electoral influence, inspiring feverish protests and calls for constitutional reform. Jeremiads about the devolution of political discourse from an active citizenry engaged in public debate to a Machiavellian nightmare of corporate manipulation proliferated. Coupled with the growing awareness of economic inequality, Citizens United helped incite the Occupy movement and has already become a byword for corruption in the American political process. Like plenty of Americans, Justice Ruth Bader Ginsburg detests the ruling. “If there was one decision I would overrule, it would be Citizens United,” she told Jeffrey Rosen of the New Republic. “I think the notion that we have all the democracy that money can buy strays so far from what our democracy is supposed to be.”

While it’s easy to locate those who defend Citizens United on constitutional grounds, finding support for the decision’s real-world effects on public discourse, debate, and democratic participation is a tougher task. But there’s one party that ought to be cheering the ruling’s positive impact on its livelihood: local TV.

Citizens United opened the floodgates for unprecedented amounts of political advertising, and nobody has surfed that wave more than local TV station operators. For local broadcast channels and their it-bleeds-it-leads newscasts, the Supreme Court might as well be that mythic relative who leaves you an unexpected fortune in his will. The cascade of political money to your local channel began for real in 2012. That year, according to the Pew Research Center, local television stations received $3.1 billion in political advertising revenue. That was 48 percent more than was spent just two years earlier (before Citizens United) and represented more than double the amount raked in during the previous presidential election in 2008. As Pew reported in April in the State of the Media 2015 Report:

Local TV stations continued to fare well economically. Much of this is due to political advertising spending, which after the Supreme Court’s Citizens United ruling seems to guarantee windfalls to local TV stations in even-numbered years. In 2014 total on-air ad revenue for local stations reached $20 billion, according to consulting firm BIA/Kelsey, up 7% from the year before ...
Advertisement

This rising tide is lifting everybody in the local television industry. The big station owners, including networks like ABC, CBS, and NBC and group licensees such as Sinclair, Nexstar Broadcasting Group, and Gannett all watched stock valuations soar. This led the giants to increase their acquisitions, setting a record in 2013 and propelling consolidation in the industry. Maximizing efficiency (and profits) then led to centralized management and shared news content. As Mother Jones reported last year, America’s local TV audiences continue to be “fed an even more repetitive diet of dreck” as the same inane “news” packages and video news releases show up across multiple markets. This makes great fodder for Conan, but the consequences are far less humorous for democracy. Cumulatively, Americans across the political spectrum still get most of their political news from their local TV stations—not Fox News, MSNBC, the network news shows, or even Facebook. And those local TV audiences materialize in the voting booth to reveal their electoral might.  

It’s precisely this electoral strength that draws the attention of political advertisers. They know the collective audience for local TV news remains massive, identifiable, and persuadable—unlike newspaper readership, radio listeners, or Facebook users. Both advertisers and audiences tend to characterize these other outlets as partisan (think Rush Limbaugh) or less capable of audience persuasion. Despite recent prognostications of Facebook’s inevitable dominance in political advertising, the scholarship on homophily and social media reveals the rarity of actual political debate taking place on Twitter and Facebook. Social media interactions tend to reconfirm rather than challenge political preconceptions, thus weakening their influence and consequent value to political advertisers.

Local TV news might be regarded as silly, repetitive, boring, or sensational, but it’s much less likely to be viewed as partisan or inaccurate. This credibility with the audience makes up the well from which advertising riches are drawn. Politicians and political action committees looking to persuade “the middle” or supposedly undecided voters on everything from hunting referenda to gay marriage spend their money where it seems to have the most effect. That’s why campaigns in Washington and Maine for marriage equality spent so much money on local television, and it’s one reason why—according to research by two of my University of Maine colleagues—the campaigns proved so successful. Such efficacy translates into premium prices.  That’s why promoted tweets remain dirt cheap, but 30 seconds on your local station the first week in November will cost you dearly.

The relative health of local TV news stands out in the desert landscape of American media economics. But we should note that local TV managers have also proven far savvier than their counterparts in competing media at leveraging their content. For example: As recently as 2010, retransmission fees to local stations (from cable companies, satellite providers, and others) generated a total of $1.2 billion in revenue. Five years later, projections estimate that retransmission revenue will hit $6 billion this year. There’s no other traditional mass medium of commercial communication that materialized $5 billion in revenue in the last five years. This money could only be wrangled out of retransmitting partners by playing hardball. If you ever wondered about those regular conflicts between local stations and cable companies—as when WCBS was forced off Time Warner Cable in New York City in 2013—look no further. Local TV executives understand how the value of their content and their relationships with their audiences can be used to increase their bottom lines. Of course, don’t feel bad for the squeezed cable companies. Your cable bill should tell you exactly how those costs are passed on.

The health of local TV broadcasting continues to fly under the radar for two reasons. One is that the Federal Communications Commission has done very little to promote its recently mandated increased transparency requirements. If you are curious, you can go to this webpage, enter any local station licensee, and then click on “Political Files” on the toolbar to find out how much the station is charging for political ads. But there hasn’t been enough journalistic or scholarly work in this area, and local stations are loath to publicly lord their recent success over other media.

The second reason is that the increase in local TV revenue is based on old-fashioned ad-selling. This isn’t about digital conversion at all; of the major legacy commercial media, local TV is least reliant on those Web pennies. Just 3 percent of its total revenues are derived from digital advertising—a rotten ratio that would get any media executive charged with transforming revenue models immediately fired. But in the poker game that is selling contemporary media, Citizens United remains an unmatched ace in the hole. While newspapers, radio stations, and even hot venture capital–funded Web entities sweat it out, local channels keep raising the bet. And just like in poker, there’s only room for one big winner at the table.