Bet On This: Political, Sports Wagering To Power Radio/TV in ’22

A “deluge’ of ads from expanded legalized sports betting and the return of midterm political ad spending in 2022 are expected to aid U.S. broadcasters’ rebound from the pandemic.

That’s the key conclusion from S&P Global Market Intelligence Senior Research Analyst Justin Nielson, who works in the Kagan arm.

Just how rich will spending in the 2022 midterm elections be? And, is legalized sports betting truly the dollar magnet companies such as Audacy perceive it to be?

Spending in the 2022 midterm elections, spurred by the 50/50 split between the two parties in the U.S. Senate and Republicans looking to flip the House Democratic majority, is
expected to reach $3.25 billion, Nielson says.

That’s up 7% from the last midterm elections in 2018.

Furthermore, political advertising will disproportionately be spent on local TV stations in swing-state markets — such as Arizona, Florida, Georgia, Nevada, North Carolina and Texas
— which are forecast to rise more than the national average.

That’s great news for Gray Television, which now has a formidable footprint in Phoenix thanks to its just-completed merger with Meredith Local Media. It gives Gray “Arizona’s Family,” news-focused unaffiliated KTVK-3, and CBS affiliate KPHO-5 in the Valley of the Sun. Meanwhile, Florida is home to three Gray stations, in Tallahassee, Sarasota-Bradenton and Gainesville-Ocala, respectively. In Georgia, Gray is the owner of such dominant stations as WTOC-11 in Savannah. And, it now owns the FOX affiliate in Las Vegas.

With Gray and other companies anticipating big dollars from political candidates, legalized sports betting has set it sights on continuing the growth for a new ad category for broadcasters that’s growing by leaps and bounds. For Audacy, a format change in Memphis from ESPN Radio to all-sports bettor fare is designed to give the company’s BetQL sports betting network added oomph. For this and other radio and TV station groups, it is a safe bet that sports wagering ad dollars will flow strongly, perhaps making it the No. 1 ad category at more than one owner group in the years to come.

Among the television companies hot on sports wagering ad dollars is the nation’s No. 1 owner of broadcast TV stations, Nexstar Media Group. It recently announced the launch of the SportsGrid Network, a diginet for sports wagering and fantasy sports. Sinclair Broadcast Group, through its Bally’s regional sports network (RSN) partnership, now has a sports betting app and an upcoming direct-to-consumer streaming service.

Other ad categories that are forecast to outperform in 2022 include healthcare, professional services, telecom, banking and home improvement, Nielson says.

In contrast, to little surprise, the auto, retail and travel categories are still soft.

THE BIG PICTURE

Based on Kagan projections, the U.S. broadcast station industry is expected to reach $40.05 billion in 2022 total advertising revenue, up 13.2% from $35.39 billion in 2021.

This would surpass the $39.66 billion posted pre-pandemic in 2019.

Core ad categories have mostly recovered from the COVID-19-induced advertising pullback of 2020, and broadcasters are feeling optimistic in the back half of 2021.

What’s helping? Nielson points to an expanded schedule of NFL games and new scripted content.

“Despite the sharp decline in broadcast network ratings, TV station ratings were boosted by local news viewership during the pandemic in 2020 and should remain stable even after a
slight dip in the first half of 2021,” he adds, suggesting some TV group’s investment in local and national news has paid off. This includes NBCUniversal Telemundo Enterprises, which over the last several years has significantly beefed up its local news.

In 2022, TV station industry revenue, including retrans, is expected to climb to $38.22 billion, up from $34.06 billion estimated in 2021. Total spot ad revenues are expected to continue to rebound from the pandemic, improving 20% to $21.20 billion, including $3.25 billion in political ad spend. Digital is expected to come in at $3.10 billion, up 5% year over year; gross retrans revenue to rise 3% to $13.92 billion.

The radio station business is also expected to bounce back from the pandemic-induced recession. But, expected growth of 6.2% to $15.75 billion in 2022 is still, Nielson notes, “only a partial recovery given the deep 23% decline in 2020 with revenues falling to $13.68 billion.”

Nielson points out that radio ads are predominantly local and focused on the auto, retail, travel and entertainment categories, which were heavily impacted by the advertising pullback.

“Radio also must compete with multiple streaming and on-demand options for music and talk and is hindered by the new hybrid or permanent work-from-home economy, which has
greatly reduced commuting hours during prime in-car radio time,” he concludes. “Despite those headwinds, radio’s lower ad cost, local audience and relatively high return on investment compared to other media should help it maintain its share of the U.S. advertising market.”