TV networks and election spending

NO ONE really ever talks about advertising spending during elections - first because it’s a highly regulated activity understood only by a small number of political consultants; and second because it’s a bit of a dark art, built around finding ways to skirt the COMELEC’s rules creatively.

This need to be creative in the face of regulatory vigilance explains why every election season sees politicians appearing on every advertising platform imaginable, from cans of tuna to the backs of buses, posing as product endorsers rather than candidates. In recent years they have also turned in large numbers to social media, their supporters doing the heavy lifting of sharing across their friends networks to get the message out.

But any politician with national ambitions will need to advertise on television at some point, and television is the weak point in the political establishment’s attempts to keep spending under wraps. That is because local television happens to be dominated by two networks, both of them listed companies obliged to disclose their financial statements. And when these networks’ profits drop in non-election years, they will not hesitate to blame “the absence of election spending” for the decline. From their publicly-available disclosures, it is thus possible to quantify the impact of election ads on their financial results, as we shall see from the chart below.

The first obvious takeaway from the chart is that election spending doesn’t seem to affect revenue much. Ad slots are finite, after all; you can only squeeze so much advertising airtime from so many hours in a day. The sharpest practitioners know this, and have found ways to show you advertising at the slightest pretext. If for instance you’ve ever seen a UAAP game on television, ABS-CBN will show you sponsored moments with every steal, every block, every fast break. But at the end of the day, there are only so many slots to fill, so the game becomes finding ways to make ads as profitable for the network as possible. 

That seems to be what happened in the last election season. A look at the chart shows that on the profit level, election spending had a far more dramatic impact than revenue. The picture that emerges is that election ad income falls directly to the bottom line as pure profit. Thus GMA Network’s profit dropped by about half in the year since we last went to the polls. ABS-CBN, meanwhile, performed its own analysis and concluded that the impact of election spending was nearly P728 million, significantly larger than the profit it booked from non-election activities.


source:  Businessworld