By Suzanne Vranica
The political-ad onslaught may be welcome news for the battered local television business, but the blitz has caused major headaches for corporate America.
Madison Avenue media buyers, who help decide where marketers spend their ad dollars, say the influx of political spending has forced many consumer ads off the air. Advertisers have had to scramble to readjust their ad plans to dodge skyrocketing ad prices and find a home for their ad spending.
"We are pulling our hair out," says Lisa Pilger , vice president of local media at Rubin Postaer & Associates, known as RPA. Ms. Pilger says her firm, which works on behalf of companies such as Honda Motor /zigman2/quotes/207173990/composite HMC +0.04% Co. and Pioneer Corp.'s Pioneer Electronics, has had about 20% of its local ad buys bumped off the air.
Elyse Clark , broadcast buying director at GSD&M Idea City, says many of her ads have been displaced. In those cases Ms. Clark has pushed ads out a few weeks or taken back the money for the spots. Idea City, an Austin, Texas, firm that is owned by Omnicom Group Inc., works on behalf of marketers such as Norwegian Cruise Line.
Many advertisers buy local ads at lower rates that come with contracts that say they can be pre-empted. But even when an advertiser buys a so-callled level 1 ad, which is more expensive and has the least chance of being pre-empted, a TV station legally is bound to take the federal candidate ad first if that politician is paying the same rate.
Political ad spending is on track to be a record-breaker thanks to highly competitive races and a Supreme Court ruling that freed corporations and unions to spend unlimited amounts on independent campaign ads. Total political-ad spending is expected this year to total $3 billion to $4.2 billion, up from $2.5 billion in 2008.
Research firm Borrell Associates, which predicts political outlays will top $4.2 billion, says local television will snatch 63% of those dollars. Local-TV ad prices in some markets have surged and are up between 20% and 200% depending on the market.
With so many ads being bumped off the air, some TV stations are having to refund money to advertisers, a tough outcome as they recover from an ad recession that saw ad spending on local television decline 16% last year to $18 billion, according to ZenithOptimedia, a part of Publicis Groupe /zigman2/quotes/207669560/delayed FR:PUB +0.33% SA.
"We have had to credit back about 15% of our total ad spending for the month" to advertisers, says Lisa Howfield , general manager of KVBC, an NBC affiliate in Las Vegas.
Ms. Howfield has gone to great lengths to try keep every ad dollar, including expanding the length of some commercial breaks to three and a half minutes from two and a half minutes—a move that prompted some complaints from viewers. KVBC has also bumped many of its own promos off the air—ads that are intended to boost ratings for "sweeps" week.
To get ahead of the problem, ad firm RPA initiated a "market alert system" earlier this year, with 80 of its executives across the country sending out daily reports on which TV markets are seeing new infusions of political spending. The technique allows the agency to move faster with contingency plans.
One alert helped the agency make a pre-emptive call to a local TV station to make sure its ads for furniture maker La-Z-Boy /zigman2/quotes/202858913/composite LZB -5.19% Inc. wouldn't be bumped because the commercials touted a sale that was imminent. "We have to be extremely hands-on and babysit our ad schedules," RPA's Ms. Pilger says.
Other advertisers have gone elsewhere. "In order to best navigate the political maelstrom, we have several clients that completely avoided local TV until after the election," says Kathy Doyle , director of local broadcast at Universal McCann, a media-buying firm owned by Interpublic Group of Cos /zigman2/quotes/203101491/composite IPG -0.13% .
For those who have stuck it out in local TV, they have had to fork out for premium prices, especially during news programming and early morning shows.
"Any marketer that has immediate need to get a message out, which is perishable, has to pay," says Maribeth Papuga , director of local broadcast at Publicis Groupe's MediaVest.
Local-TV stations are having to balance the influx of political spending with keeping long-term corporate customers happy.
Regular advertisers are "the bread and butter," adds Ms. Howfield at KVBC. "They are the ones that we count on after this is over."