Will the Presidential Election Help Broadcasters Survive?

The increasingly brutal battle for the presidency could be a godsend for America’s beleaguered broadcast television industry. Candidates and others are accumulating huge war chests, much of which will be spent on TV advertising.

A vast amount of money has already been raised by candidates and political action committees, or PACs. The New York Times reported that Hillary Clinton and the PACs supporting her had raised $188 million as of February 20, 2016. U.S. Senator Ted Cruz (R-Texas) and his supporters had raised $104.2 billion on the same day, and U.S. Senator Bernie Sanders (D-Vermont) had raised $96.4 million. Donald Trump and Ohio governor John Kasich had each raised around $27.3 million.

These figures are obviously far from complete because they were from February 20, 2016. The candidates have undoubtedly raised additional funds since then. There’s also all the money raised by candidates who have since dropped out of the race, such as the $157.6 million Jeb Bush and his allies had collected and the $84.6 million U.S. Senator Marco Rubio (R-Florida) collected. The unspent portions of those funds will probably be given to other candidates.

Nor is it just the presidential candidates that have a lot of money. One well known pair of donors, the Koch brothers, plan to spend $400 million on behalf of conservative candidates and causes this year, Reuters reported. Liberal donors will undoubtedly dig out their checkbooks to match the Koch’s largess.

Why the Election of 2016 Could Be Incredibly Expensive

The 2016 presidential election could become incredibly expensive for two reasons. First, the U.S. Supreme Court’s Citizens’ United decision allows for unlimited spending on political campaigns by individuals and organizations. Second, two of the major candidates, including the man widely viewed as the probable Republican nominee, Trump, are advocating radical anti-business policies.

Trump told The New York Times editorial board in January that he wants to put a 45% tariff on Chinese imports. Trump has also talked about putting a 20% tariff on all imports.

Over on the Democratic side, Hillary Clinton’s sole remaining rival, U.S. Senator Bernie Sanders (I-Vermont), has advanced a variety of policies that business interests would find objectionable, including a Robin Hood Tax on investment transactions, support for breaking up big banks and efforts to increase unionization. Like Trump, Sanders has been highly critical of free trade, although he has not advanced policies on the matter.

How Donald Trump’s Nomination Could Help Broadcasters

As you can see, Sanders and Trump are giving business a lot of reasons to pour money into the presidential race. Trump’s tariffs in particular could severely harm companies that export to China and those dependent upon Chinese manufacturing, such as Apple (NASDAQ: AAPL).

To add insult to injury, Trump has also begun making threats against Apple and Amazon.com (NASDAQ: AMZN). Politico also reported that Trump is widely disliked in Silicon Valley.

If Trump becomes the Republican nominee, vast amounts of corporate cash is likely to flow into Hillary’s coffers. Nor would that money just go to Hillary; Politico reported that wealthy conservatives are exploring the possibility of running a third party challenger if Trump gets the nomination.

The biggest beneficiaries of this largess could be companies that own television stations and networks because much of it will be spent on attack ads designed to smear Donald. PACs will spend big money on such advertising because TV is still the best way to reach older people, who are more likely to vote. Opponents will also want to counter all the free airtime Trump manages to get on television news.

Around 61% of people over age 65 and 54% of those between 55 and 64 voted in the November 2010 election, US News & World Report found. Just 21% of those aged 18 to 24 and 37% of persons between 25 and 44 voted in the same election.

The median age of a U.S. broadcast TV viewer was 54, The Atlantic reported in 2014. The age of the average viewer of the most popular broadcast TV show in the U.S. in 2014, NCIS, was 61.

Why Trump Is Good for CBS

This makes that torrent of campaign funding that could be coming later this year very good news for the network that broadcasts NCIS: CBS (NYSE: CBS.A). It has the demographics that the PACs want for their advertising.

Interestingly enough, CBS has already been doing pretty well lately; its revenues increased from $13.77 billion in June 2015 to $13.89 billion without the added election funding. CBS also reported a profit margin of 6.68%, a net income of $1.413 billion, a dividend yield of 1.02%, a free cash flow of $682 million and a return on equity of 22.96% in December 2015.

Naturally, cynics will wonder if this is the real reason why CBS News has focused so much coverage on Donald Trump while refusing to do any investigative journalism on the man. Even though CBS was the most watched U.S. network, its advertising revenue fell by 4.3% in the fourth quarter of 2015.

Advertising accounts for around 45% of CBS’s revenue, meaning that the company could benefit from an expensive presidential election. Electoral spending could quickly add up for broadcasters like CBS. In 2012 around $2 billion was spent on the presidential race and $7 billion on all the elections, according to The Economist.

It’s 1896 All Over Again, and That’s Good for CBS

Interestingly enough, 2012 was the most expensive election since 1968, according to Atlantic writer Matthew O’Brien. O’Brien estimated that the most expensive presidential race ever, however, was that in 1896, which consumed around .5% of the gross national product. In contrast, the 2012 election absorbed a little over .1% of the GDP.

The 1896 election was so expensive because the Democratic nominee, William Jennings Bryan, was a radical populist (much like Trump) who was running on an anti-business platform. Like Trump today, Bryan was widely despised and feared by the business and intellectual elite. The business tycoons of the era, the Robber Barons, spent big money to make sure Bryan’s opponent, Republican William McKinley, reached the White House.

If the history of 1896 repeats itself, 2016 could turn out to be a very profitable year for companies that own broadcast networks, such as CBS, Fox and Disney (NYSE: DIS); television station operators like Tribune Media (NYSE: TRCO); and companies like Viacom, which own cable networks. The year 2016 might go down as the most expensive presidential election in history and the last year in which broadcasters saw their advertising revenues grow.