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After a flat 2003, revenues in 2004 appeared to have grown slightly, based on partial-year results and projections for the rest of the year.

At the risk of restating the obvious, local news has been enormously profitable, even at a time when most stations are losing viewers. Local news accounted for some 46% of station revenues in 2003, according to survey data, and a majority of news directors consistently report that their stations made a profit. Indeed, less than 10 percent of them reported that their stations lost money in 2003.

TV News Profitability
Survey of news directors 1996 to 2003
Design Your Own Chart
Source: RTNDA/Ball State University Survey

Anecdotal reports indicate that station profit margins as a whole are high, often in excess of 40%. ABC was the lowest-rated network in 2003, yet its owned-and-operated stations — all of which broadcast ABC programming — had profit margins in the mid- to high-40% range.1 Changes in regulations that have allowed stations to own more than one station in a market (known as duopolies) have also increased profit margins. For example, Fox’s duopolies reportedly have margins in the mid- to high-50% range.2

From 1995 through 2000, revenue grew slowly but steadily. The 2001 recession caused a drop, but in 2002 revenue increased slightly. It was flat in 2003; the average station had revenue of $23.8 million, compared with $24 million in 2002.

Average TV Station Revenue
1995 to 2003
Design Your Own Chart
Source: BIAfn Media Access Pro

Part of the stagnation, according to Broadcasting and Cable, may have occurred because concern about the Iraq war led many advertisers, who commit to ad spending weeks or months in advance, to hold back on spending in the first half of the year.3

Revenue for all of 2004 was expected to prove better. The TV Bureau of Advertising, an industry group, released preliminary results showing local TV stations in the 100 largest markets had taken in $13.1 billion in revenue in the first nine months of 2004. This was a 9.8% increase over the same period the year before.4

The 100 largest markets typically account for 90% of all station revenue, so total revenue nationwide for the first nine months of 2004 may have been close to $14.4 billion.

Total TV Revenue by Market Size, 2003
Design Your Own Chart
Source: BIAfn Media Access Pro
* Percentages based on all TV households or TV station revenue.

Veronis Suhler, an investment banking company, projected station revenue at $26.1 billion in all of 2004, 7.5% more than the year before ($24.2 billion).

Incidentally, even-numbered years tend to be better for local television stations. That’s because of spending tied to the Olympics and political campaigns, and presidential election years are the best of all. Election ad spending in 2004, estimated at $1.6 billion, would account for 80% of the revenue increase, with the remainder coming from growth in regular ad spending. (See Election Year Advertising.)

Advertising revenue in local TV comes from two sources. One, called national spot advertising, accounts for approximately 45% of station revenue. National spot advertising comes from companies that wish to advertise in wide portions of the country but for various reasons don’t want to advertise through the networks. For example, snow tire manufacturers don’t want to advertise on the networks, since they’d be paying to reach viewers in Miami and San Diego who’ll never need their services, yet they want to reach viewers in places as far apart as Boise and Boston. By using national spot advertising, such advertisers can buy ads in multiple markets until they’ve blanketed the areas they want to reach.

TV Station Ad Revenue
2003 vs. 2004

Year National Spot Local Spot Total
2003 $10.6 $13.6 $24.2
Expected Growth 2003-04 8.5% 6.8% 7.5%
2004 (est.) $11.6 $14.5 $26.1

All figures in billions of dollars. Source: Veronis Suhler Stevenson

National spot advertising came to $10.6 billion in 2003. The investment banking company Veronis Suhler Stevenson estimated it at $11.6 billion for 2004.

The other revenue source is local spot advertising, which is paid for solely by companies in a station’s own market. For example, when Ford or Toyota wants to advertise its latest model, it would be considered national spot advertising; when a local Ford or Toyota dealer buys ad time, it’s local spot advertising. Local spot ads make up roughly 55% of station revenue. It amounted to $13.6 billion in 2003 and was expected to increase to $14.5 billion in 2004, again according to Veronis Suhler Stevenson.

A major question, given the pressure on audiences, is whether the industry might be wiser if it moved in the direction of accepting slightly lower profit margin–still usually in excess of 40%– in order to reinvest in stronger newsgathering and experiment in some new programming as a way of attracting new, particularly younger audiences.

One factor that mitigates against any such step is that local news plays such a crucial role in the financial health of TV stations that station managers may be unwilling to experiment for fear of damaging their product. As noted earlier, news directors in 2003 reported that news programs provided almost half (46%) of station revenue, the highest percentage recorded yet. In addition, 58% of news directors reported that their news operations were showing a profit, the highest percentage since 1999. In a time when stations are fearful of doing anything that might lead to audience loss, caution and conservatism are seen as safe bets.

Average Percentage of TV Station Revenue Produced by News

1998 to 2003

Design Your Own Chart
Source: RTNDA/Ball State University survey

Broadcast networks have been competing with cable networks for advertising on the national level for more than twenty years. Local stations had been safe from competition for local ad revenue because advertising on cable systems had been impractical until recently. Cable systems were initially franchised on a municipal level, and each system operated independently from its neighbors. Now, due to consolidation, cable companies dominate entire metropolitan areas, and new technology makes it possible to run the same ad on a group of systems at once, challenging broadcast stations’ competitive advantage.

The new options are making cable an appealing choice for local advertisers. In 1998, cable systems received only 17% of local TV ad spending ($2.5 billion out of $14.7 billion total). Veronis Suhler estimates that in 2004, cable systems received 24% of local spending, and that the figure will rise in 2008 to 30%. That would represent a growth rate of at least 10% each year over the next four years. Local broadcast revenues are expected to grow barely 5% a year.

Local Ad Revenue on Television
1998 to 2008

Year Local Spot Local Cable
1998 $12.1 $2.5
2004 $14.5 $4.7
2008 $17.4 $7.3

All figures in billions of dollars. Source: Veronis Suhler Stevenson

Local broadcast news was created, in part, as a way of establishing an identity for stations, as well as meeting FCC public-service requirements.9 At one time, 24-hour local cable news operations seemed to be a similar way for cable systems to win attention and prestige. But 24-hour local cable news operations in North Carolina and Texas closed in 2004, suggesting that cable, regardless of its growing importance to local advertisers, does not see the same need to appeal explicitly to local audiences.10

Election-Year Advertising

The presidential campaign of 2004 will be remembered, for better or worse, as the one that blew away all previous records for advertising spending. For some local TV stations, this meant a financial windfall, though the distribution of political money was far from even. Certain markets were bombarded with advertisements from the primary season straight through Election Day, while others saw virtually no presidential campaign ads and few in local contests.

In 2004, an estimated $1.6 billion was spent on political advertising on local television – an unprecedented avalanche of money from candidates and outside groups.

The amount should be kept in perspective. Altogether, political revenue (including congressional, gubernatorial, and local races) is still a small – though increasing – portion of total local TV station revenue. The segment grew from 2.3% in 2000 to 2.9% in 2002.11 In 2004, political ads were expected to account for 6.1% of all station revenue, based on estimates of political ad spending and total revenue.12 By comparison, automobile companies and auto dealers typically account for more than a fourth of station revenue.13

Though small in overall terms, in a time of shrinking audiences and economic uncertainty, the reliability of a biennial infusion of political dollars is something local TV stations cling to as firmly as possible. Stations are required by law to offer candidates their lowest rates for commercials, but those rates come with the stipulation that ads might be preempted to a different time slot if another advertiser is willing to pay more money for the airtime. Because campaigns want to reach a specific audience watching a specific show, they generally end up paying higher rates to guarantee their ads will be seen when they want.14 TV companies have fiercely resisted calls for mandatory low advertising rates for non-preemptible political ads, as well as other requirements that might be imposed by the FCC as regulator of the public airwaves.15

Political Ad Revenue

Year Local TV Political Ad Revenue Total Local TV Revenue Percentage of Station Revenue
2000 $605 $25,800 2.3%
2002 $698 $24,000 2.9%
2004 $1,600 $26,100 6.1%

Source: TV Bureau of Advertising (political ad revenue, 2000 and 2002); Morgan Stanley estimate (political ad revenue, 2004); Veronis Suhler Stevenson (total local TV revenue, 2000-2004)

Another important element is that political advertising has gradually migrated in the last quarter-century to become the nearly exclusive domain of local stations, not something that benefits the national TV networks. As the ability of campaigns to target where undecided and swing voters lived, down to their congressional districts and voter precincts, campaigns learned to match their targets to TV markets and to buy their ads just in those key areas. One Morgan Stanley analyst estimates that network advertising declined from 25% of TV political ad spending between 1972 and 1992 to less than 1% in 2000.16

Presidential campaign advertising has become just another kind of national spot advertising. The emphasis on local spending has been particularly apparent in recent years, as ad-buying strategies have become more refined and the race for president has narrowed to a few key battleground states the campaigns start targeting early. For example, in the first half of 2004, according to Nielsen Monitor-Plus, Bush and Kerry spent $63.7 million on ads, over three times as much as Bush and Gore at the same point in 2000 ($18.6 million).17 By the end of 2004, presidential campaign advertising in the 100 largest markets amounted to $587 million dollars, with the Bush campaign accounting for 31%, the Kerry campaign 27%, and outside groups 41%.18

Presidential Campaign TV Ad Spending, 2004
Design Your Own Chart
Source: Los Angeles Times, “Silence of the wolves, and their ilk, in swing states,” November 2, 2004
* General election campaign only.

Meanwhile, the small number of contested House seats led to a concentration of campaign spending in districts with the potential to tilt from one party to the other. Media buyers for the campaigns identify which TV markets match up with the battleground districts and then bombard those markets with campaign ads.

Many of those ads, moreover, are bought during local news time.

For years in politics, the conventional thinking was that political ads were best placed around local news, for two reasons. First, social science research found that if people saw ads in or around local news, they might think the ads were more credible – indeed they often thought the ads were actually news stories. In earlier years, ad makers even tried to make their ads look like TV news to add to the confusion. The second reason ad buyers liked buying during news slots is that local news hits the right kind of viewers. If people were watching the news, that meant they were interested in public affairs and had a high probability of being voters.

It turns out that local news still holds particular appeal to campaigners as a venue for their advertising. The Wisconsin TV Ad Project, a research initiative to track campaign ad spending on local television, found that approximately 40% of political ad spending in the spring of 2004 went to ads aired during local news programs.19

TV Revenue from Political Ads
Presidential campaign years, 1972 to 2004
Design Your Own Chart
Source: TV Bureau of Advertising (1972-2000); Morgan Stanley estimates (2004)

While some TV markets were cashing in on political spending throughout the year, others were left out entirely. An analysis of presidential campaign ads in the top 100 markets through mid-October found that 87% of ads were aired in markets reaching just 27% of the electorate.20

But the uneven pattern lessened as political candidates in non-battleground states began airing ads in the summer and fall. For example, in South Carolina, a reliably Republican state in the race for president, Democratic candidate Inez Tenenbaum spent some $3 million on television ads in her unsuccessful race for the U.S. Senate.21 On the other hand, in California, which went for John Kerry by a strong margin, the Republican candidate for the U.S. Senate, Bill Jones, never ran a single television ad.22


1. Louis Chunovic, “ABC banks on its local strengths,” Broadcasting & Cable, July 12, 2004. Chunovic reported that the ABC station group’s profit margin was close to 60% in the 1990s. Lower profit margins now are a sign of the effect of cable competition on station revenue.

2. Louis Chunovic, “The son also rises,” Broadcasting & Cable, October 25, 2004.

3. John M. Higgins, “A mixed bag,” Broadcasting & Cable, August 16, 2004. Ad time for TV stations is committed weeks or months in advance of air date, so even though the main action of the war lasted only a few weeks, stations did not get as much money as they might have because advertisers held back spending on commercials in anticipation of a longer war.

4. TV Bureau of Advertising, “Local Broadcast Television Ad Revenues Up 12.2% In 3rd Quarter, Says TVB,” December 1, 2004. On line:

5. Veronis Suhler Stevenson, 2004 Communications Industry Forecast & Report, p. 230.

6. Veronis Suhler Stevenson, 2004 Communications Industry Forecast & Report, p. 230.

7. The Fox station group’s duopolies reportedly have margins in the mid- to high-50% range. See Louis Chunovic, “The son also rises,” Broadcasting & Cable, October 25, 2004.

8. John M. Higgins, “Ad spending on the rise,” Broadcasting & Cable, August 2, 2004.

9. As the Encyclopedia of Television put it, local news “provided instant evidence of community involvement and an identity amid otherwise indistinguishable fare.” Encyclopedia of Television, “News, Local and Regional.” On line:

10. “Time Warner Cable and Belo discontinue joint venture to operate news channels in three markets,” press release, July 23, 2004. On line:

11. While spending tied to the presidential race accounted for the bulk of political advertising in 2004, in alternate even-numbered years 36 of the states hold gubernatorial elections; those races accounted for 57% of political advertising spending in 2002, according to the Wisconsin TV Advertising Project. See Ken Goldstein and Joel Rivlin, Political advertising in the 2002 elections, pp. 12-13. On line:

12. Estimates of total station revenue: Veronis Suhler Stevenson; estimates of political revenue: Mark Memmott and Jim Drinkard, “Election ad battle smashes record in 2004,” USA Today, November 26, 2004.

13. In 2003, out of $16.2 billion in TV station revenue in the top 100 markets, automobile manufacturers and dealers accounted for $4.6 billion. See TV Ad Bureau, “Top 25 Local Broadcast TV Categories” and “Broadcast TV Revenues Were Up 0.5% Last Year, CMR Data Shows.”

14. See “Testimony of Paul Taylor, Executive Director, Alliance for Better Campaigns before the House Committee on Energy and Commerce, Subcommittee on Telecommunications and the Internet on Campaign Finance Reform: Proposals Impacting Broadcasters, Cable Operators and Satellite Providers.” June 20, 2001. On line:

15. See National Association of Broadcasters, “Legislative issue paper: Free airtime,” September 2004. Online:

16. Krysten Crawford, “A vote for local TV,” CNN/Money, July 13, 2004. On line:

17. Nielsen Monitor Plus, “John Kerry Local Political Ad Spending On The Rise – George Bush Scaling Back,” press release, June 17, 2004.

18. Nick Anderson, “Silence of the wolves, and their ilk, in swing states,” Los Angeles Times, November 2, 2004.

19. Nielsen Monitor-Plus and the University of Wisconsin Advertising Project, “High Volume of Presidential Campaign TV Advertising in Battleground States, Yet 60 % of Americans Live in Areas Where No Ads Have Aired,” July 18, 2004, p. 6.

20. Daisy Whitney, “Study identifies hot political markets,” TV Week, October 18, 2004.

21. Schuyler Kropf, “Tenenbaum, DeMint raised $12M for race,” Charleston Post and Courier, October 16, 2004.

22. John Wildermuth, “Cash shortfall may undo Jones’ plan for TV ads,” San Francisco Chronicle, October 16, 2004.