Campaign-finance ruling may prove to be a lifeline for broadcast networks

By Frank Ahrens
Washington Post Staff Writer
Saturday, January 23, 2010

The struggling media industry -- particularly television networks and local broadcast stations -- could end up being the big beneficiaries of Thursday's Supreme Court ruling lifting limits on corporate donations to political campaigns.

How big? One Wall Street research firm has already upped its 2010 profit estimate for CBS Corp., which owns a television network and several stations.

Before the ruling, corporations and labor unions could not use their general treasuries to fund ads expressly supporting or opposing candidates. They also were banned from paying for ads that mention any specific federal candidate and air 30 days before a primary and 60 days before a general election.

Now, unless Congress throws up legal roadblocks to the ruling -- as some lawmakers are promising -- corporations are free to buy airtime for ads that back or oppose candidates and that take on campaign issues that could be of intense interest to those enterprises. For instance, corporations could buy ads that promote a candidate who opposes limits on executive bonuses.

The court ruling could prove to be a lifeline for broadcast networks, which have been losing audience and advertising revenue to cable channels, which get revenue from advertising and subscriptions. Local television stations -- which also have been bleeding viewers and revenue, thanks to increased Internet use, the rise of local newsgathering sites and a diminished prime-time network audience -- also could benefit.

"I wonder how it could not be a huge boon," said David Bank, media analyst at RBC Capital Markets. "You've got a deep-pocketed source of funds that was unable to advertise and can now advertise, and the time restrictions on spending have been lifted."

Research firm Needham and Co. added three cents per share to its 2010 earnings estimate for CBS on Friday largely because of Thursday's ruling. CBS shares rose sharply at Friday's opening before settling down and finishing the day up 10 cents at $13.30.

"We believe that this will drive higher corporate political spending," Needham analyst Laura Martin wrote. Even better, she said, television networks and stations can raise their rates.

"Given that most political advertising is on television where advertising is limited to only 12-16 minutes per hour, this change implies higher prices in the days immediately before an election," Martin wrote.

In recent years, CBS has suffered. Unlike its corporate cousin Viacom, which owns cable channels, CBS has but one revenue stream.

Now, that stream should be a little bigger. Not only does the company run a network and 29 television stations, it owns 130 radio stations, which get healthy doses of campaign ads, as well as a vast outdoor advertising business.

Analysts said the court ruling could also benefit the struggling newspaper industry, particularly local papers and those that have a high readership in the nation's capital, such as The Washington Post.

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