Thursday, November 8, 2012

The 2012 Campaign A Highwater Mark in Media Spending Which Clearly Illustrates The Limits of Media Effectiveness.

Despite the threat of the fiscal cliff, the economy will continue to strengthen over the next year. That should help boost spending on advertising and other messaging for commercial products and services.  But the absence of the spending gusher from  political and pac reserves means that comparisons for media companies ((NWS, VIA, CBS, TWX, CMCSA, DIS, DISCA) will weaken, beginning now. After gorging at the political trough all year,  media companies are likely to report weaker financial comparisons beginning in the fourth calendar quarter. Disney has already indicated such an outlook on their quarterly conference call.

In media terms, the campaign of 2012 was a highwater campaign. Some $3 billion was spent all in media, $1 billion alone by the presidential campaigns according to the Washington Post (data from October 21.)  Pac Money was also exceptional at all levels.

This is an all time high, and does not include spending by individuals or organisations who were not required to disclose.  With this tremendous gusher of spending, the return on investment was basically zero--certainly for Republicans. While three presidential debates harvested enormous audiences (upwards of 60 viewers each across all covering networks), and probably influenced voting thinking for some days after they aired -- particularly the first debate-- the vast flood of negative advertising spending proved to be a fruitless investment for both PACs and candidates. For Democrats spending might be considered highly productive because it countered the Republican onslaught but was essentially defensive.

Arguably, spending on most negative ads boomeranged as well; the speaker/sponsor of the message being damaged more than its target. To point to one example, it seems to us that messages from the National Rifle Association picturing Romney/Ryan as strong supporters of second amendment rights may have energized the white male base and terrified everyone else. But in some sense, negative ads by Democrats to define Romney harshly also hurt Obama when Romney countered the picture painted by Democrats in the debate.

Despite fears of Democrats and others who believed elections could be bought, the benefits of such feral message making clearly did not materialize. We acknowledge, as Karl Rove said, that this election would not have been as close as it was without those messages from PACs and outsiders. But the PACs and other outsider groups ultimately made this election unwinnable.  With their many agendas, they locked Romney into losing positions and defined him in a worse light than the democrats could ever have. The ideology of the messages derailed Romney's candidacy precisely because ideology was more important to the message makers. Even worse, the external messaging will continue to antagonize blocs of voters critical to GOP fortunes  unless GOP leaders and campaigns get control of ideological entrepreneurs like Rove and his outside "allies".

Equally misplaced and distracting, was the confidence which message makers displayed in high level advertising. The bullying tone of many advertisements especially in swing states like Florida and Ohio antagonized and alienated audiences and had a counterproductive effect even among a supporters. Policy choices made by Obama in Ohio--especially to save the auto industry--outweighed and negated the messaging even to traditional Republican voters. Policy choices in other areas, like the Dream act, not to enforce deportation against people brought to the US by parents were galvanizing among immigrant voting blocks, could not be overcome by marketing or messaging and resulted in a decisive margin for Obama.

The amount money raised for and spent on media, also blinded the Romney campaign to the Obama emphasis on the ground game, organizing voter registration and turn out drives. Future democratic candidates will benefit from the vast supply of email addresses and names which were generated by this campaign. The Republicans are a long way behind in this area and losing ground. Both Republican and Democratic campaigns in the future will likely reallocate resources away from national advertising campaigns and towards highly targeted, precision messaging.

With poor comparisons, high multiples and few other catalysts on the horizon media companies should underperform the market.

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