election/kanter/32 inches/dt1st/mark2nd
By LARRY KANTER
Senior Reporter
This week’s election may not have generated much enthusiasm among voters, but it’s been a multimillion-dollar windfall for the Los Angeles economy.
Spending on political contests statewide during the 1998 campaign is expected to exceed $300 million. And by the time the polls close Nov. 3, at least half that amount will be going into Southern California covering everything from TV ads to political consultants to advertising agencies.
“The bulk of the money is being spent in Los Angeles,” said Craig Holman, project director of the Center for Governmental Studies, a West L.A. think tank that monitors campaign-finance issues. “It is California’s most important market by far.”
For Los Angeles, the economic benefits fall under several broad categories.
The biggest, of course, comes from television and radio ad revenues. Over the last few weeks, tens of millions of dollars have poured into local stations as initiative campaigns and candidates try to get out their message.
L.A. also is home to the many of the state’s leading political consulting firms not to mention the public relations firms, production companies, political pollsters and direct mail firms needed to create an effective campaign.
L.A.-based consulting firm Winner/Wagner & Mandebach took in $27.8 million in billings from the Yes on Proposition 5 campaign and $16.3 million for its anti-Proposition 9 work. While the firm spends the bulk of that money on TV ads, direct-mail campaigns and the like, it nonetheless gets a fee and commission for its work.
Campaign consultants typically receive commissions of about 15 percent of the campaign’s media costs. Charles Winner, Winner/Wagner’s president, said the company’s take was likely to be much lower than that, but admitted, “This is an important year for us.”
“There is a lot of money being raised and spent,” added Rick Davis, a consultant to Attorney General Dan Lungren’s gubernatorial campaign, whose L.A.-based firm, the Dolphin Group, also has been consulting the opponents of Proposition 10, the tobacco tax initiative. “It’s been a good year for consultants.”
Campaign cash also is making its way to printers, designers, television producers, video editors and direct-mail experts.
“It’s a very nice bump for the economy,” said Jack Kyser, chief economist of the Economic Development Corp. of L.A. County. “It’s quite a bit of money being spread around.”
Some of it has been spread to Dan Siwulec, whose Mar Vista-based database management firm, Dan Siwulec Communications Marketing, has been generating databases and conducting direct-mail research for several major initiative campaigns. Revenues, Siwulec said, are up more than 45 percent compared to the 1996 election.
“The spending is all out of proportion,” he said. “The growth has been phenomenal.”
Statewide political campaigns typically spend at least 80 percent of their budgets attempting to reach voters through the media. And in California, particularly in the sprawl of Los Angeles, that means television.
“Half of our money is in L.A.,” said Frank Schubert, a partner in the Sacramento-based consulting firm Goddard Claussen, which is managing the campaign against Proposition 5, the Indian gaming initiative, and has spent about $26 million statewide.
Between January and the end of August, political campaigns spent about $41 million in TV advertising for the L.A. market, according to Competitive Media Reporting, a New York-based firm that tracks media spending.
But the real spending didn’t kick in until September and October.
“It’s been frenetic,” said Kim Philo, general sales manager of KCBS-TV Channel 2. “The fourth quarter has been one of our strongest times. The propositions will pay almost anything to get on the air.”
Just like any other valuable commodity, television time is sensitive to the laws of supply and demand.
Consider KNBC-TV Channel 4. In June, when the well-funded political campaigns began reserving blocks of airtime, a 30-second spot on the station’s 11 p.m. news broadcast cost $4,800. The price last week, in the final rush before Tuesday’s vote, was $7,000, according to Schubert.
That’s assuming they can find an available spot to purchase. By the time an election reaches its final weeks, most of the desirable slots have been reserved. But, Schubert said, KNBC will be happy to bump an existing advertiser for $15,000 more than three times the price of the same 30-second spot early in the summer.
It’s a similar situation at KABC-TV Channel 7. In June, a 30-second spot on that station’s 5 p.m. news broadcast cost $1,900. Last week’s rate was $2,400, according to Schubert.
In fact, television time in Los Angeles can cost as much as 70 percent more than in the state’s second-largest media market, the San Francisco Bay Area. In June, television advertising in L.A. cost, on average, $600 per point on the Nielsen ratings, compared with $355 per rating point in San Francisco and those rates have risen steadily in the months leading up to the election, Schubert said.
“The stations were virtually sold out,” said Bruce Silverman, managing director of the Pacific region of Western International Media, one of the world’s largest media-buying agencies, which is working with several candidates and initiative campaigns. “As these guys came in with late money, they were paying tremendously.”
KNBC did not return phone calls, and a KABC spokesman declined to comment, citing a station policy not to discuss its finances.
KCBS’s Philo said the station’s fourth-quarter revenues likely will be 15 percent to 30 percent higher than last year thanks to free-spending initiative campaigns.
Under federal law, broadcasters must take candidates’ ads and charge their lowest rates to run them. But they are under no such obligation for the initiatives, which pay whatever the market will bear. Heavy advertising from the ballot measures more than offsets the low rates offered to candidates, Philo said.
Candidates currently are paying about $500 per rating point to advertise in the L.A. market, according to Davis considerably less than the rate being paid by the initiatives.
The state’s various initiative campaigns are expected to spend more than $200 million over the course of the election; the two gubernatorial candidates, by contrast, had spent just $49 million as of late last week.
