"What radio is best for -- and why we think they're going to benefit -- is a call-to-action, get-out-and-vote rally," Michael Kupinski, analyst at Noble Markets Group, said.
Likely presidential nominees Donald Trump and Hillary Clinton have somewhat polarizing ratings and will have to turn to call-to-action advertising, Kupinski said while acknowledging that more dollars will be spent on radio later in the cycle as candidates have traditionally viewed the medium as a last-minute tactic.
Unlike television, which has historically benefited from presidential races, radio tends to gain more from local races -- yet another factor that will serve as a boon for players in the sector this year.
"If the house and senate races are tight -- and we think that they will be with democrats trying to take over the house and senate -- there will be more spending on local races," Kupinski said.
Within the radio universe, iHeartMedia, Cumulus Media and Salem Media Group in particular will reap such benefits.
According to research firm Borrell Associates, radio is estimated to see around $916 million of political spending, compared to $809 million in the last presidential cycle and $485 million in 2014. This represents approximately a 12% increase between presidential cycles.
Borrell Associates revised in April its estimates for political spending during the 2016 Election Season to be around $11.7 billion, up from its initial projection of $11.4 billion. Radio and digital had the highest percentage increase in the new estimates, increasing 10.8% from $827 million to $916 million and jumping up 8.2% from $1.076 billion to $1.165 billion, respectively.
Political advertising has already started to come in stronger than expected and will make a substantial difference for radio companies in the third and fourth quarters by bringing in a significant portion of total revenue, Kupinski and other industry followers explained.
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