July 14 (Bloomberg) -- U.S. TV broadcasters, struggling to replace a 20 percent drop in automotive advertising revenue, are turning to pawn shops, plastic surgeons and other nontraditional sources to fill airtime.

Local station owners like Nexstar Broadcasting Group Inc. and Gray Television Inc., whose revenue dropped after bankrupt General Motors Corp. and local dealers slashed marketing, are selling mortgage brokers and even landscapers on the notion that TV is affordable.

Across the U.S., the price of an average 30-second local TV commercial tumbled as much as 20 percent last year from 2007, according to the Television Bureau of Advertising, a New York- based trade organization. Auto ad revenue at local stations, down a fifth in 2008 from the year before, plunged another 52 percent in the first quarter, the TV Bureau said.

“A lot of local retailers, like the portrait shop or the pet store, haven’t advertised on TV before because they think they can’t afford it,” said Robert Prather, president of Atlanta-based Gray. “We’re out just beating bushes that we should have been doing a long time ago.”

A half-hour of prime-time TV typically contains 22 minutes of programming and eight minutes of ads, two of which are for local commercials, according to the Television Bureau. Rates depend on how many viewers are watching.

The price of an average 30-second ad placed on a local TV station last year ranged from $6.66 per 1,000 viewer homes in the early morning to $27.29 in prime time, according to the TV Bureau. Prime hours, when stations usually have their largest audience, are generally 8 p.m. to 11 p.m. In 2007, the same rates were $8.09 and $34.12, the bureau said.

‘Cheaper Than You Think’

“One of the pitches made by stations is that it’s cheaper than you think, particularly if you were looking at prices from a year ago,” Gary Belis, a spokesman for the New York-based TV Bureau, said in an interview.

Nexstar, which said auto ad sales dropped about 40 percent in the March quarter, has sold airtime to pawn shops and mortgage businesses in the Northeast and to ranches in the West, Chief Executive Officer Perry Sook said in an interview.

“The greatest opportunity in all of our markets is local businesses not currently doing business with our TV stations,” said Sook, whose Irving, Texas-based company operates or provides services to 63 stations in markets including Fort Wayne, Indiana, and Jacksonville, Florida.

Nexstar’s new-to-TV advertisers include Snare & Associates Mortgage Services LLC in Hollidaysburg, Pennsylvania, near Pittsburgh.

‘It Worked’

“I started a new business and needed to get my face out there,” Chief Executive Officer Anthony Snare said in an interview. “It worked.”

Snare said he bought packages of 30-second spots from Nexstar at $1,000 to $4,000 a month.

Gray, whose 36 stations in markets including Madison, Wisconsin, and Augusta, Georgia, received 19 percent of ad revenue from automakers and dealers last year, is now booking ads from landscapers and plastic surgeons for the first time, said Prather. He declined to predict how much Gray would make this year from first-time TV advertisers.

The new ad sources aren’t likely to entirely replace the decline in auto revenue, analysts and TV executives said.

“The big issue is that it takes 10 or 12 small ones to make up for some of the big car dealers we’ve had in the past,” Prather said.

Auto Ads Plunge

In the first quarter of 2009, U.S. advertising spending by automotive companies on local stations plunged to $334.8 million from $698.6 million a year earlier, the Television Bureau of Advertising reported in June. Auto ad spending on local TV fell to $2.93 billion last year from $3.65 billion in 2007, according to the Television Bureau. Auto is the largest advertising category in local TV, the bureau said.

Nexstar’s revenue dropped 13 percent in the first quarter while Gray’s fell 14 percent. The average decline in first- quarter sales for the five U.S. publicly held TV broadcasting companies was 18 percent.

The stocks, beaten down last year, have rallied since the end of 2008. Nexstar’s shares jumped 35 percent this year through today after plunging 94 percent in 2008; Gray’s rose 15 percent after a 95 percent slump last year.

Nexstar gained 7 cents, or 11 percent, to 69 cents at 4 p.m. New York time in Nasdaq Stock Market composite trading. Gray rose 3 cents, or 7 percent, to 46 cents in New York Stock Market composite trading.

Broadcasters are scrapping for a dwindling pool of advertisers with local newspapers, cable TV channels and the Yellow Pages, according to Prather and analysts including Edward Atorino of Benchmark Co. LLC in New York.

‘The Pie Has Shrunk’

“The pie has shrunk dramatically and everybody’s going after the same ads,” Atorino said in an interview.

Ad spending in local newspapers dropped 25 percent in the first quarter from a year earlier, TNS Media Intelligence reported in June.

“I haven’t seen anyone who says they’re losing local advertisers to local television,” Mort Goldstrom, the vice president of advertising for the Newspaper Association of America, said in an interview. “Our losses have come in other areas,” such as classified real estate and job ads, he said.

Auto ads will pick up again when consumers have more access to credit and can buy and lease new cars again, Nexstar’s Sook said.

“Selling auto ads, if you were one of the two biggest stations in town, was relatively easy,” Barry Lucas, an analyst with Gabelli & Co. Inc. in Rye, New York, said in an interview. “Now what it takes is people who are really hungry, going out and knocking on doors.”

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.

Last Updated: July 14, 2009 16:31 EDT