Once again lowering his estimate for 2009, BIA Financial Network’s Mark Fratrik is now looking for TV station ad revenues (national and local spot combined) to be $16.6 billion, down from his previous estimate of $17 billion. Don’t look for any return soon to the good old days, but he does see a significant bump up in business coming in 2012.
Fratrik made a huge revision to his forecast in May, so by comparison this one is just tweaking. He’s now expecting revenues to drop 17.3% this year to $16.6 billion. And even with the federal elections (though not a presidential race) next year, he sees only a small gain to $16.7 billion. After dropping back to flat with ’09 in the non-election year 2011, things are finally expected to improve for 2012, with a 6% gain to $17.6 billion.
“I think you do see some sort of a bump up in 2012, the election/Olympic year, with the economy assumed to be healthy. It’s not the good old days. It’s a different television marketplace,” Fratrik told RBR/TVBR. A lot of that, of course, is due to the structural changes in the automotive sector.
The analyst is bullish, though, on mobile DTV as a new revenue stream for local television stations. Also, online revenues are already a major growth area, as noted by his associate.
“We are very optimistic about the online revenue potentials for television broadcasters, particularly as they step-up their mobile and Internet offerings. We project the industry will see Internet revenues of $556 million in 2009, moving up to $1.1 billion by 2013. This represents 19.7% compounded annual growth rate for online television broadcasting advertising alone,” said Michael Boland, mobile local media analyst for BIA’s The Kelsey Group.
So, is TV still a good business?
“Yes, I think TV is still a good business. I think TV stations are still viable operations in the local media marketplace,” said Fratrik, noting that stations which are run efficiently and move into related businesses can prosper. “They have a brand name in the local marketplace. They have local content. They have a great loudspeaker to get people to go to certain websites. And they have a sales force that’s local, with feet on the ground, that have the contacts with the local advertisers,” Fratrik said.
RBR/TVBR observation: The good news is that local television is still a good business, so long as you are not overleveraged. Cash flow margins may have shrunk, but it would be much worse to face the negative cash flow situation that some major newspapers are dealing with.