Retransmission consent deals and digital offerings are the biggest reason: As local television stations continue to generate substantial cash flows, investor confidence has risen, driving stock values up 185% in the first three quarters of the year, per a new report from BIA/Kelsey. “Local Television Stations Profiles and Trends for 2014 and Beyond” notes that in the first three quarters of 2013, the S&P 500 index increased by 15.6%, while BIA/Kelsey’s comprehensive Local Media market capitalization index, which includes more than 55 local media companies, rose by 64.9%. Broadcast TV was on top with the highest growth in the index.
Local TV stations are using the income boost from retransmission consent agreements with local cable, telco and national satellite distribution services to invest in their programming and develop new services. From over $2 billion in 2012, BIA/Kelsey predicts retransmission consent revenue is expected to triple by 2018, representing a 20.6% compound annual growth rate (CAGR) during that time.
BIA/Kelsey estimates total local media spending for 2013 to be $132.7 billion. This marketplace includes all of the media that local television stations compete against for national and local advertising spending in their markets. Based on this definition of local advertising, local TV stations receive 14.9% of all advertising revenue spent in local markets, third among local media segments, behind direct mail (27.2%) and newspapers (16.1%).
“The advertising revenue pendulum of the local television industry swings predictably between odd and even years,” said Mark Fratrik, BIA/Kelsey’s chief economist and report author. “However, an interesting way to look at the future of the local television industry is to examine two-year revenue changes, which remove the dramatic ups and downs associated with election and Olympics years. With strong negotiations around retransmission consent agreements and expansion of digital offerings beyond the over-the-air base, we anticipate the industry to average between 5 and 8 percent increases every two years, or 2.5 to 4 percent increases per year.”
However, the overall media marketplace shares mask the strength of television within certain groups of advertisers, at present and in the future, according to the report. For example, BIA/Kelsey estimates that automotive dealers will use 30 percent of their annual $12.5 billion advertising budget on local television stations this year alone.