Gray calls Q3 a success despite 10% loss in total revenue


The amount of cash brought in by Gray Television during the third quarter of 2011 was $76.5M, $8.8M less than during the same quarter in 2010. But when you factor in a $10.8M drop in political spending, that result looks pretty good to the company’s executives. Looking ahead, President/COO Bob Prather said, “I think you’re going to see ‘12 being a good year for advertising and a real good year for us.”

Prather knew that political would be down, but the fact is that political spending with the group was even lower than anticipated; however, that makes the prospects for 2012 look that much better.
Another positive sign, said Prather, is an expected increase in retransmission consent income, with contracts under negotiation for 45% of the group’s stations. Prather said that the value of local broadcast has historically been under-appreciated by cable operators, but he said they seem to be coming to the realization as to just how important the stations are, particularly the strong market-leading stations.

CEO Hilton Howell noted that even though political was down, all five of the company’s other top advertising categories were up. Automotive increased 5%; restaurant increased 3%; medical increased 7%; communications increased 7%; and furniture and appliances increased 9%.

The breakout of Gray income sources for Q3 is as follows:
* Local advertising revenue increased $0.4 million, or 1%, to $44.7 million.
* National advertising revenue decreased $0.5 million, or 4%, to $13.8 million.
* Internet advertising revenue increased $1.9 million, or 57%, to $5.2 million.
* Political advertising revenue decreased $10.8 million, or 67%, to $5.2 million.
* Retransmission consent revenue increased $0.5 million, or 11%, to $5.2 million.
* Production and other revenue decreased $0.3 million, or 17%, to $1.7 million.
* Consulting revenue from our agreement with Young remained at $0.6 million.

The company is expecting positive growth of 3%-4% in Q4 2011 – excluding political of course. As for 2012, Prather noted that visibility continues to shrink, but the return of political and the Olympics, plus a much more favorable network home for the 2012 Super Bowl all bode very well for Gray. What doesn’t bode so well are upcoming negotiation with the national networks on reverse compensation. But none of those contracts are up immediately, and Gray will be watchful as pacts between the majors and other television groups are completed.

Prather commented on maintaining relationships with advertisers during the height of the political season. He said most of them are happy to move to the sidelines and avoid the clutter, the competition for desirable time slots and the higher prices. For its part, Gray stays in close contact with its core group and promises to “make it up to them” once the elections are over and the situation returns to a state of normalcy.