A study of prospects for the television industry from Moody’s Investor Service Inc. says that a bumper crop of political advertising could produce advertising income gains in the 12%-16% range for broadcast television, with groups Gray Television, LIN Television, Nexstar Broadcasting, and Sinclair Broadcast particularly well-represented in battleground states. However, core advertising business will remain below peak levels.
“Advertising depends on a healthy economy, and our stable outlook for US broadcasters is tied to GDP in the US,” said Carl Salas, a Moody’s VP-Senior Analyst and author of the report. “The automotive and retail sectors that contribute significantly to core advertising will fuel 2012’s gradual rise in advertising demand.”
Moody’s dates the advertising high-water mark back to 2006-2007, and the deepest valley to 2009. It notes that during this time, television is dealing with both increased competition from new media and a slow pace of return by its traditional local advertisers. In fact, Moody’s believes the return to full core business health is still a few years away.
In short, the positive comps that will be produced by the elections and the 2012 Olympics will give way to some truly ugly comps during the 2013 off year.
On top of that, local broadcasters are going to feel a new pinch in the form of reverse compensation to their networks.
Moody’s did say that television broadcasters have in general been doing a good job of getting their financial structure in order. It said that “…TV broadcasters have been successful in refinancing near-term debt maturities and reducing leverage overall, as broadcasters have pushed many of their maturities beyond their original 2012-2014 due dates. Media General remains one of the few broadcasters facing significant maturities in the next two years.”