Moody’s turns bullish on US TV industry


Moody’s Investors Service has changed its outlook for the US broadcast television industry from “stable” to “positive.” The credit rating service is now projecting mid-teens revenue growth for 2010.

The statement from Moody’s on Wednesday was rather brief, but good news for broadcasters:

“Moody’s Investors Service changed its Industry Sector Outlook for the U.S. Broadcast TV sector to positive from stable.

This outlook expresses Moody’s expectations for the fundamental credit conditions in the industry over the next 12 to 18 months.

The positive outlook incorporates Moody’s expectations for mid teens revenue growth in 2010 followed by approximately flat revenue in 2011.

Broadcasters will benefit from the recovery in auto sales, likely to have a disproportionate impact on TV advertising on the upside as it did during the downturn, as well as broad based improvement in advertising across most categories. The potential for epic political advertising revenue from factors including gubernatorial and congressional contests in almost every state, the negative impact of high unemployment on incumbents, and weakening poll numbers for the current White House administration will also boost advertising revenue as we expect more hotly contested seats than usual. Furthermore, a portion of the cost cuts initiated during the downturn represent a permanent reduction in fixed costs, so the majority of the revenue lift will likely fall through to EBITDA, with as much as 90% of new ad-sale proceeds converting to EBITDA.

The outlook will likely revert to stable over the next year as the projected cyclical rebound of both auto and core advertising subsides and there is a return to more typical political advertising revenue in 2012.

Moody’s cautions that the positive outlook does not necessarily presage positive rating actions. A number of positive rating actions in the broadcast TV sector have occurred over the past several months due primarily to improved liquidity resulting from capital markets access, as well as the better revenue outlook. Furthermore, negative rating actions could occur as companies at the lower end of the spectrum navigate remaining high leverage and challenging covenants.”