Moody’s Investors Service has changed its US TV broadcast outlook to stable from positive, citing concerns that revenues will flatten out once the political advertising wave has passed. Moody’s however, is sticking with its previous view that revenues will be up by a mid-teens percentage this year.
Here is the commentary issued Wednesday (7/7) by Moody’s:
“Moody’s Investors Service changed its Industry Sector Outlook for the U.S. Broadcast TV sector to stable from positive.
This outlook expresses Moody’s expectations for the fundamental credit conditions in the industry over the next 12 to 18 months.
The outlook change incorporates expectations for a period of flat revenue once the political season passes and the cyclical rebound in advertising subsides.
Moody’s continues to expect mid teens revenue growth in 2010 as advertisers benefit from the cyclical rebound in advertising and strong political spending, followed by approximately flat revenue in early to mid-2011. However, with the loss of political dollars and continuing economic uncertainty, broadcasters could face challenges in maintaining revenue at comparable levels in 2011. If we expect the very recent soft trends in employment, auto sales, retail sales, and consumer confidence to be sustained over the coming quarters, Moody’s would likely revise the outlook to negative based on the potential for a shift in our view to at least a mid-single digit revenue decline in 2011.
The stable outlook does not necessarily lessen the likelihood of either positive or negative rating actions. Moody’s has taken positive ratings actions over the past several months based on improved fundamentals, but negative rating actions could occur as companies at the lower end of the spectrum navigate remaining high leverage and challenging covenants, especially if economic conditions deteriorate.”
RBR-TVBR observation: The bond markets have been very good to broadcasters lately and hopefully that window to raise money will remain open. We would note that Moody’s has not turned negative on the TV sector, merely neutral. To be sure revenues next year will not be as hot as this year because there won’t be a federal election next year – but we all knew that and the only realistic way to look at TV revenues is on a two-year cycle (or comparing revenues excluding political).