Retans money is good, but…


Wachovia analyst Marci Ryvicker says that new money still won’t offset the drop-off in auto advertising, the tough economy and the absence of political and Olympic spending. So, she’s cut her TV revenue estimates for 2009 and sees the overall industry suffering a decline of 12%, down from the previous forecast of a 10% decline.

“In addition to the economic disaster and the absence of political and Olympic revenue, broadcasters are getting slammed by the auto industry, which has historically comprised 25% of TV ad revenue. While retrans likely will be a substantial revenue stream for most companies in 2009 and beyond, we don’t think it will be enough to offset the difficult macro environment, in the near term,” Ryvicker told clients.

The analyst is now looking for local spot to fall 15% in 2009, national 25%, network 5% and syndication 3%. The only up category is revenue from television companies’ Internet operations, which she sees growing by 3%. That all adds up to a 12% decline for the TV industry as a whole. She is looking for radio to be down 13% and outdoor 8%.

In the TV biz, Ryvicker expects CBS and Entravision to be the best performers.

“While CBS has significant exposure to advertising revenue (at approximately 70% of total revenue), it also has a diversified set of revenue streams – such as its O&O stations, the CBS network, syndication, Showtime, interactive, outdoor, publishing and radio. Some of these revenue streams are more insulated from economic downturns than others; particularly affiliate fees, syndication and interactive. CBS also has an investment grade balance sheet and a lot of cash on hand ($553 million as of September 30th) which provides it with more flexibility than most of its peers,” she wrote.

“EVC’s revenue declines should be less significant than its English-language peers given its below average exposure to political. Political revenue comprised only 4% of total television revenue (per our estimates) during this past presidential election vs. the ~10% exposure of most English-language broadcast groups,” the analyst said. Also, she has not yet factored in a retrans figure for Entravision in 2009 because Univision is handling the negotiations for its largest affiliate group and Entravision has not yet given the Street any guidance on the status of its retrans negotiations. “That being said, once Univision/EVC complete their retrans negotiations, this revenue stream could be quite significant for EVC. We estimate that 2009 retrans revenue could vary between $10 million to $40 million, which would equate to an additional $2-$5 per share of equity value,” Ryvicker noted.

Her forecast is that all six of the TV companies she covers will have revenue declines in 2009. Worst on her forecast list is Hearst-Argyle, which she sees suffering a 22.7% revenue decline. Close behind is Gray, down 22.5%, then LIN down 22.1%, Sinclair down 18.2%, Entravision (TV only) down 11% and CBS (TV only) down 4.4%.