And that’s pretty scary, when you consider that core spot business is pacing down 20% in Q4, with political reducing that to a low single-digits decline. Revenues were up, but only by 0.5%, in Q3 to $150.1 million, but that was in spite of having only a single NBC affiliate to benefit from the Summer Olympics.
"The economic recession and financial crisis have clearly impacted advertising budgets, as indicated by the number of industry sectors that advertised less in the third quarter 2008 as compared to a year ago. Despite the decline in the core advertising business, our net broadcast revenues grew $0.7 million, of which advertising time sales were down only $0.2 million on the strength of political advertising in the quarter. Furthermore, on both a political included and excluded basis, our stations grew their local market share on average, a sales effort of which we are very proud, especially considering that we did not have the benefit of the Olympics due to having only one NBC affiliate,” said CEO David Smith.
"It is unclear how long the economic recession will last or how deep it will be. We are, therefore, managing as though 2009 will continue to be a difficult advertising climate. In this regard, we have already begun the process of reviewing our cost structures and initiating cost reduction measures. In addition, we recently announced that we have scaled back our expectations for additional investments in non-television ventures in 2009,” Smith added.
Steve Marks, COO of Sinclair’s Television Group, noted that the company outperformed its peers in Q3. Including political, local sales declined 0.4% and national was up 0.4%. Excluding political, local was down 1.7% and national was down 13.8%.
CFO David Amy referred to the “fog of war” in describing current market conditions, with many ad categories showing their greatest declines ever. But CEO David Smith remains confident of an eventual recovery. “This isn’t the first time we’ve seen this. We’ve seen it in ’87, ’91, between ’91 and 2001 there was at least one event, 2001 was an event, so this, while it’s difficult, it’s not new,” Smith said. So, what Sinclair and everyone else has to do is manage to hit a number and meet their obligations to lenders and others. “It is foggy out there, but we know what we have to do,” he said.
RBR/TVBR observation: CEO David Smith sounds pretty confident about being able to weather the storm. That’s because Sinclair has been cautious about its leverage and kept its eye on the ball – local sales. Smith noted how many times the company has come through economic downturns, so he’s looking ahead to the upside at the end of this one. Let’s hope he’s right in predicting that it will last about 10 months – the average of past recessions.