Media investment bank M.C. Alcamo & Co. has studied the Q1 performance of television groups and reported that the revenue growth for the industry was an impressive 15.3%. Margins expanded by 11 points, to 35% from 24% a year previous.
“The Great Recovery of 2010 is underway, and in broadcasting, it is strong,” said Michael Alcamo, the firm’s President. “Not all broadcasters are recovering equally, however,” he noted. “Some have already shown sharply higher profitability margins, while others will no doubt catch up in coming quarters.”
“Despite continuing troubles in the greater economy, the broadcast industry’s overall profitability margin, measured as pro forma EBITDA/ Revenue, rose 11 margin points, from 24% in Q1 2009 to 35% in Q1 2010. Overall, the US broadcast industry showed impressive first quarter revenue growth of 15.3%,” Alcamo said.
He credits the industry-wide margin expansion to two factors.
“First, revenue was up 15.3% on the strength of many major categories. This was then magnified by cost controls across the industry. The two dynamics led to 67% EBITDA growth industry-wide, and margin expansion of 11 points, to 35%,” Alcamo said.
But he also had some words of caution. “In Q1 2009, steady-state quarterly expense may have been a bit high, as broadcasters were busy executing on the digital conversion for June 12, 2009. Steady-state operating expense then decreased after the digital conversion, because of lower electricity costs; we therefore expect more moderated levels of operating expense in coming quarters.” Nonetheless, he noted, “Sharp increases in automotive, foodservice, telecom, financial, and political advertising will continue to power revenue and EBITDA margin improvements throughout 2010.”
Who were the top performers? Alcamo noted that three of the top five were pure-play TV companies (discounting the small radio operation at Fisher). In fact, they were the top three.
Fisher Communications and Nexstar led with 24% revenue improvement. LIN was close behind at 23%, with Meredith and the Washington Post Company each at 20%.
The seven pure-play TV companies posted aggregate quarterly revenue growth of 15.2%. For the seven integrated media firms in Alcamo’s analysis, the growth in their TV divisions averaged 15.4%.