Why TV is holding up better than other media


Wells Fargo Securities analyst Marci Ryvicker pulled back a bit this week on her Q4 revenue projections for many of the broadcasting stocks she covers. But she did say that TV is holding up better than other media.

“The tone from the television operators we have spoken to over the past several weeks has generally been positive – particularly on the long term fundamentals of the business. It sounds like the networks are a little more affable with regards to reverse comp and that retrans revenue continues to grow (these two probably go hand in hand – the more retrans at the affiliate level, the easier it is to pay reverse comp). We are also hopeful that political will be robust and that auto ad spend will come back with SAAR [the seasonally adjusted annual rate of auto production]. Last but not least, underscoring operators’ positive sentiment about the long term prospects of broadcast TV has to be the recent M&A transactions – i.e. the sale of McGraw Hill stations to E.W. Scripps and Four Point stations to Sinclair – both at a high single/low double digit sellers’ multiple (per our estimate),” Ryvicker wrote.

The analyst noted that Gannett reported that auto advertising came back in September for its TV stations, but gave no indication on other categories. “BUT there was no mention of other ad categories. We have heard from our checks that financials and groceries are still weak, while telecom, retail and restaurants are ‘spotty’ – most would characterize as ‘flattish’ to slightly up. As a result, we think the tone will be cautiously optimistic with regard to Q4 guidance/pacings and we adjusted our Q4 core spot revenue growth estimates to reflect positive low single digits (2-3% for most),” said Ryvicker. “Importantly,” she added, “we have not heard of any significant level of cancellations – but rather a slower ‘time to commit’ as one group head explained to us.

Here is the analyst’s bottom line: “We think that television fundamentals are holding up relatively well considering the volatile economy. A lot of this is stemming from strong auto, while other categories are mixed. We think the market may be pricing in a double dip or close to it, and we just are not seeing it. Of our companies under coverage, we highlight SBGI given its strong dividend (5.5% yield), younger-skewing demo via FOX and CW and recent retrans negotiations, which should help consolidated revenue growth.”