Broadcast Ads Recovering, Still Affected by COVID-19, Say CEOs
Broadcasters aren’t back to their pre-pandemic financial states, but they see improvements on the horizon, said Cumulus, Sinclair, Nexstar and Graham Holdings in quarterly reports and calls this week. CEO Perry Sook said Nexstar has enough certainty about its outlook to reinstate guidance for upcoming quarters, conceding that broadcasters aren't out of the woods. “We don’t anticipate being back above 2019 levels” in advertising revenue in the next year, Sook said. Nexstar will be “still retracing our steps” and recovering in 2022, he said.
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Sinclair "will emerge more flexible in how it operates” and will be positioned for growth post-COVID-19 pandemic, CEO Chris Ripley told investors Wednesday. ATSC 3.0 also was a focus for this and other TV station owners.
Nexstar revenue rose 25% to $1.4 billion over the same quarter in 2019. TV ad revenue grew 37%. Sinclair media revenue decreased 6% to $1.49 billion. Revenue in Graham’s TV broadcasting division increased 42% to $175.2 million. Cumulus sales slid 14% to $245.9 million. That’s better than expected, Noble analyst Michael Kupinski emailed. Ripley said the same about Sinclair’s Q4, noting there’s much uncertainty. Graham “cannot predict the severity or duration of the pandemic,” warned the company’s release.
All the broadcasters see their ad revenue improving and reported large gains from 2020 political commercials. Q4 was the strongest political revenue Sinclair ever had in a single quarter, $10 million higher than predicted due to runoff elections in Georgia, said Chief Financial Officer Lucy Rutishauser. Nexstar is having “strong” ad pacing so far in Q1, with resurgences in advertising from the auto industry, insurance providers, gaming, home repair, and retirement and nursing homes, said Sook.
“Local and national advertising revenues have improved steadily through 2020 since the onset of the pandemic,” said Graham. Cumulus ads are pacing down 20% in Q1, but improvement is expected in March, said Kupinski. "Once COVID seems to stabilize, we’ll see advertising return to pre-pandemic levels," said Ripley. Cumulus is “well positioned to return our business to its pre-pandemic trajectory,” said CEO Mary Berner.
The broadcast industry expects ATSC 3.0 services to be available in 45 markets covering more than 60% of U.S. TV households by year's end, said Ripley. That's close to the industry’s NAB Show 2019 goals for year-end 2020 before COVID-19 restrictions (see 2009220034). The ability for 3.0 to provide a “superior audio and visual experience” to targeted homes and devices and to be used for datacasting “are just a few ways we believe this important IP transmission technology can be monetized for the future,” said Ripley. Sinclair plans to transition its regional sports networks operations from a Disney facility in The Woodlands, Texas, to “a brand-new, state-of-the-art,” 25,000-square-foot “sports media operations center” at Encompass Digital Media in Atlanta this year, said the CEO. “This facility can run up to 50 RSN channels, including provisions for ultra-high-definition channels."
Sinclair and Nexstar cited sports betting and associated advertising as a growing revenue source. It was “nary a category” for Nexstar in Q1 2020 but is now in “the double-digit millions,” said Sook. Sinclair made sports betting plans a centerpiece of its quarterly announcement, touting an arrangement with casino and betting company Bally’s, built around Sinclair’s RSN and an app planned for 2022 (see 2101270075).
A few of the broadcasters noted 2021 is an off year for political spots but look to 2022 for another windfall due to Senate, House and gubernatorial races. Though digital ads increased, TV still gets “the lion’s share” of political ad dollars, Sook said. He said he’s not sure if TV stations can hold on to the increased viewership they had in the pandemic, but Nexstar is seeing ratings growth of “high teens to 20%,” compared with pre-pandemic. During the recent storms in Texas, “people did not go to Apple TV to find out” emergency information, he said.