Broadcaster Ads Improve; Little Change on Ownership Rules Expected
Broadcast advertising improved and station owners see opportunities in sports betting and ATSC 3.0 but little chance of relaxed ownership rules anytime soon, they said in Q1 calls last week. “What a difference 10 weeks makes,” said Cumulus CEO Mary Berner of the COVID-19 recovery. “We are optimistic for gradual, but continued progress throughout the balance of the year as macroeconomic conditions progress, said Entravision CEO Walter Ulloa.
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Gray Television was “in the ZIP code” of its 2019 ad levels in Q1, said President Pat LaPlatney. Sinclair is having “continued improvement” in core advertising, said Sinclair CEO Chris Ripley. Nexstar is also having ad improvements, but there’s “no hard and fast rule” about the pace of recovery in specific markets, said CEO Perry Sook. The reopening is “gaining momentum,” said ViacomCBS CEO Bob Bakish.
CEOs said it isn't likely the FCC will relax ownership rules or loosen the national ownership cap soon. Scripps' Adam Symson said the Supreme Court’s ruling in favor of the FCC provides some opportunities for the company to pick up additional stations due to the removal of the eight-voices limitation (see 2104010067). Though the same decision also reinstated the agency’s case-by-case restriction on same market top four combinations, Symson said getting one through the agency was likely “a long putt.” Sook doesn’t expect much activity on ownership, and broadcasters need to see the status of “the bright line” on possible top four combos. Sook said he also doesn’t expect much meaningful transaction opportunities for his company. With the ownership rules as they are, “no one will be able to create a company like ours,” he said in response to a question about Gray’s proposed purchase of Meredith’s stations.
CEOs mentioned one hitch: auto supply slowdowns due to a shortage of computer chips. “Visibility” into the return of auto advertising is low because of the low supply, said Ripley. “You’re not gonna advertise if you’ve got nothing to sell,” said Gray CEO Hilton Howell, calling the problem a COVID-19 “hangover.” Gray Chief Operating Officer Bob Smith said a trend of advertisers not buying commercials until shortly before their content is to run has continued.
Indications are the country is entering “a period of robust economic activity” due to pent-up demand for travel and other pandemic-affected entertainment, said Berner. This time last year, stations faced “the specter of a deep and prolonged recession,” she said. “The tone of Radio advertising has significantly improved,” Noble Capital Markets analyst Michael Kupinski emailed investors.
Gray Q1 revenue was little changed at $544 million. Cumulus declined 12% to $201.7 million. Nexstar rose 2% to $1.11 billion. Sinclair decreased 6% to $1.5 billion. Salem gained 1.9% to $59.4 million.
Salem is likely to get a smaller increase in Q2 than peers because it handled the pandemic well, said Kupinski. “Its rebound is more muted.” Entravision revenue rose 132% to $148.8 million. HC2 Broadcasting reported $10.5 million, a 4% gain.
The pandemic increase in broadcast TV viewing has started to back off, CEOs said, but it remains higher than pre-COVID-19. The increase had “some stickiness,” said Sook. “People have returned to elevated but normal levels,” said Howell. Gray doesn’t expect political ads in 2022 to reach the heights of presidential years, but a tight House and Senate indicate spending will be significant. “People haven’t dropped their political divisions and started singing ‘Kumbaya,’” said Chief Legal and Development Officer Kevin Latek.
Many touted their focus on sports betting as a source of future growth for their companies. Sinclair is continuing its partnership with gambling company Bally’s and will add elements to its sports betting app later in 2021, including gamification, Ripley said. Sinclair is pursuing direct methods of getting sports content to its consumers to avoid blackouts from intermediaries, Ripley said. Berner cited sports betting as an opportunity, calling Cumulus league contracts and sports talent “beachfront property” for associated advertisers.
ATSC 3.0 has synergies with sports betting because it provides a reliable, low latency avenue for viewers to watch games on mobile devices, said Ripley and Sook. Sinclair has launched in 14 markets, Ripley said. He said 3.0 allows increased monetization of Sinclair’s existing viewers. Symson said Scripps is focused on testing the applications of the new standard and is certain it will lead to new revenue streams. “It is still a little difficult to size the opportunity,” said LaPlatney.