Auto Ads May Never 100% Return: Broadcast Executives
Automotive advertising could take a while to recover from vehicle supply shortages and may never return to the prior position as a category, said broadcast executives in Q2 calls last week. “We don’t see it getting back” to being 25% of Nexstar’s ad business, said Chief Operating Officer Tom Carter. This was echoed by Gray Television co-CEO Pat LaPlatney and others.
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Quarterly reports show radio and TV station owners emphasizing other ad buyers, most prominently sports gambling. Nexstar CEO Perry Sook called it “super-hot.” All the broadcasters whose calls we listened to said ads and the economy are recovering from the pandemic, with little drag from the recent negative variant news. “We’ve not seen any financial impact we’re aware of from the delta variant,” said Audacy CEO David Field.
“The lack of inventory is catching up with these dealers,” said E.W. Scripps President-Local Media Brian Lawlor Friday. He said auto was the lone category with headwinds. Lack of car inventory stems from a global chip shortage, and was widely blamed by station owners. Cumulus’ ad sales rebound “faced some drag” from chip shortages, said CEO Mary Berner. “All our categories are up except auto and telecom,” said Fox CEO Lachlan Murdoch.
Diversifying away from auto commercials is good, said LaPlatney. Auto spots are “moving to other mediums,” LaPlatney said. He said they will likely never go back to 30% of Gray’s ad sales. Lawlor believes auto will recover after some difficult months, conceding it's unlikely to supplant Scripps’s largest category, services. Field said these commercials will return to former heights: “I think a very healthy portion of it comes back to radio. I do want to underline we’re not hearing any talk of defecting from radio.”
Gaps are being “back-filled” by sports gambling, said LaPlatney. “Legal gambling is driving increased ad spend,” said Murdoch. Sports betting has become a top ten category for Nexstar, and Sook expects it to move to the top five as more states legalize it. Cumulus’ recent deal with WynnBET made that gambling company one of the broadcaster’s largest advertisers “overnight,” said Berner. Urban One CEO Alfred Liggins mentioned his company’s partnership with a Richmond casino. Field expects sports betting as a “$100 million category” for Audacy within a few years.
Nexstar Q2 net revenue of $1.13 billion rose 24% from the year-ago quarter, and Fox’s TV segment reported $1.45 billion, an increase of 30%. Fox’s cable network had $1.4 billion, up 10%. Gray announced $547 million, up 21%. Scripps $565 million, an increase of 57%. Executives said numbers were returning to nearly 2019 levels. “We’re encouraged by the overall acceleration in economic activity,” said Sook.
Every broadcaster whose call we heard said ads are recovering from the pandemic, especially in comparison to Q2 2020, which was considered hardest hit by the COVID-19 shutdowns. Beasley Media reported net revenue increased 96% due to a “year-over-year increase in audio advertising revenue and digital revenue due to the continued recovery of the commercial advertising market from the effects of the COVID-19 pandemic.” Graham said TV broadcasting revenue increased 19% to $120 million on COVID-19 recovery. “The radio advertising business saw a robust rebound from the worst impacts of the pandemic in Q2 2020,” said Urban One's Liggins. Its sales rose 42% to $107.6 million.
Many executives said they are monitoring news of the delta variant, but they hadn't seen a slowdown. “We remain wary of the rising tide of delta infections,” said Field. “The delta is a concern,” said LaPlatney. Some Scripps advertisers in Florida delayed ad buys because of it, but only there, said Lawlor. They are hospitals or are legal services affected by courthouses being closed, he said. Delta could be a larger issue in Q4, Field said.
Political ads in 2022 could approach 2020, said Gray and Nexstar executives. Gray Chief Legal and Development Officer Kevin Latek said the company has seen record fundraising “dwarfing” prior off-year elections. “It’s anyone’s guess what our 2022 net political will be, but it is safe to say it will be large,” said Gray co-CEO Hilton Howell. He suggested 2022 could outpace 2020. Sook said spending will be “robust” in 2022, but doesn’t project it eclipsing 2020’s record.
Gray executives still expect buying Meredith' TV stations to conclude in Q4. Howell noted Gray would be 3% under the 39% audience reach cap, which he called “some room to work with.” Low-power broadcaster HC2 said it plans to add 25 new stations by the end of Q1 using its construction permits. Latek said the FCC is primarily focused on broadband buildout and net neutrality, which are unlikely to affect broadcasting. He said it’s not clear what will come out of the agency’s call for a refreshed record on the 2018 quadrennial ownership review. Fox doesn’t “see a strategic need to get bigger,” said Murdoch.