TV Station Reliance on Ad Revenues DiminishesFebruary 8, 2010
 CHARLOTTESVILLE, VA.: Diversification
of TV station revenues finally appears to be taking hold, and not a moment too
soon. The advertising business that supplied nearly 100 percent of TV revenues
for decades contracted dramatically in 2009, SNL Kagan analyst Robin Flynn
noted.
“In 2006, we estimate that TV station revenues from the three sources stood at
$24.6 billion,” Flynn wrote. “In 2009, despite growing retrans and online
revenues, due to terrestrial ad revenues that on a preliminary basis appear to
have been off by 20 percent or more, we estimate the total revenue pie shrank
to less than $19 billion.”
Kagan analysts don’t see a full recovery to 2006 revenue levels in the near
future, projecting total 2013 levels at $21.7 million. Of that, they say 16
percent will be from retrans and online advertising, compared to 3 percent in
2006.
“Based on our latest projections, TV station industry revenues could go from
what was a 97 percent reliance on local and national terrestrial ad revenues in
2006 to a revenue mix of just 84 percent from terrestrial ad revenues by 2013
with 9 percent from retrans revenue and 7 percent from online revenues,” she
said. “Based on expectations for increasing online and retrans revenues, that
16 percent from nontraditional sources is expected to continue to grow, with
mobile interactive revenue also potentially contributing to the category.”
Flynn said stock prices reflect growing investor confidence in the sector in
part due to the revenue diversification picture. Gray TV shares, for example,
are up nearly 55 percent year-to-date to $2.32, after taking a pummeling last
year when it swung to a
$10 million loss in the third quarter. Retrans, however, increased 466
percent to $4.3 million during that period. Sinclair Broadcast Group, the
pioneer of demanding retransmission fees for broadcast signals, pulled in $28
million in related revenues during 3Q09, up 51 percent
from the year-earlier period. Sinclair shares are up 32 percent year-to-date to
$5.31.
“Although investors were initially concerned that TV networks would force
stations to give up some of their hard-won retrans dollars, it now appears that
with the weight of the networks behind them, local affiliates should be able to
profit from the higher rates being negotiated by the networks for their own
O&Os,” she said.
Flynn’s analysis, “The brightening picture for TV stations,” is available at
SNL Kagan’s Broadcast
Investor.
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