TV Stations Seeing Slow Ad Improvement; Future Uncertain

Gray’s Kevin Latek, Brian Lawlor of E.W. Scripps, and Graham Media CEO Emily Barr said ads have improved each month since what Flynn called “a deep shock” in April. Flynn said that trend continuing depends on factors such as whether a recovery happens, if there’s a second pandemic wave, and if sports leagues start back up. Scripps had been set to move to “phase 2” of its COVID-19 plan, but slowed that down since infection spikes began showing up in re-opened states, said Lawlor, Scripps president-local media.

Commercials have been down in all categories during COVID-19, said the panelists. Local core ads for Q2 are expected to be down 30%-40%, said Flynn. Industries that are slowly starting to return to buying TV ads include home improvement, loan refinancing, and legal ads, said Latek, Gray Television chief legal and development officer. Latek said Gray has also seen new commercial purchasers that hadn’t previously been involved in TV ads, which he called “positive.” That includes thank-you spots to hospital workers and “messages of hope,” he said. Lawlor predicted a lack of ads for new cars will continue, but he has seen used car advertising doing better. With rental car giant Hertz going bankrupt and likely selling its inventory, “we could see a healthy used car market” over the few months, Lawlor said.

All the executives were positive about political spots. Flynn projected $3.1 billion in political ad revenue for TV stations this year. Both the Republican and Democratic presidential campaigns have begun buying ads in battleground states, said Lawlor. Since rallies and campaign events are likely to be reduced by COVID-19 concerns, “there’s more money in the ecosystem” for ad buys, Lawlor said. Along with the White House campaign, “down ballot races are going to factor in heavily,” said Barr. The recent protests and actions on racial inequality “have not diminished anyone’s interest in politics,” said Latek. The industry should “be even more bullish” about political ad projections now, he said. “Races that didn’t seem competitive have become competitive.”

Retransmission consent revenue has been “critical” in helping insulate TV stations from the COVID-19 ad market fluctuations, said Flynn. She said continuing growth in retrans rates is expected, though it's likely to be affected by increasing declines in MVPD subscribership. That means increases will need to be driven by fee increases, Flynn said. “There is always going to be a balance between subs and rates,” said Barr. Retrans fees are about 25% of overall MVPD fees, Flynn said.

TV deals have been a “feast or famine situation” for a number of years, said Flynn. Most station sales have been associated with one or two large deals, such as buying Cox’s stations in 2019, Flynn said. “Since this crisis has begun, the deal market has obviously dried up."

There’s not likely to be many station buys happening in a presidential election year, even not accounting for the pandemic, Lawlor said. The potential for deals exists, but those transactions may not happen for a year or two, he said. Lawlor and Latek said it’s unlikely that COVID-19 will lead to any bargains on stations for prospective buyers. “Stronger stations are able to ride out the tough circumstances of the coronavirus,” Latek said. It's unlikely that smaller stations will be pushed into selling because of the current downturn, he said.