Some TV Groups Seeing Advertising Improvement, Future Still Uncertain

“We saw sequential month-over-month improvement in our same-station core advertising revenue performance from April to May, and from May to June,” said Nexstar CEO Perry Sook. Sinclair had a 43% decline in ad revenue in April, compared with the same month in 2019, and June ad revenue fell 26%, said CEO Chris Ripley. “We expect a sustained adverse impact in future periods, depending upon the extent and duration of the economic downturn brought on by the pandemic,” said Walter Ulloa, Entravision's chief.

“Sequentially, things have gotten better,” said Nexstar Chief Financial Officer Tom Carter. Nexstar and Sinclair said setbacks in locations reopening -- such as virus surges in Texas and Florida -- didn't have much effect on the improvements in advertising. “We are not getting fits and starts” in ad buys, said Sinclair Chief Revenue Officer Rob Weisbord, saying the company is seeing ad buyers booking later than pre-pandemic, and monthly buys rather than quarterly or semiannual ones.

Sook said the gradual reopening didn’t hurt the increased TV ratings broadcasters enjoyed during the pandemic. He said Nexstar is hopeful those audience gains are “sticky.” He conceded cable subscribers are decreasing, which affects the company’s retransmission numbers. Fox, meanwhile, "remains vulnerable to deteriorating basic cable subscriber trends, which saw a sequential uptick in net declines," Cowen analyst Doug Creutz wrote investors. Total sales of $2.42 billion fell 4% "as growth in affiliate revenues was more than offset by declines in advertising revenues," Fox reported.

Sinclair quarterly revenue increased 66%, due to buying 21 regional sports networks, but the company missed expectations. Teams have to pay the broadcaster for not playing the agreed-upon number of games this year, but Sinclair has to pay distributors for not broadcasting those games. CFO Lucy Rutishauser said the company expects the team payments to exceed the money going out. Sinclair has to begin accruing the money for the payments to distributors now, which affects results, she said. “Consolidated revenue was less than the Company's quarterly guidance, due to $124 million of accrued rebates to distributors tied to minimum game guarantees,” the TV station owner said.

Ripley touted the progress of ATSC 3.0. He said Sinclair expects 10 more of its stations to start broadcasting on the new standard this year.

Nexstar trumpeted Q2 revenue of $915 million, a record. “Total second quarter television advertising revenue increased 18.1% to $319.8 million, including political revenue of $21.6 million and core advertising revenue of $298.2 million,” said the earnings release. Graham Holdings reported profit of $18.9 million, down from $57.1 million. “The Company cannot predict the severity or duration of the pandemic, the extent to which demand for the Company’s products and services will be adversely affected or the degree to which financial and operating results will be negatively impacted,” said Graham. Entravision reported a 35% decrease in revenue. That’s in line with expectations, Noble Capital Markets analyst Michael Kupinski emailed investors.

Nexstar is “rapidly transitioning out of this being about core advertising during the pandemic” said Sook, saying he's looking ahead to Labor Day when he believes election ad spending will kick off in earnest. Carter said Nexstar is comfortable political ad outlays will live up to expectations and won’t be adversely affected by the pandemic. Political ads will help mitigate the “weakness in core advertising,” said Ripley.

Companies said they trimmed costs. Ulloa said Entravision performed “an extensive review” of the business to reduce expenses, and Ripley said Sinclair continues to “judiciously manage our costs and to take the actions necessary to enable us to endure this period of economic weakness.” Sook said Nexstar is starting to allow some discretionary spending to restart. The company has had 145 confirmed COVID-19 cases out of 13,000 employees, with one hospitalization, Sook said. Sixty percent of Nexstar employees are working in their offices, Sook said.

Ripley said he’s not concerned about broadcasters facing stiffer regulations after the election if there’s a change atop the White House. Broadcasting enjoys bipartisan support, he said. Tech companies might face more regulations, but inflicting more on broadcasters would be “akin to picking on the little guy,” he said. His industry is “so small” and “fragmented” that increasing regulation would “make little sense,” he said.