Hello everyone! Click here for Deputy Editor Victoria McNally. You may remember last time I wrote for Alyssa Boyle in this newsletter. I’m not taking over permanently, but you can expect more work from me over the next six weeks or so while Alyssa is away.
I probably didn’t need me to tell you that, financially speaking, things aren’t looking great for the local television broadcast industry these days.
However, just in case you need quantitative evidence, consider the fact that many of the major broadcasters are considered credit risks.
Last week, independent credit rating agency S&P Global Ratings compiled a recent analysis of six major television station groups: Sinclair, Nexstar Media Group, Tegna, Gray Television, EW Scripps, and CMC Media Corp. A report was published.
The bottom line? S&P downgraded four of the six companies, specifically Sinclair, Gray Television, EW Scripps, and CMC Media Corp., reducing the shift from linear TV to streaming among viewers and advertisers. Given the long-term transition, the outlook for debt recovery is currently “lower than expected.”
Rose Overman, director of media and entertainment at S&P Global Ratings, said this is a big change from five years ago, when local broadcast groups were in much better financial shape overall.
S&P also predicts that local TV advertising revenues will continue to decline in the coming years, resulting in the industry becoming more dependent on political advertising.
Currently, political ads are eating up much of local TV’s finite ad inventory, crowding out other advertisers in the process. Once the election period is over, those advertisers will return, perhaps causing a slight temporary boost in growth — from a 2% decline this year to a 1.5% increase next year, Oberman suggested. do.
However, don’t get too excited as it will quickly go back down after that.
consistently inconsistent
Still, many political advertisers are risk-averse and (at least for now) still prefer local broadcasts due to reach and brand safety standards. That preference remains despite political camps’ curiosity about the targeting possibilities of streaming.
Subscribe
AdExchanger Daily
Get our editor’s roundup delivered to your inbox every weekday.
Additionally, “while digital doesn’t seem to be giving political advertisers as much profit as they would like, TV still seems to be giving it,” Overman said.
However, political spending is not constant from one election season to the next. For example, after big numbers in the 2020 presidential election, they dropped significantly in the 2022 midterm elections, making broadcasters nervous heading into this year.
“Until you really know the candidates and the issues and you know where the battleground states are, it’s hard to know how much money is actually going to be raised,” Oberman said, adding that this presidential election cycle I cited this as a good example.
worst case scenario
Overman emphasized that the local television stations profiled in S&P Global’s report are not at immediate risk of serious financial strain.
But from a purely hypothetical perspective, what happens if a major broadcaster goes out of business?
In fact, if I had to guess from recent examples, not that many.
Despite the number of bankruptcies in the radio industry in recent years, advertisers are still spending money on these companies, Oberman said.
In other words, as long as there are ears and eyes to reach, at least some advertising dollars will flow in.
Again, no local stations are on the brink of bankruptcy yet, at least not based on S&P’s current projections.
But (and maybe this is just the financially insecure millennial in me speaking), even if things got really bad for the station, filing for Chapter 11 probably wouldn’t do. Isn’t it nice to know that things won’t get any worse?
Questions? Comments? Concerns? Please look for me (email protected).
