Commentary

Will Higher TV Ads, Retrans Fees Meet Bottom-Line Expectations?

After an expected drop in TV stations' advertising revenue in 2017 versus the year before, TV stations' prospects this year look better -- thanks to political advertising.

At the same time, non-advertising sources in the form of TV retransmission revenues will climb. That's also expected. The question is: What is the unexpected for TV stations?

With regard to TV advertising, programmatic systems in particular and new technologies/businesses, coming from new ATSC standards, have long been promised -- all to help stabilize and grow revenue.

In 2017, the top six TV station groups hovered around $1.20 billion to $1.63 billion dollars per year in advertising sales, with Sinclair Broadcast Group at the top ($1.6 billion) and Tegna at the bottom of this list ($1.2 billion), according to BIA Kelsey/TV NewsCheck.

Total local TV advertising revenues were down in 2017 versus the big 2016, which included the presidential election campaign and the Summer Olympics.

advertisement

advertisement

Mark Fratrik, senior vice president/chief economist for BIA/Kelsey, says the answer to more advertising growth in the near-term may just be to buy your way in.

When the Sinclair-Tribune Media deals get sorted out, expect more ‘buy in’ acquisitions by groups feeling competitive pressures from advertisers and audiences.

Even without raising the cap on owning TV stations, business executives expect more permutations -- akin to the earlier practice of local marketing agreements. That's when TV stations, while not owning TV stations outright, can make agreements to operate outlets, including ad sales, and other types of station functions.

Although TV stations have long adjusted to the ups and downs of two-year ad cycles -- big Olympic/political years versus low periods -- it’s getting tougher. For example, in 2016 Sinclair pulled in $2.9 billion, which was followed by a $1.62 billion take in 2017.

Even accounting for higher retrans fees and slowly rising digital advertising sales, this isn’t enough for TV station groups. They need much more stability. Thus, you can understand Sinclair’s dogged pursuit of Tribune -- making further concessions when it comes to divesting some TV stations.

So there is this attraction -- among others -- for Sinclair: Tribune's net core advertising sales were $1.14 billion in 2017 -- down 3% from 2016.

So count on retrans revenue for the consistency TV stations always love. The big question is: When will that source of funds start its own cycle?

2 comments about "Will Higher TV Ads, Retrans Fees Meet Bottom-Line Expectations?".
Check to receive email when comments are posted.
  1. Ed Papazian from Media Dynamics Inc, June 12, 2018 at 9:45 a.m.

    Right now, approximately 81-82% of U'S' TV homes utilize either a cable system, satellite distributor or telco ( fiber optic ) means of getting TV content and all of these sources are profitable ventures despite "cord cutting". At the present pace of "cord cutting" it appears that the various distribution entities who pay the stations---and through them the networks----retransmission fees can continue to do so for some time---perhaps a long time. Also, despite "cord cutting", the amount of retransmission fees paid to broadcast stations, which was a mere $200-300 million twelve years ago, has risen beyond $10 billion and is expected to increase, albeit at a reduced rate, in the near future.

    The real question is how much of these highly profitable incomes will the stations retain and how much will they have to give to their primary program content suppliers---the networks. We will shortly release a report on how this has been trending since 2006 to subscribers to "TV Dimensions 2018" in one or our "Alert" reports. The trend is very much in the networks' favor, though the stations are still keeping a hefty share.

  2. Hector Bauza from Accent Strategy Group, June 12, 2018 at 3:10 p.m.

    Is this trend affecting Hispanic market TV stations?

Next story loading loading..