Broadcasters Expect Q3 to Look Up, Not Enough for Guidance
The broadcast TV industry expects improvement in Q3, but it's still (see 2008050063) too uncertain to promise specifics, said executives from Gray Television, Univision, E.W. Scripps and Tegna. “The situation is still fluid and visibility is limited,” said Gray Chief Financial Officer Jim Ryan. “The impact of the pandemic remains uncertain,” said Tegna CFO Victoria Harker. "Scripps has suspended issuing new guidance because of the economic uncertainty caused by the COVID-19 pandemic," said the company.
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Several companies wouldn’t issue formal guidance on expectations, but others expect it to improve. Most pinned that hope on the onset of political advertising and Q2's trend of improving each month. Advertising “slowed less than we feared, and recovered faster than we hoped,” said Gray CEO Hilton Howell in an earnings call. “We hope to have turned a corner from the worst of the pandemic’s economic impact,” said Univision.
Tegna’s advertising revenue in Q2 declined by 21% from Q2 2019, said CEO Dave Lougee. “That’s a very strong result, given that the consumer economy basically stopped in March.” Gray total revenue was down 11%, and 30% for broadcast revenue, excluding political. Univision had a 24% drop in revenue in Q2, and Scripps had a decrease in core ad revenue of 17%, said the company’s earnings release. Nonetheless, its stock closed up 6.7% at $11.82 Monday.
High expectations for political spots in 2020 are stoked by the large fundraising effort and presidential campaign spending in states where it previously wasn't expected, the broadcasters said. “Our political theater of 2020 has never been more dramatic,” said Howell. With in-person rallies and whistle-stop tours less of an option during the pandemic, TV has become the “dominant” medium of political reach, Howell said. Gray expects political revenue in 2020 of up to $275 million. Tegna anticipates $370 million in 2020 political ad revenue, said Harker. After better than expected political ad numbers in Q2, Scripps adjusted expectations for 2020 political commercial revenue to over $200 million, it said.
A possible change in the White House isn’t seen as having much effect on whether the FCC shifts its stance on broadcast ownership regulation, said Lougee: “We’re not banking on anything relative to the cap regardless of what party takes over.” He said younger staffers on the eighth floor understand why consolidation makes sense. A problem with pursuing takeovers now is how to value any such offerings, “given market volatility,” said Harker. Gray “remains intent on continuing to grow” said Howell. The company reaches 25% of American households, and so has room to grow under the 39% cap, he said.
The companies had different outlooks on the importance of sports on results. Tegna and Univision are looking ahead to previously canceled sports events that may instead air on the back half of the year. Lougee cited the Indianapolis 500 and Kentucky Derby as revenue-generating events that Tegna will air, and Univision listed the UEFA Champions League soccer tournament. All of Gray’s sports offerings together account for just a single digit percentage of its revenue, said President Pat LaPlatney.
The pandemic hasn’t affected retransmission consent negotiations, said Chief Legal and Development Officer Kevin Latek, conceding Gray has had an unexpected amount of subscriber losses so far in 2020, as many in the year's first half of the year as the company incurred for all of 2019. Subs could rise if the economy improves or due to a second federal stimulus check, Latek said. Tegna had an expected number of subscriber losses, but increased retrans revenue through renegotiated deals, said Lougee. Scripps is locked in a 42-market blackout with Dish Network, said the Scripps release. “Dish TV dispute will eventually be resolved” and Scripps’ new rate will be “retroactively enforced,” Noble Capital Markets analyst Michael Kupinski emailed investors.