LIN CEO Sees Auto Gains As Sustainable

A 25% year-over-year boost in automotive advertising powered LIN Media to 2Q results that beat even the high end of the company’s guidance to Wall Street. Auto is leading the charge again in 3Q and LIN President-CEO Vince Sadusky assured analysts that the auto rebound is sustainable.

Analyst Aaron Watts of Deutsche Bank noted that with auto accounting for 26% of LIN’s 2Q ad revenues, the category is back to pre-recession percentages. So he wanted to know what the implications are for TV being so heavily dependent on a single category.

Sadusky agreed that being back to having auto account for a quarter of ad sales can been viewed as either a positive or a negative, depending on your outlook for the U.S. car business.

“We view it as a positive because the balance sheets of the automobile manufacturers, especially the domestic guys, are in better shape than they’ve been in in a long, long time,” Sadusky said. “Coupled with what we see on a day-to-day basis at our dealer lots, a lot of our advertising in quote-unquote ‘the good old days’ leading up to ’08, where there was a lot of volume and a lot of cars being moved, but really driven by a lot of the deep discounting that took place, especially in the third and fourth quarters, to move old inventories off the lots — when you recall the ‘employee pricing’ concept that a lot of the manufacturers followed, which arguably pushed a lot of demand that really was unnatural — so when we look at automobile sales right now, the data from the industry, it feels sustainable,” the LIN CEO said in this morning’s quarterly conference call.

“It feels like they’re doing a much better job of managing their inventory. The advertising we’re seeing is around what we consider more normalized branding, it’s around services, it’s promoting fuel economy, you know, getting the word out about new model launches. And those kind of things feel sustainable and the turnover of the fleets feels sustainable relative to some of the advertising-related dollars that came in leading up to the recession,” Sadusky told the analysts.

“From where we sit, we view the auto industry as being healthier than it’s been in a long, long time — and this level of demand being sustainable,” he said.

The 25% auto gain accounted for all of LIN’s 6% core advertising gain, excluding political, in 2Q, with other categories being down collectively by 1%, but that has changed in 3Q. Auto is still the big driver, but non-auto categories are pacing up 7%, said LIN management.

Olympics-related advertising on LIN’s NBC stations is expected to total about $6 million, up sharply from $4.5 million for the Beijing Summer Olympics in 2008.

Projecting political advertising is difficult, with campaigns shifting allocations as states and races become more or less competitive, but LIN is guiding to a mid-point of $16 million for 3Q.

“You see the strength of political, not only for us but for other broadcasters,” Sadusky said. “It’s been strong. The PAC money’s been strong and it looks like local broadcast continues to win the day in terms of share,” he said of media spending by candidates, parties and political action committees.

All in all, LIN is telling Wall Street to expect 3Q revenues to be up 26% to 33% from the year-ago mark of $97.8 million.