Lougee Sees Record Spend For Cong. Races

The 2016 election cycle wasn’t the only topic of discussion as executives from Tegna met with investors and analysts to discuss first quarter results, but it came close. And the verdict is that it is already lucrative and will remain so through the fourth quarter.

Tegna Media President Dave Lougee spelled it early in the presentation. “Our market footprint is a healthy mutual fund of strong swing states like Ohio, Florida, Colorado, North Carolina, Virginia. Additionally and significantly, a Trump or Cruz nomination on the Republican side will very likely expand the number of U.S. Senate and House seats that will come into play in our markets, and spending for the control of Congress will almost certainly be unprecedented.”

The group has no worries about Republicans suffering a lack of enthusiasm for their eventual presidential nominee regardless of who it is. In the event of an unpopular candidate at the top of the ticket, they fully expect that political warchests will still be emptied.

The money will simply be shifted, as the Republican Party and its PAC supporters redouble their efforts to maintain the Republican hold on Congress.

Another positive is the fact much of the spending will come from PACs, organizations which are in many cases unburdened by spending caps. Not only will aggressive spending have the supply-and-demand effect of driving up spot prices, it will not be subject to lowest-unit-rate regulations, providing television stations airing such campaigns with full value for the inventory.

And regardless of spending patterns in the primaries, the presidential election can be expected to attract major spending as well. President-CEO Gracia Martore said: “I think Mr. Trump, if he is the candidate, will have to spend. I think Secretary Clinton will also be a big spender.”

EVP-CFO Victoria Harker noted that the media segment’s 12% revenue growth for the first quarter was at the high end of guidance, and added it was up an even better 14% excluding the impact of the Super Bowl network shift.

Lougee explained that first quarter income was good enough to overcome the decrease in its number of Tegna Super Bowl stations as the event moved from the group’s NBC stronghold (17 stations) over to CBS where it has less assets (11 stations).

Harker set media revenue guidance for the second quarter at 10%-12%. She  noted that 44% of the group’s MVPD subscriber base was up for renewal in 2016. Lougee explained that the vast bulk of the retransmission consent contracts would be in play late in 4Q and would therefore have no impact on 2016 earnings.

Nevertheless, they will be a welcome buffer against the onset of reverse compensation payments that will be going to the group’s core network, NBC, which are scheduled to kick off at the beginning of 2017.

The company is interested in M&A, but the spectrum auction and the quiet period that is currently in effect is throwing a wet blanket over the M&A marketplace, which in the television sector is even further dampened by the FCC’s current interest in minimizing the opportunity to enter into JSAs. Tegna, said Martore, will take an opportunistic approach to potential acquisitions.

Digital is very much in Tegna’s plans. Hatch revenue is a growth initiative which Lougee described as the sale of fully-integrated multi-platform advertising programs that make a play for advertiser budgets beyond pitching more traditional advertising packages. He said that Tegna closed 81 such deals in Q1 compared to 83 during all of 2015, and the value of the Q1 deals was double the total for Q4.

On the syndication front, Tegna’s T.D. Jakes’ program is clearing on 53 stations, including 23 non-owned stations above and beyond the group’s 30 O&Os that will be carrying the program.

Martore expressed general satisfaction with the current state of Tegna. “When we formed Tegna,” she commented, “we had a vision for what it could be, a plan for how to achieve our goals, and a talented group of people that were passionate about making these things happen.… While we still have a lot more to do, and the journey never ends as we all know, we are already starting to see the fruits of our labor, and are more confident than ever on reaching the goals that we set out to do.”