SNL Kagan projects U.S. TV stations will see a 6.5% decline in ad revenue in 2017 to $21.38 billion. Midterm political advertising and Olympic revenues are forecast to buoy 2018, however, where Kagan sees a 9.6% climb to $23.4 billion in its Radio/TV Station Annual Outlook.
SNL Kagan, a unit of S&P Global Market Intelligence, estimates the U.S. broadcast station industry, including radio and TV stations, generated $48.53Ã¢â‚¬Â¯billion in total revenue in 2016, with $30.84Ã¢â‚¬Â¯billion from TV stations (including national and local spot, political, digital/online and retrans) and $17.70Ã¢â‚¬Â¯billion from radio stations (including network, national and local spot, digital and off-air).
TV station industry revenues increased 9.4% year over year in 2016 despite political ad spend on local stations, estimated at $2.65Ã¢â‚¬Â¯billion, coming in 7.5% lower than the 2012 presidential election season’s $2.87Ã¢â‚¬Â¯billion. Overall, Kagan estimates TV station ad revenues in 2016 increased to $22.86Ã¢â‚¬Â¯billion from $20.89Ã¢â‚¬Â¯billion in 2015, boosted by political ads and a 12% gain in digital revenues to $2.12Ã¢â‚¬Â¯billion from $1.89Ã¢â‚¬Â¯billion the previous year.
TV station political sales had been expected to be up to $3.3Ã¢â‚¬Â¯billion in 2016, but those estimates fell over the course of the year as Republican Donald Trump’s unique campaign relied heavily on social media and news coverage of his rallies, only spending on local stations in swing states during the late stages of the campaign. However, expectations are high for a strong 2018 midterm cycle, given the relatively high number of Congressional seats that will be open and the potential for hotly contested ballot issues.
In the five-year outlook, TV station ad revenue is projected to grow at a 3.0% compound annual rate from 2017 to 2022. TV station ad revenues in 2018 are expected to increase to $23.43Ã¢â‚¬Â¯billion, with midterm political swing-state markets outpacing the national average. This follows an estimated decline of 6.5% to $21.38Ã¢â‚¬Â¯billion in 2017, attributed to the ebb tide of a nonelection, non-Olympics year compared to improving core results without political ad displacement in 2016.
Based on past patterns, Kagan believes political revenue for broadcast TV stations will grow to $2.81Ã¢â‚¬Â¯billion by presidential election year 2020. Its projections take into account the fluctuations between even/election and odd/nonelection years and call for $2.58Ã¢â‚¬Â¯billion in total annual political advertising in midterm election year 2018, up 6.5% from $2.42Ã¢â‚¬Â¯billion spent in the 2014 midterms.
Non-political years should also benefit from early campaign and issue-based spending, with a projected $860Ã¢â‚¬Â¯million in 2017 political ad spend up 20.0% from $717Ã¢â‚¬Â¯million in 2015. Hotly contested House, Senate and gubernatorial races and issue-based campaigns should receive the bulk of early political ad spend ahead of the 2018 campaign season.
Going forward, while political ads will remain a key driver, the TV station industry is expected to become less reliant on the traditional spot-ad marketplace, with growing revenues from retrans fees and more emphasis on digital helping smooth out the highs and lows of the election cycle.
According to Kagan’s latest projections, national and local spot ad revenues including political will likely continue to decline, falling from 94% of total TV station revenue in 2007 to 62% in 2017 and 59% in 2022, while retrans revenues are expected to rise from just over 1% of industry revenue in 2007 to 30% in 2017 and 33% by 2022.
In 2017, total TV station revenues are forecast to decline slightly to $30.77Ã¢â‚¬Â¯billion, based on an 8% ad-revenue decline offset by retrans growth of 18% and digital/online growth of 7%. In 2018, TV station industry revenue is expected to grow to $33.66Ã¢â‚¬Â¯billion including $18.39Ã¢â‚¬Â¯billion in national and local core spot, $2.58Ã¢â‚¬Â¯billion in political, $2.46Ã¢â‚¬Â¯billion in digital/online and $10.23Ã¢â‚¬Â¯billion in retrans.
By the end of the projection period in 2022, total TV station industry revenue is expected to reach $37.19Ã¢â‚¬Â¯billion including $19.08Ã¢â‚¬Â¯billion in national and local core spot, $2.72Ã¢â‚¬Â¯billion in political, $2.99Ã¢â‚¬Â¯billion in digital/online and $12.40Ã¢â‚¬Â¯billion in retrans.
The radio station business, helped by political revenues and a firmer tone to the ad market, grew 1.9% in 2016, but over-the-air ad revenue was up just 0.4% excluding digital, non-spot and network. In 2017, Kagan projects an overall revenue decline of 0.3% to $17.65Ã¢â‚¬Â¯billion from $17.70Ã¢â‚¬Â¯billion in 2016, with digital and off-air sales buttressing declines in national and local advertising. In 2018, the return of political spend, improving core ad spot revenue and digital growth are expected to push total revenues up 1.3% to $17.89Ã¢â‚¬Â¯billion.
Radio station national ad revenues are expected to decline 3.0% in 2017, as the weakness carries further into the year and the industry absorbs the loss of political sales. Local revenues could see a less pronounced decline of 2.0% in 2017 based on the firmer second quarter, with local auto dealers pushing inventory off the lot and better ad pacings later in the year driven by improving ad rates, with lower average-unit-rate political spots being displaced by higher-priced core advertising.
Kagan projects digital gains of 7.0% in 2017 to $1.18Ã¢â‚¬Â¯billion from $1.10Ã¢â‚¬Â¯billion in 2016, growing to $1.25Ã¢â‚¬Â¯billion in 2018. Off-air has been another solid segment for the industry, and we think that will continue in 2017 with an 8.5% gain to $2.41Ã¢â‚¬Â¯billion and 6.0% growth in 2018 to $2.55Ã¢â‚¬Â¯billion.
Over the next five years, Kagan expects to see radio station revenues increase gradually off a lower base as ad buying efficiencies improve through programmatic platforms and higher growth segments in digital/online and live events become a larger part of station revenue. Radio’s lower ad cost, local audience and relatively high return on investment compared to other media will also continue to generate business for station owners.
Between 2017 and 2022, we expect radio station local and national spot ad revenues (including digital) in rated radio markets to increase at a compound annual rate of 0.9%, with non-rated markets declining at a negative CAGR of 0.9%. Total radio revenue, including national and local spot, digital, off-air and network revenue, is expected to grow at a five-year CAGR of 1.1% from an estimated $17.65Ã¢â‚¬Â¯billion in 2017, reaching $18.60Ã¢â‚¬Â¯billion by the end of 2022.