Political, Retrans Growth Powering Sinclair
Advertising revenues were down $107 million to $208 million for the Sinclair Broadcast Group television stations in the second quarter, while distribution revenues (retrans) rose $14 million to $349 million. That’s a total decline of $68 million to $592 million. But following that decline, Sinclair is telling Wall Street to expect third quarter broadcasting revenues to be up 6%-10% pro forma to $777 million-$805 million.
“This is driven by higher political and distribution revenue, which is partially offset by a projected 15-22% decline in core advertising,” said EVP-CFO Lucy Rutishauser in the company’s quarterly conference call with Wall Street analysts Wednesday morning.
Following a 43% drop in April as the COVID-19 lockdowns impacted ad demand, Sinclair has reported sequential month-over-month improvement. And that has continued into the third quarter.
Asked about the impact of changing pandemic restrictions in various markets, Robert Weisbord, president of local news and marketing services, said he is not seeing any “fits and starts” by advertisers. But he confirmed that buys are coming later. “They’re holding on to it to see how COVID is affecting the different DMAs that we’re in.” He added that ad buys are generally more month to month, rather than quarterly, semi-annual or annual contracts.
Weisbord provided some detail on advertising categories. “We continue to see services perform well. We have pharmaceuticals that has joined the strength. We’re seeing the education category take off as well. We expect in the back half, towards the end of third quarter, going into fourth quarter, to see auto getting healthier than what we’ve seen it. They’ve had a supply chain issue. We expect that to be fixed as the plants have been reopened and the ’21s [2021 models] will be hitting the dealerships,” he said.
In addition to the financial impact of this political year, Sinclair President-CEO Chris Ripley was asked about the potential impact on the TV industry if Democrats come to power in Washington. “I think it’s worthy to note that broadcasting has significant support on both sides of the aisle. You saw that with letters from a very large amount of both Democrats and Republicans supporting local media and promoting its survival as vital to the communities we serve. So, we feel as an industry in good shape with bipartisan support. So, we’re not concerned about a change in administration,” Ripley said.
“The notion of reregulating broadcasting would be akin to picking on the little guy,” he added, apparently referring to current Capitol Hill and White House concerns about the strength of the tech giants.