Despite reporting revenues 20% lower than in first quarter 2008, the company’s executives say gradual month-to-month increases in ad revenues in this year’s first quarter offer hope.
Despite a dismal first quarter, LIN TV executives are beginning to sniff out the scent economic improvement.
One sign: There was gradual month-to-month increase in advertising revenues in the first quarter. And while there’s some backsliding in April, executives are hoping the same theme of baby steps forward will hold true in the second quarter.
“The pattern we observed in the first quarter was similar to other broadcasters — the quarter improved each month,” said Richard Schmaeling, LIN’s CFO, during this morning’s first-quarter results conference call. “April was a little down compared to March. But we may see the quarter strengthen each month as we saw in the first quarter.”
Nobody’s popping champagne corks yet. Projections for the second quarter are hardly positive. The company sees net revenues sliding somewhere between 18.9 and 23.7 percent — or $19.6 million to $24.6 million — compared to 2008’s second quarter.
For the full year, the company expects revenues to fall 13-18 percent, excluding political. With campaigning for 2010 gubernatorial and congressional races starting to gear up at year end, political spending may offer an upside surprise but nobody’s counting those chickens, particularly with lingering uncertainty over retail spending.
The isolated bright spots in an otherwise glum picture: Digital revenues, which include Internet advertising revenues and retransmission consent fees, increased 82 percent to $8.9 million, compared to $4.9 million in the first quarter of 2008. Retrans revenues alone more than doubled — up 114 percent.
Meanwhile, continuing cost cutting shaved 9 percent, or $6.5 million, off operating expenses compared to the same period last year.
Just containing the damage from the downturn has required drastic measures: advertising rate cuts, job cuts, cost cuts, all of that as the company boosts local news coverage and seeks to capitalize on new media initiatives.
Executives side-stepped a question from Wachovia’s Marci Ryvicker about whether their advertising rate cuts were in the 30-50 percent range she’d heard of elsewhere in the industry. But they didn’t dispute those numbers and acknowledged that LIN’s first quarter revenue decline of 20 percent was in the ballpark of what other broadcasters are experiencing. (See results story.)
“On the [advertising] pricing side, this is really a supply-and-demand business,” said LIN President-CEO Vince Sadusky. “It’s such a competitive media environment with so many choices for advertisers, it’s difficult even for the No.1 station to hold the line on pricing.”
That said, group-wide initiatives to capture more local advertising — it accounts for just under 70 percent of total advertising revenues — are paying off, executives said.
Scott Blumenthal, LIN’s executive vice president-television, said that in a two-day blitz, the company signed up 350 new advertisers.
Combine the company’s efforts on the new media front — Web and mobile — with the secular decline in newspapers and the opportunity exists for broadcasters to become the platform of choice for advertisers, LIN executives contend.
“Our plan is to have those advertisers remain with us going forward,” Sadusky said.
While the financial results tell a sobering story, Sadusky acknowledged, there’s cause for guarded optimism in the less visible story about what the company is doing to find opportunity in a dramatically changed broadcast market.
“Unfortunately, the total ad market is off so much it’s shielding people from seeing the important local efforts going on,” he said. “We’ve added literally hundreds of new advertisers. The good news you don’t see in the financial numbers is the significant retraining of staff and our change in focus.”
Executives readily acknowledge that substantial challenges remain. Among them: Achieving a market capitalization that will allow the company to retain its New York Stock Exchange listing; finding ways to replace auto-related advertising revenues; and maintaining a debt-to-cash flow ratio that avoids loan covenant violations.
“Getting through these tough times is our No. 1 goal,” said Sadusky. “As we come back … there’s an absolute opportunity to gain share.”