A new SNL Kagan study says that non-traditional revenue streams, such as retransmission and Internet revenues, as well as political and Olympics spending, will help offset steep 2009 advertising declines for broadcasters next year.
A newly-released SNL Kagan study, “TV Station Deals & Finance,” reveals TV station ad revenues, after declining by 2.5% in 2008 and a further 17% in 2009, could grow in 2010 to $18.5 billion.
SNL Kagan analysts expect that a mild recovery in ad markets, plus even-year political and Olympics spending, will drive the positive momentum.
SNL Kagan analysts’ prediction of a record drop in 2009 ad revenue, the report says, “underscores the importance for broadcasters of broadening their revenue base with non-traditional streams, such as retransmission consent fees and the Internet.”
It says that retransmission consent revenues reached $500.1 million in 2008 and are projected to grow to $738.7 million in 2009, crossing the billion-dollar threshold by 2011. SNL Kagan also estimates that online revenues realized by TV station operators will eclipse $1 billion by 2012.
“Non-traditional revenues have helped to offset some of the revenue softness resulting from the economic downturn,” said SNL Kagan analyst Robin Flynn. “In particular, retransmission fee revenue has proven to be a high growth, high margin revenue stream for TV station owners. We’ve seen broadcasters successfully conclude retrans agreements with multichannel providers over the past several years, which should lead to continued growth for this revenue segment.”
The latest SNL Kagan study also examined TV station deals. The TV deal market in 2008 plummeted to lows not seen in decades. The average deal price for 2008 reached an 18-year low of $12.9 million and cash flow multiples fell to 8x in the fourth quarter — a benchmark not seen since 1991.
Through the first half of 2009, 114 stations sold for $550.1 million or 9.3x cash flow, but the majority were senior lender takeovers in debt-for-equity swaps.
“Although the deal market has been very quiet in 2008-09 thanks to lack of finance and a slow advertising market, things could begin to improve in 2010 as a pent-up supply of stations comes to market. Leading TV station properties in attractive markets continue to be highly sought-after assets,” said Flynn.