Spending on campaign spots totals $23.4 million, carrying third-quarter percentage growth of total revenue and net ad revenue at the station group into double digits. The company reports a 5% decline in non-political advertising, but CEO David Barrett maintains it would have been up as much as 2.5% had political not displaced some of it.
Hearst-Argyle must wish that every year was an election year.
Political candidates spent $23.4 million for spots on Hearst-Argyle TV stations in the third quarter, driving total revenue for the pure-play TV broadcaster up 11% over the same quarter last year to $183 million, according to third-quarter earnings released this morning.
The top-line increase primarily reflects a 10% increase in net advertising sales, including political, from $147.8 million in the third quarter of 2005 to $162 million in the third quarter of 2006.
“OurÃƒÂ¢Ã¢â€šÂ¬Ã‚Â¦financial results for the third quarter were expectedly strong, as we capitalized on significant political spending in a number of our markets, and translated our strong local market leadership positions into improved revenue and profitability versus the prior year period,” said Hearst-Argyle CEO David Barrett in a prepared statement.
Hearst-Argyle reported that non-political local and national advertising dropped nearly 5% year-over-year in the quarter, from $145.4 million to $138.6 million.
But during a conference call with securities analysts after the release of the earnings this morning, Barrett argued that non-political or core advertising would have been up 1.5% to 2.5% if some of it had not been displaced by political ads.
According to Barrett, 25 Hearst-Argyle stations reported that 26% of the nearly 3,000 spots they ran last Thursday (Oct. 19) night were political, with the percentage running as high as 47% at some stations.
“I can assure you that last year 26% of our inventory was not unsold,” he said after being challenged by Vic Miller, an analyst with Bear Stearns. “I can assure you that next year we are going to sell 90% to 100% of this inventory.”
“There is displacement and I think this illustrates the point,” he said. “We look at all of the numbers. We get a sense of how people are spending. And I will continue to maintain that our core is up a couple of percentage points. You can’t just pull all the political out and come to a conclusion.”
Hearst-Argyle said that the all-important automotive advertising category, which accounts for 26% of the company’s net advertising sales, declined 10.5% in the quarter compared to the prior-year period.
Barrett attributed much of the auto troubles to General Motors, which cut spending 36% in the quarter.
But he also said the auto decreases were not across the board. Numerous brands increased spending, including BMW, Land Rover, Mitsubishi, Saturn and Mercedes, he said.
Hearst-Argyle also reported year-over-year, third-quarter increases in ad spending by the retail, furniture and housewares, telecommunications, soft liquor and attractions categories
Also contributing to the revenue line are $3.6 million in net digital revenue (up from $113,000 in 3Q 2005), and $4.7 million in retransmission revenue (up from $2.4 million in 3Q 2005).
Adjusted EBITDA increased 18% in the quarter to $57.8 million, up from $49 million in the prior-year period, reflecting the increase in revenue and $1.9 million of stock-based compensation expense in the quarter.