Gray Touts Bright Outlook For 2024

One of the biggest jewels on display during Gray Television’s third quarter earnings call Wednesday was its new Assembly Studios facility in Atlanta. The company also gave some details related to its slight gain in core advertising and future prospects for sports rights deals moving into the coming year.

“We posted year-over-year growth in core advertising and in retransmission revenues — and growth in political advertising revenues over 2019, the last year before a presidential campaign,” said Hilton Howell, chairman-CEO.

“Our guidance for the fourth quarter illustrates that we currently anticipate that these trends will continue throughout the rest of this year. In fact, our guidance today increases the full-year political advertising total to $80 million from the $60 million dollars full-year guidance we offered in early August.”

In discussing Assembly, Howell noted that the “historic achievement” that occurred in September when the company completed and delivered to NBCUniversal the soundstages, offices, warehouses, mill spaces, parking and related facilities that the studio has leased in the Atlanta-area facility.

Assuming that the actors strike ends soon, the first film and television series and live television productions “should begin shortly,” Howell said. In the coming year, “Assembly Studios will no longer require significant capital investments by us.” And instead it will begin to reap revenue from NBC and other parties, he added.

Pat LaPlatney, president and co-CEO, noted the company’s strong growth in digital platforms and digital sales. In the third quarter Gray set a new all-time record, with video plays up 45% over the third quarter of 2022. “While we do not break out digital sales in our financial results, I’m pleased to report that our stations are continuing to grow digital revenues at an annual double-digit rate,” he said.

LaPlatney said that the company has a few dozen FAST versions of local TV stations across several streaming platforms. “And in the coming weeks additional channel launches that are in the works now could nearly double the total number of FAST channels that our stations have on CTV platforms.”

On the sports front, LaPlatney said Gray is pursuing local broadcast packages for professional basketball, hockey and baseball. This fall the company is broadcasting local games of the Phoenix Suns throughout its Arizona footprint. And it’s also broadcasting NBA G League games across a few different markets.

“If and when the Diamond Sports bankruptcy court permits additional teams to negotiate with local broadcasters, we will be ready in several markets to provide compelling opportunities that aims to expand their reach and grow their fan bases,” LaPlatney said. “We’re cautiously optimistic that Gray will have some exciting announcements in this space prior to our next earnings call.”

LaPlatney made mention of statewide sports channels that the company launched in Georgia, Arizona, Connecticut and Nevada. They offer live local and regional professional college and high school level sports. “We believe these networks and a couple of others that we may launch in the near term also provide a foundation for Gray to secure more professional sports packages as they become available over the next several months.”

He also mentioned the launch of Free TV Networks (FTN), founded and led by Jonathan Katz, which is partnering with Warner Bros. Discovery, Lionsgate and Gray Television to launch free ad-supported over-the-air and streaming channels. “The first two networks will go live on New Year’s Day, and we are particularly excited to reunite with Jonathan Katz in the diginet business,” LaPlatney said.

In speaking of advertising, James Ryan, CFO, said the company is “very pleased with our Q3 results, especially with our core revenue up 1% in the third quarter. For our fourth quarter guidance, we again very pleased that we’re seeing continuing strong performance demonstrated in our core advertising, and we expect that to be up low single digits.”

Breaking down the core advertising numbers, Sandy Breland, COO, said: “The automobile advertising category continued improving in the third quarter, with an 18% year over year increase overall and a 26% increase in the national automobile ad category.”

Home improvement also continued to do very well, Breland said. “The biggest decrease came from sports gambling, which was expected as that category cycled through heavy market-share spending at launch, and then stepped down to maintenance-level spending. New businesses from local customers that previously did not advertise on our platform continues to exceed our expectations.”

In the coming year, Gray will be renegotiating the bulk of its traditional MVPD contracts, said Kevin Latek, chief legal and development officer. The new agreements will cover “about 38% of our MVPD subscribers in the first quarter and 23% of the subscribers in the second half of 2024,” he said.

Latek noted that the recent distribution agreement between Charter and The Walt Disney Co. “confirms that the most premium content, such as ABC and ESPN, will continue to be key drivers of value for distributors.” He said that the deal also provides new ways to help lessen pay TV churn through DTC offerings like Disney+ and the flexibility to tier cable channels. All of which bodes well for Gray in the upcoming renewal negotiations.