Sinclair came in slightly under its guidance for core advertising in the first quarter, largely due to fewer premium sports events compared with the same quarter last year. But it has already booked some $77 million in political spend for the second half of the year, way up from this time during the last presidential election year or the 2022 midterms. And its top executives are very gung-ho on its Broadspan Wireless venture in the NexGen TV space.
Those were some of the highlights during the company’s first quarter earnings call with analysts, which was held Wednesday.
Within his remarks, Sinclair CEO Chris Ripley put a special emphasis on the company’s Broadspan, whose first go-to-market partner is Edgio. The partnership will offer a new content distribution service that combines OTT and OTA distribution of live streaming events. Broadspan also will provide auto connectivity and a data distribution platform.
While the Edgio partnership for live streaming is expected to be the first Broadspan offering to launch, enhanced GPS will come “hot on its heels,” Ripley said.
“Some of those things are going to be coming live at the end of this year,” Ripley added. In 2025 Broadspan’s revenue probably won’t be very material, he said, but added that the pace will pick up significantly as penetration climbs.
In discussing the quarter, Lucy Rutishauser, Sinclair’s EVP-CFO, reported that “as compared to last year, consolidated media revenues increased to $792 million during the quarter, primarily on the higher political revenues and an increase in distribution revenue.” Adjusted EBITDA for the quarter came in at $136 million.
Core advertising for the quarter was $284 million. Adding in political revenue of $24 million, total ad revenue came in at $308 million, a hair under the company’s guidance of $310 million to $320 million.
“Performance for advertising was down 2.1% on a reported consolidated basis,” explained Rob Weisbord, COO and president of broadcast, comparing the first quarter results with the same period last year. “The quarter was impacted by less premium sports exposure compared to the year ago period due to the Super Bowl being broadcast on CBS this year versus Fox last year, as well as the Final Four being based on cable this year.” There was also a $6 million decline in sports betting revenue, versus the same quarter last year.
If not for those sports and betting declines, ad revenue would have grown by low single-digit percentages, Weisbord added.
National advertising was soft in the first quarter, but it’s pacing positive in the second. “In addition, we struck a very unique deal to be the exclusive seller of Netflix in our local markets as well. So, in any impact where streaming might take some of the ad dollars, we positioned ourselves to have premium streaming inventory to sell with our local sellers. So I think it fortifies us both locally and nationally,” Weisbord said.
The services ad category continued to be a top performer, driven by home repair and home building. Pharmaceutical was another strong category. “Auto continues to see modest pressure, as manufacturers and dealers see fewer sales primarily due to the higher interest rates,” Weisbord said. “As we begin the second quarter, retail services and entertainment pacings are strong, while medical and pharmaceutical pacings are slightly softer than April last year.”
Weisbord added that while sports betting was down almost 60% year over year in the first quarter, it’s pacing up almost 30% in the second quarter.
Political revenue is expected to be backend loaded in the second half of the year. All told, Sinclair projects that its political revenue to rise to north of $350 million this year. As of the earnings presentation, “we have pre-booked over $77 million in political advertising for the second half of the year through the election. This compares to $21 million as of the same day in 2020 and $28 million in 2022,” Weisbord said.
Sinclair has identified 12 battleground presidential states, and its stations serve 10 of them. The stations also cover markets where 10 competitive Senate races are being fought, vs. eight in 2020. There are three competitive governor races within Sinclair’s footprint, compared with four in 2020. And the company should benefit from 24 hotly contested House races compared to 18 in 2020.
Sinclair’s revenue from distribution agreements totaled $384 million for the quarter, slightly above its guidance of $380 million to $382 million. The company has reached retrans agreements with 42% of its traditional Big 4 subscribers for new multi-year distribution agreements so far this year. And nearly all the rest are under agreements that expire by year’s end.
“We also have only one Big 4 network affiliation that expires before the back half of 2026, providing us with high visibility on our network compensation expenses over the 2024 through 2026 timeframe,” Weisbord said.
Weisbord noted that the over-the-air networks Charge, Comet and TBD increased primetime viewership by 38%, reaching 75,000 viewers in the 25-54 age group. “In fact, the three networks combined set 62 all-time-high ratings records during the first quarter.”
Meanwhile, Tennis Channel had a 35% bump up in its average household audience year over year, and it was up 27% in total viewers. The channel’s social media impressions grew 141%. The streaming platform TC+ enjoyed 7% growth in the average number of monthly subscribers. And the T2 FAST channel’s total minutes viewed increased by 273%. Sinclair will be sure to talk about all that at the sports upfront, taking place next week, in which it’s participating for the first time.
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