Political At All-Time High For Sinclair

Sinclair Broadcast Group today reported second quarter media revenues of $366 million — up 11% from a year ago and the all-time record for a second quarter. That was driven by political advertising, which also posted a second quarter record of $54 million.

Sinclair President-CEO Chris Ripley noted: “Political revenues were not only very strong, but they were the highest second quarter and year-to-date political revenue in our company’s history. Year-to-date, through the end of June, political revenue was over double 2018’s political revenue for the same period, and up over 20% compared to 2020, which was the presidential election year.

“We expect political revenue to drive total ad sales for the remainder of the year, resulting in growth over last year. It is important to note that while we’re not in a position to forecast the state of the economy through the end of the year or in 2023, we expect that a strong year of political advertising helps cushion against any possible downturn,” Ripley told Wall Street analysts in the company’s quarterly conference call.

Executive VP-CFO Lucy Rutishauser provided details for the TV stations and related businesses, plus Tennis Channel, with the regional sports networks now being reported separately.

Total revenues for the second quarter were up 5% to $831 million and media revenues rose 5% to $789 million. Total advertising revenues grew 11% to $366 million, including political, while core was down 3% to $312 million. Distribution revenue increased 4% to $430 million. (Click here for Sinclair’s full release.)

“Turning to our third quarter guidance, we expect another strong quarter for political, which is the main driver of media revenues, increasing 10% to 12% over pro forma third quarter of last year. Third quarter core advertising is expected to be flat to down a low single digit percent versus third quarter of last year pro forma. The downside of the range is driven by anticipated political crowd-out, the absence of Olympics and macro-economic factors, while the high end is driven by growth of our digital revenues,” Rutishauser told the analysts.

COO and Broadcasting President Robert Weisbord reiterated that political advertising will continue to drive ad sales through the second half of this year. “I think it is fair to say at this juncture that political revenue for 2022 could possibly approach the level we had in 2020,” he said.

“The political strength in the quarter helped media revenues grow 5% over the prior year, which was within our guidance range,” he said of the second quarter results.

“Core ad sales were down low single digits, coming in around the low end of our expectations on decreased revenues in the service category — particularly insurance — and the sports betting category versus a year ago,” Weisbord told the analysts. He also noted later that political crowd-out is decreasing available inventory for advertisers, and thus pushing up rates.

During the Q&A session, he provided additional details on category trends.

“We’re seeing retail and medical categories — they were strong in the first quarter — and held up in the second quarter as well. Services, which is our largest category, saw some weakness due to the insurance subcategory within that category. Auto is now — on a go forward basis —I t has come full-circle with the chip shortage, so we expect it to have a new normalized look until the chip supply is fixed,” said the COO.

“The sports betting category will be down slightly. What we’re seeing is it’s crossed the 50% threshold, so dollars are moving to network and where our opportunities are when each state opens up. And we expect Ohio to open up. That’s when we’ll see money coming in,” Weisbord.

“When you think about Q2 core being down single digits, but having a record political quarter, insurance going through their issues, auto still not back, we’re very pleased with that outcome,” said Ripley.

“Looking forward, Q3 will definitely have some crowd-out, but political will be tremendous again, as we anticipate. And then Q4 will have a half-quarter of political, but also we’re going to be lapping the end of the cyber incident that we had [in 2021]. The year, in terms of core, and advertising revenue in general, looks very positive going forward,” said the CEO.

“I want to add one last thing. We’ve done extensive training on how to sell in a down economy with our local sellers. They’re having those conversations on a continuous basis with our local and regional clients to get through a potential recession,” Weisbord assured the analysts.

Also on Wednesday, Sinclair announced that its board declared a quarterly cash dividend of $0.25 per share on the company’s Class A and Class B common stock. The dividend is payable on Sept. 15 to the holders of record at the close of business on Sept. 1.