Sinclair Expects Boost From Retrans And Political In ’24

Sinclair reported a 9% decline in total revenue to $767 million for the third quarter compared with the same period last year. And total advertising revenues were down 19%, to $304 million. The revenue decreases were largely attributable to the off-year in the election cycle. But core advertising was up low single digits, to $293 million, driven by strength in several advertising categories — not the least of which was the all-important auto category.

During the earnings call with analysts Wednesday, top executives at the company said they are anticipating a gangbuster year for political advertising in 2024. And nearly all the company’s agreements with MVPDs for retransmission consent revenue are up for renewal over the next year. Sinclair expects low single-digit growth in that area over the three-year, 2022-2025 period.

“We expect to see record-breaking political advertising revenue in 2024,” said Chris Ripley, president-CEO. “We are seeing current political revenues trend above both 2021 and 2019 levels so far this year. We expect the strong growth of issue-oriented political advertising. And what appears to be several close Senate and House races in our footprint will accelerate this growth significantly as we get closer to next year’s election.”

Some $11 million in political advertising was raked in during the quarter just ended, which was above the $7 million to $9 million guidance range. And $25 million to $30 million is now anticipated for the fourth quarter. That would be a record for a non-election year, said Rob Weisbord, COO-president of broadcast. For the full year, $46 million to $51 million in political spend is now expected.

Twenty-three of the 34 Senate races in 2024 will take place in states that include Sinclair stations, as will seven of the 11 gubernatorial races. What’s more, Sinclair stations are in 10 of the 12 presidential battleground states, according to the company.

Pro-forma core advertising, excluding political, was up about 3% during the third quarter. “Our current outlook for the advertising environment is relatively stable,” Weisbord added. “National is slightly positive, year over year in the quarter, which was welcome news.”

Among the ad categories trending upwards in the quarter, versus same time last year, were home services (including home repair and builders), which rose 18%; automotive, +7%; home products, +18%; and legal, +1%. The insurance category is beginning to lap previously weak results; companies in the sector reduced their budgets last year.

The company expects core trends to be largely the same in the fourth quarter.

Sinclair signed two network affiliate agreements in recent months. A new agreement for the CW allows Sinclair to expand its ability to negotiate carriage agreements directly with vMVPDs. This is a major accomplishment, as station groups have taken issue with broadcast networks’ contention that they should be striking deals with the virtual platforms on behalf of themselves as well as the stations.

Sinclair also inked a deal with Paramount for 21 CBS network affiliations. In addition, Sinclair has renewed an agreement with Comcast for its TV stations, Tennis Channel, Marquee Sports Network and YES Network.

“With virtually all our Big 4 traditional subscribers up for renewal by the end of 2024, we remain confident in our guidance for a net retrans low-single-digit CAGR growth through our renegotiation cycle from 2022 through 2025,” Weisbord said.

Ripley said the recent distribution deal between The Walt Disney Co. and Charter is an indicator that the pay TV bundle is strengthening. Among the key takeaways: “premium content got paid, and non-premium content — like the dozen or so Disney channels that ended up getting dropped from Charter — does not get paid. We think that’s significant. Our programming is, pound-for-pound, the most premium programming available to a pay TV distributor. So we definitely see that being a validation of our pricing power.”

Ripley went on to say that the inclusion of Disney+ and ESPN+ into the Charter packages “is a significant value proposition for the consumer.” He noted that a la carte streaming options are going up in price, so the relative cost to consumers is “skyrocketing.” On the flip side, the relative value of cable is increasing. “We think that’s a very positive trend. That wasn’t the case a few years ago. But over the last couple of years we’re seeing a right-sizing of the alternatives that people choose for their entertainment.”

Sinclair’s adjusted EBITDA for the third quarter exceeded the high end of its guidance, to $141 million. That marked a decrease of 29% over the prior year period. Lucy Rutishauser, Sinclair’s EVP-CFO, said that the company has been focused on reducing expenses all year. “It is coming across all our large spending categories and departments. You can’t point to just one area.”

“We expect these changes are permanent,” Ripley said, referring to the expense reductions. “We’ll continue to improve all the investments that we’re making this year.”