Sinclair Sees Post-COVID Return To Normal Advertising

Has the disruption of COVID-19 permanently reset the core advertising market at a lower level? That question was asked by analyst Alexia Quadrani of JP Morgan during Sinclair Broadcast Group’s third quarter conference call this morning shortly after the company released earnings information.

“From our vantage point, we think things will return to normal when COVID goes away,” replied Sinclair President-CEO Chris Ripley. “One of the great data points that I mentioned earlier in my comments is that on the sports side [regional sports networks], we were up mid-single digits on our advertising revenue. There has been a dislocation in the market because of COVID. There’s no doubt about that. But our inventory still is highly valuable. In fact, it’s only getting more valuable as advertising-based content shrinks and the amount of avails that you can get in front of people — as people migrate to more ad-free platforms — continues to get more scarce,” he said.

Sinclair isn’t giving formal guidance for 2021 due to uncertainty about when COVID will cease to be a factor, but did provide some information on what to expect in the current quarter, as record-breaking political ad revenues move to the rear-view mirror.

“Every month has picked up, which is encouraging. Especially with record political spending and crowd-out, the core has been able to strengthen. It’s too early to tell in the fourth quarter, as we come down from this record political spending,” said Robert Weisbord, president of local news and marketing services.

However, he noted, “November appears to be the strongest month since pre-COVID, since we’ve gone into this pandemic. But again, with the spike [in COVID cases], we want to hold off and see if the core advertising is returning from the crowd-out. We expected to see this political, but it came in in droves in the last few weeks, which causes crowd-out,” Weisbord told the analysts.

Asked specifically about the auto sector, Weisbord said it continues to improve, with dealers falling into “have” and “have-not” groups. Those who had been able to sell vehicles during the pandemic have been getting new inventory from the factories and are buying ads.

EVP-CFO Lucy Rutishauser had noted that broadcast core advertising was down in the mid-single digits for the third quarter.

What about now? “For our broadcast and other segment, our fourth quarter media revenue guidance is $942 million-$961 million, up approximately 16-19% from last year’s pro-forma $810 million. The pro-forma numbers exclude the numbers for our Lexington [Ky.] and Harlingen [Texas] stations, which were sold this year. The increase in media revenues is driven by higher political and distribution revenue, which is partially offset by a projected mid- to high-teens percent decline in pro-forma core advertising,” the CFO told the analysts.

“I cannot stress enough what a record, historic year political revenues were for us, reflecting over 30% more than our pro-forma previous record political year in 2012 and over 70% more than 2016’s pro-forma political ad revenues. And we expect this should bode well for the 2022 mid-term elections,” said Rutishauser.