Sports, FAST Channels Are Bright Spots For Broadcasters In A Down Quarter
It’s as sure as Black Friday sales in November that broadcasters will experience an ad revenue slump during the off year in a political cycle. So, while some other ad categories are performing well, most notably automotive, there’s little wonder that revenue results were largely down compared with last year in the most recently completed quarter.
Nobody’s sitting on their hands, waiting for the election deluge. Media companies are picking up an increasing number of sports licensing rights to magnetize viewers and advertisers. They’re also deepening their connected TV forays. And while some streaming platforms have been bleeding cash, some executives are giving a clearer view on when profitability will be achieved.
Those are some of the most notable trends that came up during 10 quarterly earnings reports tracked by TVNewsCheck over the last couple of weeks.
The “big swings” that media companies are taking don’t always follow the sports and streaming patterns. For example, Gray TV’s brand new Assembly Studios reached a major milestone in September when it completed and delivered soundstages and various other assets to an anchor tenant, NBCUniversal. In the coming year, “Assembly Studios will no longer require significant capital investments by us,” said the company’s chairman-CEO, Hilton Howell, during Gray’s earnings call.
At the same time that Gray works to make the Atlanta-area studio complex a huge success, it’s also pursuing local broadcasting packages for professional basketball, hockey and baseball. And it’s already airing Phoenix Suns games across its Arizona footprint.
Tegna is on the prowl as well. “With the existing RSN and cable model in the final innings, the move of local sports from cable to broadcast is in the first inning of a new era,” said Dave Lougee, Tegna president-CEO.
The company’s San Antonio, Texas, CBS affiliate, KENS, has an exclusive deal to air San Antonio Spurs games. “As the current RSN bankruptcy proceeding plays out, look for more announcements to come,” Lougee added.
Sports is also a key part of Nexstar Media Group’s strategy as it gives The CW a programming makeover. “Demand for broadcast television [by sports-rights holders] has allowed us to enter into exclusive agreements with a number of major sports organizations, including our just-announced deal for WWE NXT in 2024; LIV Golf, which will return in 2024; ACC football and basketball, and NASCAR starting in 2025,” said Michael Biard, president and COO.
Over 15 new advertising partners came on board for the first full season of the ACC, including Verizon as the presenting sponsor and Subaru as the halftime sponsor, Biard added.
E.W. Scripps is playing the sports “card” in a slightly different way. It struck agreements with two National Hockey League teams: the Vegas Golden Knights and the Arizona Coyotes. To achieve the maximum benefit, Scripps transformed an Ion affiliate in Las Vegas to an independent, and it runs the Golden Knights games as anchor programming. That, in turn, impacted the MVPD carriage revenue.
“The new station, Vegas 34 [KMCC], joined our ABC affiliate there, expanding our advertising opportunity and distribution fees significantly. So, despite erosion in the nation’s pay TV landscape, Scripps is now getting higher rates and getting paid on more stations than before,” said Adam Symson, Scripps president and CEO.
While TV companies are all fired up by sports, they are also aflame with visions of big profits from streaming initiatives. FAST channels abound. And while the streaming platforms with big-ticket programming have been very costly, the breakeven point can now be seen by some, and they are attracting substantial audiences.
TelevisaUnivision said that its direct-to-consumer losses improved by 60% in the quarter, and its ViX streaming service surpassed 40 million monthly active users globally.
The Walt Disney Co. now expects that its Disney+, Hulu, and ESPN+ streamers to reach the breakeven point in next year’s fourth quarter.
Comcast’s Peacock service is still posting losses, but its driving toward profitability with a hefty slate of sports. “With Peacock now, we have the most live sports of any of the streaming services,” said Comcast Chairman-CEO Brian Roberts. “I believe that’s a surprise to many people when they learn that.”
At Paramount Global, total revenue in the DTC division improved 38% over the same quarter last year. And advertising revenue for Paramount+ and the FAST platform PlutoTV increased 18%.
“We now believe 2022 was our peak year of streaming investment,” said Robert Bakish, Paramount’s president-CEO. “We’re clearly on the path to streaming profitability. And this continued DTC improvement will be a key driver of the total company earnings growth we expect next year.”
While Fox didn’t disclose a profitability scenario for its Tubi streamer, the company’s executive chairman-CEO, Lachlan Murdoch, said that revenue was up 30% in the quarter, driven by a 65% lift in total view time. “Tubi logged nearly 4 billion streaming hours in the first half of the calendar year,” he said. “It remains the No. 1 AVOD player, and the most watched free, ad-supported streaming service in the United States.”
When it comes to total revenue, units of the media companies that include TV stations (along with other assets) were almost entirely down. Comparing the quarter recently ended with the same period last year, the results mostly hovered around minus 10%.
The cyclical low tide for political revenue is a glaring reason why, although the ad category hasn’t disappeared completely. “We are seeing current political revenues trend above both 2021 and 2019 levels so far this year,” said Chris Ripley, Sinclair president-CEO.
“We expect 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,” Ripley added.
When singling out core advertising (which excludes election spending), most companies reported low-single-digit gains.
The all-important automotive category was up substantially for several companies. At Tegna, for example, auto revenue rose for the fifth consecutive quarter. And in the third quarter, it was up double digits versus the same period last year.
Of all the ad categories, automotive was the only sector that showed widespread, positive reports from TV companies, although gains in home improvement, financial services, retail, consumer packaged goods and alcohol were all mentioned by at least one company.
The ad category that seemed to be consistently down for just about everyone was sports gambling. That was expected, explained Gray’s COO Sandy Breland. “That category cycled through heavy market-share spending at launch, and then stepped down to maintenance-level spending,” she said.
Media and entertainment ad spending also suffered, at least partially due to the Hollywood strikes and delayed release schedules for some movies.
On the retransmission front, several executives heralded the recent deal between Charter and Disney as an extremely positive sign — particularly because the MVPD can now add Disney’s streaming platforms to its offerings and drop weaker-performing Disney channels.
There’s a related trend at play: streaming platform prices are on the rise. Buying them on an a la carte basis is less cost-effective for consumers. So the perceived value of cable video packages could benefit when the streaming services are part of the MVPD bundles.
“It’s somewhat ironic that we’ve unbundled to re-bundle to unbundle to re-bundle,” said Comcast’s Roberts.
“We think that’s a very positive trend,” said Sinclair’s Ripley. “We’re seeing a right-sizing of the alternatives that people choose for their entertainment.”