Tegna Bullish On In-House Rep, Retrans

Tegna is expecting an immediate financial payoff next month (Sept. 9) as it takes national spot sales in-house. TVNewsCheck reported last week that Tegna was parting ways with Cox Reps.

“This is not going to be negative, but should immediately be positive on the revenue side,” said Tegna CEO Dave Lougee in a Q&A with Wall Street analysts following the release of the company’s second quarter results. He said the move will increase automation of national spot sales and reduce the number of points of contact that the agencies have to deal with. “The response from the agencies to what we have announced has been tremendous,” he said.

Lougee said national sales account for something in the 30% range of Tegna’s advertising sales. The new structure will “embrace automation,” he said, and “free up our talented sales force to develop more solutions and results for our national clients.”

Last week’s announcement noted that the in-house move does not include the 11 spinoffs it is acquiring for $740 million from Nexstar’s pending acquisition of the Tribune group. Tegna executives aren’t speculating on when that will close, except that they think it will come sometime this quarter. Meanwhile, the company’s $535 million acquisition of Dispatch Broadcast Group should close “shortly.”

Subscription revenues were the big growth area for Tegna in 2Q, up 13% to $236 million, which Lougee noted more than offset the decline in political ad revenues for this election off-year. The CEO told analysts that retransmission consent revenues should account for about half of total revenues beginning in the 2020 cycle and continue to grow thereafter.

Asked about cord-cutting, Lougee said the subscriber number declines for MVPDs will be more than offset by price escalator terms as Tegna renegotiates more than 85% of its paid subscriber base this year and early next. Meanwhile, the company has more than 99% of its network payments in place, with the recent CBS renewal through 2022.

“As cable loses total subs, the broadcast networks are becoming a larger distribution source for them,” Lougee said of the Big Four network owners, so while talks take place behind closed doors about how the retrans cash passed on to the nets is spent on programming, the Tegna CEO thinks the affiliates and networks are pretty much aligned in their thinking. A lot of that investment is in sports, and Lougee said “they are going to be invested in sports as they ever have been.” And that is very much aligned with what the affiliates want.

Those programming discussions, he noted, are not just about primetime. “For instance, with our NBC portfolio, the Today show is very important to us,” Lougee said. “We help them make money and they help us make money,” he said of the affiliate/network relationship.

Tegna plans to refresh its financial guidance to Wall Street in November, with the Dispatch and Nexstar-Tribune acquisitions completed. Meanwhile, though, Lougee said July TV ad sales were very good and that the third quarter is pacing “better than the second quarter.” While much has been made of softness in auto advertising, Lougee said the sector was “not terrible, it’s just not positive.”

For the second quarter, CFO Victoria Harker noted that professional services, banking, media, utilities and education were strong categories. For the third quarter, she told analysts to expect total revenues to be down in the low single digits — but up in the high single digits, excluding the impact of political advertising.

Looking ahead, it is no surprise that Lougee is predicting record political revenues in 2020. But he says there’s no pressure on Tegna to make acquisitions in any particular markets to capitalize on political spending. He’s happy with the company’s current portfolio, although he said Tegna remains interested in making more acquisitions in the top 100 markets.