Gray Hitting Rough Patch In 2Q Spot Sales

Gray Television today acknowledged that second-quarter spot sales are weaker than expected, saying a “good May and healthy June” are unlikely to offset the “slow” April.

“We see our core local up a little bit in the [second] quarter [0%-1%] and, continuing a trend we saw in the first quarter, we think our national will be down slightly [-3% to 0%],” said  CFO Jim Ryan during a call with securities analysts following release of its first-quarter earnings.

The second-quarter forecasts are pro forma, calculated to account for stations acquired and divested in 2014, 2015 and 2016 and allow for easy year-over-year comparisons.

Ryan offered no specific reason for the poor April, in which both local and national were down. It was “fairly broad-based,” he said.

For the second quarter as a whole, the crucial auto advertising category, he said, is “flat to up slightly right now and that may be a little bit conservative on my part. We are not overly concerned about the trends we are seeing in auto.”

Gray’s projections for the quarter have a solid basis. Between 85% and 95% of the inventory has already been booked for May, he said, and between 60% and 70% has been booked for June.

(Pro forma, the company reported that local spot revenue grew 3% in the first quarter to $96.7 million, while national dropped 3% to $24 million.)

According to Ryan, political advertising has also been relatively scarce in the second quarter due to the drawn out primary campaigning and the delayed start of the general presidential campaigning.

“There is a possibility for a little upside late this quarter as maybe Trump starts gearing up more in  general election mode,” he said.

The company said that it expects political revenue to fall between $9.5 million and $10 million in the second quarter.

Ryan was still bullish on political for the year on the whole. “We are still very comfortable that we will do better than the $143 million we had pro forma … in 2012,” he said.

He noted that the group did a little better than expected in political in the first quarter and that, historically, half the political revenue comes in the fourth quarter.

Ryan said the company is “delighted” so far with its decision last year to cut ties with its rep firms, which was skimming a mid-single-digits commission from its national spot revenue, including most of the political.

Ryan repeated the company’s promise that it would save more in commissions than the $6 million-plus charge it took last year to end its rep contracts.

The company saved $1 million in the first quarter, Ryan said, pointing out that Gray will not have to pay any commissions on the millions in political advertising that will be coming its way later this year.

Against the big savings are modest additional costs of bringing the national sales in house. Gray has hired just two additional people to make up for the loss of the reps — a national “sales generalist” and a political specialist, “who has been doing very good work for us,” Ryan said.

“We have been getting good feedback from the national agencies we have been dealing with,” he added. “Several agencies have provided feedback that the service level and the response time are better than they had been.”