Healthy But Challenging Outlook For Stations

In the face of increased competition for viewers, television stations are maintaining their position in the advertising marketplace.

That’s just one of the conclusions of a new report released today by BIA/Kelsey.

“Local Television Stations: Maintaining an Important Presence in 2016 & Beyond” analyzes opportunities and hurdles for the local television industry. The report examines TV’s position in the competitive media landscape, with a look at a range of influences, from the many viewing options now available to consumers, to the variety of revenue streams the industry is embracing.

New options for national and local advertisers are now available, exerting competitive pressure on local television stations, the report finds. At the same time, some national cable networks are feeling pressure themselves from the increase of online viewing options.

Many local television stations are benefiting from increased retransmission consent revenues from cable, telco and satellite delivery services. Local television stations are also continuing to provide new services with their digital signals and are in the planning stages for a massive overhaul and improvement in their transmission technology, though that is several years away.

What is not encouraging in the short term, the report says, is the prospect of any regulatory relief of ownership rules.

The level of television station transactions increased between 2013 and early 2014, due to the success of larger groups’ retransmission consent negotiations and the upcoming reverse auction to be held by the FCC. While M&A activity declined in late 2014 and into early 2015, recent combinations late last year and early this year of several television groups have led to increased concentration on the national level.

Among the many findings of the report are:

• Local TV ranks second in terms of U.S. local advertising revenue share at $21.9 billion. Direct mail is No. 1 at $36.9 billion, newspapers is third at $17.4 billion, closely followed by online at $17.3 billion and radio at $15.4 billion.

• Local news is key programming for stations, drawing national and local advertisers via audiences with higher education and income levels.

• Over-the-air advertising revenues will grow 12.1% in 2016 due to political advertising.

• Online/interactive ad revenue is growing steadily — it will account for 6.4% of total revenue by 2020.

• Local TV stations get nearly 35% of the $16.7 billion in total advertising spent by the automotive sector.

• Local TV stations will receive more than $543 billion in restaurant advertising in 2016.

• Between 2016 and 2020, local TV will receive a growing share of mobile advertising, up to 14.9%.

• By 2020, local TV stations’ advertising revenues will remain the largest portion (63.6%) of the local video ad marketplace.

• Retransmission consent revenues are expected to grow at a 17.3% compound annual growth rate through 2020.

The report concludes that “increasing choices now available to consumers and advertisers have already had a significant impact on local television stations. Stations have responded by bolstering their online presence, becoming more involved in social media, expanding their offerings and improving their overthe-air services. Given recent revenue increases from advertising revenues and retransmission consent payments, they are making these changes from a strengthened position.”

Even with these steps, the study says stations “will need to remain vigilant in adapting to their new environment. They must consider thinking of themselves as not just local television stations providing a stream of programming in which they sell advertising, but as local media companies reaching their local communities in different ways and providing many access points for their advertiser clients. There is some optimism that local television stations will be able to adapt in such a fashion. Recent acquisitions and the strengthening of revenues generated by these stations have led to a renewed confidence in many of these television groups.”