NBCU Broadcast To Ride Retrans Gains In ’17

Football and politics fueled a successful 4Q 2016 for NBCUniversal’s broadcast assets, and retransmission consent income was also a factor. While political will largely disappear in 2017, the opposite is true for retrans income. Meanwhile, the company is hoping to profit down the road from the presence of Donald Trump in the White House.

Political and Thursday Night Football were primary drivers of the NBCUniversal Broadcast Television segment revenue increase of 14% to $2.8 billion. The gain was accompanied by a 21.1% increase in operating flow to $264 million.

Senior EVP-CFO Michael J. Cavanaugh noted that if political and TNF are excluded, “…advertising increased modestly as strong pricing from the upfront outpaced ratings declines.”

The company’s earnings release and conference with analysts and investors was, for the most part, light on guidance. A small amount was shed when Chairman-CEO Brian Roberts outlined the current state of the broadcast division.

Roberts said: “In our TV businesses, This Is Us is the year’s breakout new series and a wonderful show. SNL is having its most-watched season in 20 years and we continue to rank No. 1 across dayparts in broadcast ranging from The Today Show, to Nightly News all the way through to Late Night. Telemundo beat Univision on many nights for the first time in its history.”

NBCU CEO Stephen B. Burke added some color regarding the company’s Hispanic television network. “Telemundo’s a great story, where Telemundo was essentially making no money at all and now makes a couple of hundred million dollars a year and … our ratings suggest in the future we should make significantly more than that.”

Retransmission consent is one area where the outlook is crystal clear. An expense item at the able-operating side of the company, at NBCU it is the opposite. Discussing past results, Cavanaugh said: “Retransmission revenue increased 55% to over $200 million dollars for the quarter and totaled nearly $850 million for the full year.”

For the year in progress, the retrans arrow is pointing up — steeply. “In 2017, retransmission revenues should reach nearly $1.4 billion,” Cavanaugh stated, “an increase of almost 65% over 2016 as the result of the recent successful renewals of a number of our distribution agreements.”

While specifics regarding core advertising at the company’s television stations did not come up at the meeting, Comcast Cable President-CEO Neil Smit noted that core has been a little soft on the cable side, and said automotive in particular was suffering some softness. He wrote it off as cyclical and not a major concern.

Cavanaugh noted that the company is operating a 2.2x leverage and indicated that it is comfortable with that level of debt.

Roberts is optimistic about the presence of Donald Trump in the White House. “I think regulatory certainty for investors is the same as it is for management. You have the confidence to make long-term plans. The more uncertainty, the less encouraging it is to want to invest…. We’re looking forward to working with the new administration and the new regulatory leaders to try to arrange something that’s good for consumers and gives a stable platform that we can invest in.”

Cavanaugh added that while the company is all for any beneficial tax reforms, it has not incorporated any potential decreases into its financial planning.

Asked about the possibility of going on the station acquisition trail should ownership caps be relaxed, Burke indicated it’s not a priority, but also not something that has been ruled out. “I don’t think there’s a necessity to increase our footprint, but I think if the caps get changed we would certainly look at it and do what’s right for the company.”