Political Turns Out As A Net Plus For Meredith

Widely-reported concerns about lower spending in the presidential contest have not been a factor for Meredith Corp., which anticipates making good on political guidance, key executives told analysts at a conference call regarding the group’s fiscal first quarter 2017 results. And while strong political spending put a damper on core results, the effect was largely limited to four markets.

Results for Meredith’s Local Media Group, where the company’s television assets reside, have never been better. Revenues of $153 million, operating profit of $51 million and EBITDA of $60 million represented respective gains of about 20%, 70% and 50%, and were all record-setting performances. Chairman-CEO Stephen M. Lacy said the Local Group’s $16 million political take was also record-setting and added that gains in retransmission consent income was also a key positive factor.

Meredith’s Olympic benefit was limited to its lone NBC affiliate, WSMV Nashville.

The gains in revenue were solely the result of political, which increased $14.233 million to $16.353 million, more than making up for a 6% drop ($5.126 million) drop in non-political advertising. Displacement was a factor in the core advertising loss. Part of the loss was a 10% decrease in automotive income, which Lacy attributed to both lack of Olympics exposure and political displacement.

According to CFO Joe Ceryanec, political was said to be strongest in markets that had hot down-ballot contests, including Las Vegas, St. Louis, Phoenix and St. Louis. Spending in the presidential race so far has amounted to 15% of total political spending.

Ceryanec said that the loss in core was largely contained within its four hot political markets, stating that core was not so bad if they were excluded from overall results. “Ironically, if you took those four markets out, the rest of our markets were basically flat for the quarter…. I would say, remove the political and we probably weren’t as bad as down 6 for the group.”

Local Media Group President Paul Karpowicz further suggested that the drop in core may have in part been a self-inflicted wound. “As an industry … we probably did ourselves a disservice to the extent that we talked so much about how big a political year this was shaping up to be, and I think we scared off a lot of our traditional advertisers who have said … ‘look, I just didn’t want to get in the middle of all this activity in September, October, November.’ And the expectation is they will be back.”

Looking ahead to the company’s fiscal 2Q, political is expected to drive Local Media Group revenue upward by 25%, fueled by a political advertising gain in the $27 million-$32 million range. That surge will make up for an expected low-single-digit loss for its National Media Group (including magazines and other assets), resulting in a mid- to high-single digit gain for the company as a whole. According to Lacy, guidance provided in July pegging political for the cycle at between $40 million and $50 million is expected to be accurate.

Results in the final two weeks of the cycle will likely determine if the company ends up at the low or high end of its political guidance, said Ceryanec. The company is comfortable with its ability to make the low end, and results could be better if there is a surge in presidential spending or a stronger down-ballot effort from the Democrats. Karpowicz added that a possible run-off in the Georgia Senate election would also boost the company toward the high end.

The company is very focused on bringing its automotive and all other core advertiser back into the fold. Said Karpowicz: “We’re working really hard to determine if people are going to be back in December or if they’re going to hold off until [calendar] first quarter. We’re going to be incredibly aggressive post-Election Day, so on Nov. 9 we’re already out there with packaging and incentives and a lot of things to make sure that we can fill up December.”

Lacy said that pacing visibility is murky, but was able to note that for the quarter in progress, “October was actually the weakest, November is better and December at this moment is even better yet. It’s still down a little bit, but more like low-single-digits.”

Lacy touted the company’s new entrant into the television programming world, Dinner Spinner, which airs Saturday mornings on The CW and was spawned by Meredith’s popular app of the same name. Panasonic is sponsoring the show and Meredith is supporting it across all of its media platforms.