Sinclair Pumped About Political, Even In NY

The competitive presidential primaries helped Sinclair Broadcast Group outperform its political guidance, and more of the same is expected going forward, especially if a certain real estate mogul brings a new state — New York — into contention during the general election this fall, Sinclair executives told securities analysts following release of its first-quarter earnings this morning.

The executives said they also see a chance for broadcasters to compete more effectively with cable networks for ad dollars by aggregating their viewers.

EVP-COO David Amy said he was more than pleased with political results thus far in 2016. Guidance for the first quarter was in the $16 million-$18 million neighborhood, and Sinclair blew it out of the water with $24 million, he said. The 33 hours of weekly local news added in anticipation of the elections was a contributing factor to the gains, he said.

With fewer primaries on the schedule, Amy said, political revenue in 2Q will likely be between $15 million-$17 million.

The group is not downgrading its political expectations as a result of Ted Cruz’s exit from the Republican primaries, however. The majority of its political income historically is booked during the second half of the year. In 2012, only 15%-16% was earned during the first half.

In fact, Sinclair sees some upside in Donald Trump’s upgrade to presumptive Republican nominee. Steven Marks, co-COO of the Sinclair Television Group, said he believes Trump may do something that has not happened in years — put New York in play in the presidential general election.

“The swing states that we enjoy being in are obviously still there, but now we enter into the New York equation where New York was never really up for grabs,” he said. “That’s a state that always goes Democratic, and it will be interesting to see where that state goes now,” he said, noting that Sinclair operates stations in several New York markets, including Rochester, Buffalo and Albany.

Company executives also talked about bringing other station groups into its Audience Network, through which advertisers can buy across all the Sinclair stations.

“Ongoing discussions are being had with other partners, other broadcasters, to join our footprint so that we can address a larger national buy, and we’d expect that to launch in Q4 of 2016,” said CFO Christopher Ripley.

Marks noted that combining Sinclair’s power with that of other broadcast groups is what would give broadcast television the scale and leverage to compete with the cable networks. The key is broadcasters coming together to reach 70% of national TV households, he said.

“When we combine forces with other broadcasters, our viewership dwarfs not only cable networks, but in a lot of instances, the four traditional major networks,” Marks said.

“Sinclair and its partners are going to have a product that will be second to none, and it will literally put us in the network business in terms of viewership, and what you think about this is it’s a network of viewers, not necessarily a specific program or a specific network, a network of viewers.”

According to Lucy Rutishauser, SVP, corporate finance and treasurer, Sinclair is in a quiet place in terms of retransmission consent and reverse comp. It has recently concluded most of its business with MVPDs, with Comcast the lone upcoming project, due in July, she said. After that, no significant activity is on the calendar until 2018. On the reverse compensation side, station contracts are coming due in piecemeal fashion, with minor impact on the group’s expense profile, she said.

Rutishauser put growth projections for net retrans at high teens for 2016, low teens for 2017 and single-digits for 2018.

Sinclair is expecting overall revenue for the second quarter  to rise 19% to about $600 million, and will include a low-single-digit gain in core advertising.

Discussing the key automotive advertising category, Marks and fellow TV group co-COO Stephen Pruett said it did well in the first quarter and is doing better in the second.

Marks brushed aside concerns about losing local automotive business to competing digital advertising platforms.

“In terms of the digital, it’s important to point out that we sell digital as well to automotive and we have products that we’re pitching specifically to local dealers on digital with a great deal of success.”

Amy pleaded “quiet period” when asked about the spectrum auction, and wasn’t much more illuminating when it came to discussing what it might do with any proceeds.

He said the company will evaluate its needs and existing opportunities and then make a decision on the proceeds.

The company has been driving the move to a new broadcast standard, ATSC 3.0, and it noted that the effort is moving forward smoothly. Technological issues are expected to be resolved late in 2016 with FCC approval expected early in 2017.