Tegna TV Looking Forward To Lucrative 2016

With key retrans and affiliation contracts salted away and a plethora of stations in primary states, Tegna is expecting a banner 2016.

Speaking to investors and analysts on a conference call following release of fourth-quarter earnings today, CEO Gracia Martore touted the new streamlined portfolio of the company, which has divested non-core assets to concentrate on its TV stations group and such digital businesses as Cars.com and CareerBuilder.

The TV group reported a 7% decline in revenue in the quarter, but that was due to the anticipated shortfall political advertising revenue.

Other TV results in the quarter were encouraging. Core advertising revenue rose 7% and retransmission consent income was up 27%.

Dave Lougee, president of Tegna Media (the TV group), is bullish in the extreme when it comes to 2016 despite the first-quarter headwind provided by a six-station Super Bowl deficit as the landmark event moved from NBC to CBS.

“Between now and March 22, we have presidential primaries in 31 of our 38 markets. We know we will end up at record levels for the primary season,” he said. “Between political, net retrans, the Olympics and digital sales growth, Tegna Media will have a record year.”

Lougee said the company has done well at the negotiating table. “We successfully negotiated retransmission consent agreements covering 58% of our distributors’ paying subscribers,” he said.

Furthermore, the company came to terms with its largest network partner, NBC, signing a deal that covers both the former Gannett and Belo stations and delaying the onset of reverse compensation payments until January 2017. The deal runs through 2021.

Tegna also recently signed a new deal with CBS.

The onset of NBC payments next year will create an expense that the company will have to deal with in 2017. It is already working on initiatives, including an emphasis on program production, to blunt the impact.

Martore said there are no other similar hurdles facing the company through the next several years.

Lougee sees an advantage for broadcasters when it comes to the changing behavior of MVPD subscribers. “There appears to be far more cord-shavers than cord-cutters. MVPDs are moving many of their video subscribers to basic tier packages that only include broadcasters, and that has some very key potential long term implications in ad dollar allocations as there will be a growing gap in the size and distribution for us versus cable channels.”

The company is banking on the production and distribution of some of its own programming. One such effort is a talk show featuring T.D. Jakes, who brings a ready-made audience of seven million Facebook followers to the table. Jakes is headed into 29 Tegna markets and 13 others. And the latter number is expected to grow.

CFO Victoria Harker noted that program development was expected to be a major factor in the company’s 2016 capex budget.

While Tegna is glad to have long-term retrans income secured for about a third of its stations, it is also happy to have two-thirds of its contracts set to expire in the short term, providing an opportunity for significant hikes in retrans fees, Lougee said.

There was no discussion of M&A or incentive auction activity on the call.