TVB Forward: Local TV Looks Pretty Healthy

TVB President Steve Lanzano promised that this year’s Forward Conference yesterday in New York would have more meat. It did, in more ways than one.

The agenda was packed with facts and figures on where TV broadcasting is and where it is going next year, and on its two biggest advertising categories — auto and political.

And they added up to a fairly positive outlook for the business, even though there was a general acknowledgement that revenue from advertising would fall significantly next year.

The fall-off is due mostly to political spending, which is heavy in even-numbered years, when there are many races, and light in odd-numbered years, when there are few.

Broadcasters and industry followers know this so, when they see people forecasting that revenue will be down next year 5% (BIA/Kelsey), 8% (TVNewsCheck) or even 13.5% (Jack Myers) as they did yesterday, they don’t become alarmed. It’s just a result of political money coming in unevenly over the years.

If the political money is averaged out over two or, better, four years, it’s clear that spot revenue is growing in the low single digits.

Now that’s not a great business, but spot is not the only source of broadcasting revenue.

There is retrans or, more to the point, net retrans, which is the money broadcasters collect from the MVPDs minus the reverse comp they pay to the networks.

And, according to Wells Fargo analyst Marci Ryvicker, net retrans will grow at an average rate of 7% between now and 2021, while becoming a larger slice of broadcasters’ revenue pie. She said it will amount to $3.6 billion in 2021.

Ryvicker was the bearer of other good thoughts. (I see why TVB trotted her out first.)

From the start, she has been more conservative than most on how much the FCC incentive auction would generate for TV spectrum sellers.

Those who predicted it would go to $80 billion or more were not paying attention to the balance sheets of the wireless companies, she said. The real players — Verizon, AT&T and T-Mobile — just don’t have the financial capacity to drive spectrum bidding that high.

She believes that the bidding will top out at between $28 billion and $37 billion. That’s not $80 billion, but anything in that range would still be a “huge windfall” for the industry, she said, noting that its total revenue this year will be just $21.8 billion.

All the major station groups would share in the windfall and they will be able to use the cash to pay down debt and to invest in ATSC 3.0, she said. Overleverage is an abiding concern of broadcast investors.

Ryvicker is a big proponent of 3.0, seeing it as a way for broadcasting to integrate with the internet, become mobile and offer new businesses like datacasting and enhanced services like targeted advertising.

Instead of marking the beginning of the end of broadcasting, she believes the incentive auction may fund its renaissance.

Ryvicker also reassured broadcasters that they need not worry about consumers migrating from cable to broadband for their TV. Generally speaking, the broadband services — the so-called skinny bundles — will include the network affiliates.

One other thing Ryvicker said really struck me. She said broadcasting is now  facing “low regulatory risk.”

I’ve been harping at the Congress and the FCC for trying to micro-manage the business for so long that I hadn’t really noticed that we have moved into a period where stations’ profitability is not being directly threatened by Washington.

Yes, the national and local ownership caps are still in place limiting M&A, but broadcasters are no longer faced with “reforms” that might cut into their retrans or having to undo lucrative duopolies built on JSAs and SSAs. And there are no signs that concerns about political fundraising will harden into actual restrictions.

Of course, the news out of theTVB conference was not all good.

As I suspected, Ryvicker lowered her forecast for political advertising on spot this year by 25% — from $3.3 billion to $2.65 billion.

And so did Steve Passwaiter, of Kantar Media, which closely tracks political spending. In his talk, he also cut his original forecast, although not quite as severely. He went from $3.3 billion to $2.8 billion.

For the record, TVB’s Lanzano stuck to the prediction he gave me last week, that political would be at least $3 billion.

The reforecasting was, of course, due almost entirely to Donald Trump and his make-it-up-as-you-go-along campaign.

“If you took ‘unprecedented’ out of the dictionary, we would have nothing to talk about in this presidential election,” Passwaiter said.

One of his slides told pretty much the whole story. In 2012, Mitt Romney and his supporting PACs spent $550 million on TV. This year, the GOP nominee and his supporters have so far spent just $78 million.

That number will grow, but it will not get anywhere near the 2012 total, Passwaiter said.

Buried in Passwaiter’s figures was a disturbing one. His analysis had spot’s share of TV political spending slipping from 81% in 2012 to 76% this year. Spot’s loss was local cable’s gain.

By contrast, Ryvicker had spot losing just one point of share, from 83% to 82%.

Of course, as I pointed out last week in my discussion of Sinclair and Gray cutting their political revenue for the year, you have to be careful how you use any of these political numbers. You can’t paint with a broad brush.

There is more at stake than the presidency in November — the Senate, the House, state houses. And because the political dollars flow to states and markets only where there are tight races, they are not doled out equally among the stations and the groups.

At the TVB conference, I was assured by several broadcasters that the dollars were pouring in just as they had budgeted and that whatever problems Sinclair and Gray were having certainly didn’t pertain to them.

I would also point out that there are many broadcasters who are unconcerned about a shortfall in political because they weren’t figuring on getting much of it in the first place.

Unlike political, all broadcasters are concerned about auto and I have to say the talk by Steve Szakaly of the National Auto Dealers Association was not completely reassuring.

It was essentially an explanation of why car sales that have been growing fairly rapidly since the Great Recession have peaked and will now enter a period of gradual decline — from 17.7 million this year to 16.7 million in 2020.

Broadcasters are tying their auto hopes to the idea espoused by Szakaly and others that as the auto market slows, car makers and dealers will spend more to maintain share.

I don’t know about that. One of the axioms of broadcasting has been “as goes car sales, so goes car advertising” with each car sold generating marketing dollars for the next ones coming off the assembly lines.

You can’t ignore an axiom just because it doesn’t fit your narrative of an ever-prosperous broadcasting business.

Kantar Media tells me that auto spending was up nearly 4% in the first half of this year. We’ll see where it goes from there.

So the story of broadcasters presented at the conference isn’t perfect, but, as I said, it was a mostly positive one. I had one Detroit-based station group executive tell me that he feels good about advising his children to get into the business — and that he didn’t always.

TVB keeps moving its annual conference, looking for the right venue. This year’s was on the Hudson River waterfront (Chelsea Piers at Pier Sixty), although you wouldn’t know it from the sprawling main room, which was cut off from the river views by curtains and four gigantic video displays. They were made necessary because the room was long and narrow like a football field for players who can’t move laterally.

The separate room with the luncheon buffets had enormous windows facing the river, but the effect was spoiled by the gloomy weather. Maybe next year.

Anticipating that attendees would need some relief from the onslaught of facts and figure, Lanzano invited the chief marketing officer at Arby’s, Rob Lynch, to show how a revamped menu and bold marketing campaign have turned around the fortunes of the fast-food outfit.

Rather than follow its peers by offering healthy alternatives like salads and apple slices, Arby’s decided to be true to itself and double down with a full menu of “proteins” — brisket, chicken, turkey, ham, corned beef and steak. It’s not just roast beef anymore.

That decision was backed by advertising campaign built around the slogan, “We have the meats.” The commercials with voice-over by actor Ving Rhames make quite an impression. His voice defines sonorous.

Lynch gave a lively presentation that included a segment on how Arby’s turned around the ridicule that Jon Stewart heaped upon the company during his late latenight show.

Lynch said that its marketing campaign has been a winner, putting Arby’s on a faster growth path than its competitors, even though its $100 million ad budget is only a fraction of its competitors.

Well, that’s just great. Good for Lynch and good for Arby’s.

But, speaking for broadcasters in the room and the many more around the country, I got to ask the questions that weren’t asked at the conference: how much of that budget went into spot and how come it wasn’t more?

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.