Broadcasters Seeing Earliest-Ever Presidential Ad Buys

TV broadcasters are getting presidential campaign ad buys earlier than in any previous race, expect opportunities for sports deals, and vary on whether a possible recession is affecting their businesses, said executives from E.W. Scripps, Gray, Sinclair and Nexstar on recent Q1 earnings calls. “We candidly don't see current signs of recession looming on the horizon,” said Gray co-CEO Hilton Howell last week. “There is no question that there are economic headwinds out there,” said Nexstar CEO Perry Sook Tuesday.

Gray’s Q1 revenue was $801 million, down 3% from Q1 2022, said its earnings release. E.W. Scripps reported Q1 revenue of $528 million, down 6.7% from the same quarter last year. Nexstar’s Q1 net revenue was $1.26 billion, up 3.9% from the prior year quarter. Sinclair’s Q1 revenue was down 40% to $773 million, but those results reflect the deconsolidation of Sinclair’s regional sports networks (RSNs) owned by Diamond Sports Group, from its financial statements “Excluding DSG, total revenues decreased 7% from $831 million in the prior year period,” said Sinclair.

The country is facing “an economic malaise” that's putting pressure on broadcast businesses, said Scripps Chief Operating Officer Lisa Knutson on that company’s earnings call last week. Local advertising is outperforming national, “which tends to be that way when the macroeconomics have some headwinds,” said Sinclair Broadcast COO Rob Weisbord on Sinclair’s call. Scripps is seeing “softness” in large core ad categories, Knutson said. National advertising tends to recover when the economy returns to growth, said Gray co-CEO Pat LaPlatney.

Politics is one advertising category where signs are bright, the executives said. Nexstar, Gray and Sinclair reported earlier-than-ever ad buys from presidential campaigns and parties. “In April, we experienced the earliest spending for a presidential race in the company's history, with early bookings from the Trump, DeSantis and Biden” political action committees, said Sook. “As a result, we remain very optimistic about our growth prospects for political advertising revenue in the ’23-’24 election cycle.” “Not one, but three presidential campaigns are already advertising on Gray stations in the early primary states,” said LaPlatney. “We are projecting political spending to continue and set us up nicely for a highly contested presidential race in 2024,” said Weisbord. He said presidential race election spending for 2024 is expected to break previous spending records.

The TV broadcasters said there have been drops in the services category of advertising, but all said auto has shown a resurgence compared. Auto was Nexstar’s largest category in dollars spent, Sook said. “While overall automotive spending remains below 2019 levels we are encouraged by the continued rebound in this category,” he said. The chip shortage “is about half of what it was at this time last year which is another good sign of spending to come,” said Knutson.

The broadcasters all cited retransmission negotiations with virtual MVPDs as an ongoing problem. “The big four networks negotiate these agreements with virtual MVPDs and present agreements for us to accept or reject,” said Gray’s Kevin Latek. Gray managed to reach agreements with YouTube TV, he said. “Though limited in scope, this deal proves that local branches are in fact fully capable of negotiating retransmission agreements with a large sophisticated virtual distributor,” Latek said. Since many virtual MVPD contract deals were recently renegotiated and such deals have two- to three-year terms, Sook said the industry is likely to come back to the matter at the end of that period. “I think that's probably going to be the window absent a legislative act or something that might accelerate the process,” Sook said. “I think that's a meaningful time to revisit the issue, at the time of contract expiration.”

Sinclair CEO Chris Ripley discussed the company’s restructuring, which will separate Sinclair’s nonbroadcast ventures from its broadcast assets, which Ripley said was a reaction to the current regulatory environment. Sinclair is “optimistic” about broadcasting's prospects, but “continued regulatory uncertainty is causing us to think differently about the allocation of capital, with continued governmental restrictions on broadcasters' ability to transact, transform, and negotiate,” Ripley said. Sinclair affiliate Diamond Sports Group announced a bankruptcy restructuring in March. The Gray, Scripps and Nexstar executives said the poor performance of regional sports networks creates an opportunity for sports to return to independent broadcasters. Entities will have to figure out “the new world order,” Sook said. “I think there will still be RSNs. But I think they'll be much smaller in terms of the amount of programming that they have from a particular team or league,” he said.

The broadcasters roundly praised the FCC’s announcement of the ATSC 3.0-focused Future of TV initiative. Ripley called the task force “quite a significant event” and said he believes it could get ATSC 3.0 “over the hump.” There's “alignment there between us and the regulators where there might not be alignment on other issues, like ownership for instance,” he said. “I'm increasingly bullish about this new industry catalyst,” said Scripps CEO Adam Symson.