Broadcast Execs Bullish on Retrans

Broadcast TV executives are bullish on the future of retransmission consent but are seeing varying levels of softness in the advertising market, they said on Q3 earnings calls this month. Nexstar and E.W. Scripps have experienced softness in the national advertising market, which Scripps CEO Adam Symson ascribed to macroeconomic headwinds. “We’re seeing no sign -- by region or market -- of any kind of recession,” said Gray Television co-CEO Hilton Howell in Gray’s call last week.

All of the broadcasters reported a decrease in revenue from Q3 2022, but all said the decrease was largely based on the political advertising cycle, since 2022 was a midterm election year. Gray’s Q2 revenue was $803 million, down 12% from Q3 2022, according to its earnings release. Sinclair’s Q3 total revenue was down 9% from Q3 2022 to $767 million. Nexstar reported Q3 net revenue of $1.13 billion, a 10.8% decrease from the prior year quarter. E.W. Scripps revenue was $353 million, down 6.7% from Q3 2022.

The CEOs of Scripps, Sinclair, Gray and Nexstar made similar statements on their earnings calls declaring that Charter’s agreement with Disney on retransmission and streaming (see 2309120002) indicates the stability of retrans as a revenue source and the return of content bundling. “We believe that the Disney/Charter resolution supports our business model,” said Nexstar CEO Perry Sook. The deal confirms the high value of broadcast content and the value of content bundling and making basic cable bundles more attractive to consumers should reduce subscriber churn, creating future retrans dollars for broadcasters, said Gray’s Kevin Latek. “We believe that broadcast transmission rates remain significantly undervalued and have new momentum for growth going forward.” The Charter/Disney deal led to premium content getting paid, and broadcasters offer premium content, said Sinclair CEO Chris Ripley. The deal is “a validation of our pricing power,” Ripley said. The deal “will benefit the paid TV consumer, benefit the ecosystem and therefore benefit broadcasters,” Symson said. “Our negotiations and new deals are a testament to the strength of the MVPD broadcaster proposition.”

Nexstar COO Michael Biard said the company’s retrans negotiations with DirecTV and accompanying 76-day blackout (see 2309180065) were a win for Nexstar. “The [return on investment] on the period we went dark -- based on where the deal was prior to going dark versus where we ended up -- was significant,” Biard said. Ripley said he doesn’t believe that retrans blackouts will increase. “We both need each other,” he said of MVPDs and broadcasters. Most of the broadcasters are expecting to renegotiate many retrans deals next year, which they said will lead to increased retrans revenues.

All of the broadcasters said the automotive advertising category has continued to improve, but Nexstar and Scripps reported softness in national advertising. “Our core television revenues continue to be impacted by a soft advertising market led by weakness in national,” Sook said. “We're seeing some improvement on this front as the third quarter rate of decline improved sequentially from second quarter, and we're continuing to see improvement in the fourth quarter to date.” Gray, which has said it's less exposed to national advertising than other companies, said it isn’t experiencing an advertising decline. “There's no signs of a recession that we yet see anywhere in the country,” said Howell.