Broadcast Execs Doubting Auto Ads Return
Broadcasters are reducing their expectations for a resurgence in auto advertising revenue and are concerned about inflation but are seeing bigger numbers from travel and other categories that were diminished by COVID-19, said executives on recent Q1 earnings calls for Cumulus, Nexstar, Gray, and Sinclair. Nexstar CEO Perry Sook referenced supply chain concerns Tuesday but said “there are many bright spots” among broadcast ad categories. “Experiential-based businesses entertainment and travel are back in a big way,” said Sook, echoed on the other companies’ earnings calls.
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Several of the broadcasters noted worries about inflation, but all executives framed it as a potential future concern rather than an ongoing problem. Sinclair is “covering its bases” in case of inflation but so far it hasn’t been reflected in advertising buys, said Sinclair Chief Operating Officer Robert Weisbord. Broadcasters are somewhat insulated from inflation because it doesn’t directly affect their core businesses and they can raise their ad rates to reflect it, said Sook.
Nexstar’s net revenue for Q1 2022 was $1.21 billion, up 8.6% from Q1 2021, it said in a release Tuesday. Gray Television reported total revenue of $827 million, an increase of 52% from Q1 of 2021. This was the first full quarter since Gray completed purchases of Meredith and Quincy and became the 2nd largest U.S. broadcaster, Howell said. Sinclair’s total revenue decreased 14.8% to $1.28 billion, from $1.5 billion in Q1 2021. Cumulus had Q1 net revenue of $232 million, up 15% from the same quarter in 2021.
The automotive category is “struggling” due to supply chain problems, said Gray Television co-CEO Hilton Howell. Expectations for the category for recovery shifted to the end of 2022 or into 2023, said Weisbord. For Cumulus, auto is down 50% from its pre-COVID-19 pandemic numbers for the same quarter in 2019, and down 20% from the same quarter in 2020.
The hit from reduced auto ads is offset by “an ongoing rebound in physical presence categories,” said Cumulus CEO Mary Berner. “Our reliance on auto is mitigated by our focus on the service, rental, and food categories,” said Weisbord. Even though the auto category is struggling, health and travel have risen to be just below auto, said Gray Television President Pat LaPlatney.
All the companies remain bullish on 2022 political revenue. Howell said Gray is getting political ad buys aimed at the upcoming midterm elections earlier than ever. Gray Executive Vice President Kevin Latek said the company expects the recent leaked Supreme Court opinion that would strike down Roe v. Wade to “galvanize” ad spending by political action committees. Political fundraising has increased and is expected to accelerate, Sook said.
None of the broadcasters announced specific M&A plans. Gray will launch Telemundo affiliates on LPTV stations in 22 markets, said Gray COO Bob Smith. Cumulus’ board unanimously voted against accepting an unsolicited offer from a group reportedly headed by Connoisseur Media CEO Jeff Warshaw. “After a careful and thorough review, conducted in consultation with our financial and legal advisors, the Board unanimously concluded that the indication of interest significantly undervalues the Company,” said Berner. Sinclair has made accounting changes to report the results of its broadcast businesses separately from its sports media and betting properties, contained under the Diamond Sports Group. The accounting change won’t materially affect how the company behaves, said Sinclair CEO Chris Ripley.