Phil Kurz /
04.07.2009
Originally featured on BroadcastEngineering.com
Dramatic revenue declines hit operating, capital budgets

The ongoing recession took a big toll on revenue of some of the nation’s largest broadcast groups in the fourth quarter of 2008 with straight-line income declines of as much as 30 percent, according to an SNL Kagan analyst.

Those double-digit revenue declines are expected to continue through the first half of 2009, primarily because of weakness in the auto advertising category before leveling off in the third and fourth quarters of the year, said SNL Kagan senior analyst Justin Nielson, who co-authored the firm’s recently released "Radio/TV Station Annual Outlook: Market-by-Market Revenue Projections." According to the report, local and national spot TV ad revenue dropped 6.9 percent to $20.1 billion for all of 2008.

“There were some quarters down in 2000 and 2001, but this is the largest we’ve seen in quite some time going back to the early 1980s,” he said. The dramatic drop in revenue has prompted stations to make “massive operating cuts” in the form of layoffs, slashes to management salary, outsourcing and the combining of news production units within station groups and even among competitors, he said.

Capital spending is down significantly as well, but the drop in spending on new technology may be somewhat exaggerated due to heavy capital spending over the past couple of years to prepare for the DTV conversion, Nielson said. For stations that already have made their DTV conversion, the analyst said he expected double-digit declines in capital expenditures.

Capital outlays on HD are likely to slow as well because the networks and many stations in major markets already have launched or are preparing to launch HD operations, Nielson said. “I think HD will trickle down to mid- and smaller market stations,” he said, adding that HD has not produced increased revenues, but rather kept stations competitive with crosstown HD rivals.

One bright spot on the horizon is ATSC Mobile DTV. The relatively low cost of entry, which can range from $100,000 to $150,000, will not be difficult for stations to swallow, even during the ongoing economic doldrums, he said. With consumer receivers under development by Samsung and LG and an expectation that the first of these will reach consumers’ hands by the end of the year, mobile DTV holds a lot of promise, he said. Some 60 stations already have committed to launching mobile DTV services this year, he added.

Stations’ development of the Web as an alternate distribution platform and revenue source is an encouraging sign, too. In some markets, SNL Kagan has identified 20-30 percent revenue growth from station Web sites. However, he cautioned the Internet remains a small fraction of a station’s total revenue. “It is still less than 10 percent of the station’s total revenue,” Nielson said.



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