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Local Economies Inch Back from the Edge

NEW YORK: Some economic recovery is evident in cities across the country, but it’s still not enough to replace lost media revenues, Wells Fargo analysts report in “A View From The Trenches.”

Advertising revenues and TV subscriber metrics depend heavily on local economics, which, although improving, continue to be “weak,” the report said. “

“On average, about 85 percent of publishing, 80 percent of radio, 55 percent of outdoor, and 50 percent of TV ad revenues are derived from local advertisers,” it said. “While cable, satellite and entertainment players have little exposure to local advertising, the health of local economies can give some indication of subscriber trends given that housing and unemployment data is highly correlated with demand for pay-tv service and recreational activities.”

“View” tracked four key metrics for the top 50 metropolitan statistical areas--unemployment, employment growth, the increase in single-family construction permits, and housing-price growth--to measure the health of local economies. The markets were ranked with data from the first quarter and May of this year.

Among those markets ranking highest and showing improvement over the previous six- and three-month periods, San Antonio, Texas was at the top. Buffalo, N.Y. was No. 4, though it ranked 19th for unemployment. Columbus, Ohio was fifth. Both markets were bullish in the housing metrics. Oklahoma City and Houston were Nos. 2 and 3 respectively, though both markets declined over the last three months.

“Given recent data released from EMMS [Emmis] and SBGI [Sinclair], broadcast radio and TV continue to suffer and reports from the television upfront have not been encouraging,” the report said. “Further, most broadcast companies have significant revenue exposure to declining markets.”

Saga (AMEX: SGA) has the most exposure to those markets, with 91 percent, followed by: CBS (NYSE: CBS) at 90 percent, LIN TV (NYSE: TVL) at 63 percent.

Housing metrics correlate with cable and satellite TV subscriptions, and those are on the rise overall. However, Wells Fargo analysts said that further weakening in unemployment made them cautious about subscriber gains.

Comcast was in the best position in the healthiest markets, with 47 percent of its subscribers in markets with improving metrics. Time Warner Cable was next with 46 percent.

Wells Fargo said it would issue a more detailed report later this week.
-- Deborah D. McAdams