Skip to main content

TV Market Sector Summary: June 1, 2009



NEW YORK: Thousands of car dealerships closing across the country won’t have a huge impact on advertising because most had already cut budgets, Wachovia’s Marci Ryvicker said.

“Trends for both outdoor and pure-play broadcast are stagnant--not getting better and not getting worse,” she wrote in her weekly roundup. “We polled several companies regarding the potential impact of the GM and Chrysler dealership closings. Most believe that such dealerships were already failing and hence were not spending much on advertising, so while there could be some incremental decline, it is not expected to be significant.”

For the week ending May 29, Wachovia’s broadcast stocks were down 3 percent versus 4 percent for the S&P. CBS (NYSE: CBS) and Lamar Advertising (NASDAQ: LAMR) put in the best performance with a 5 percent increase. Radio broadcaster Entercom (NYSE: ETM) trailed the group, down 16 percent.

Wachovia’s broadcast stocks are trading at 8.8 × enterprise value to earnings before interest, taxes, depreciation and amortization; 8.4 × price-to-earnings; and 4.6 × price-to- free cash flow. By comparison, CBS is trading at 4.5 × EV/EBITDA and 5.7 × P/FCF.

Among pay TV providers, rates were static. Cable and telcoTV providers continued to shill for bundled services while the satellite guys battled on deep-discount ground. Dish’s monthly $9.99 plan continued as did DirecTV’s $21 per month discount. Pay platforms will feel the effects of the recession going forward, Ryvicker said.

“The tone from the cable MSOs during this week’s investor conference was very cautious. Underlying trends in Q2 are mirroring Q4 rather than Q1,” Ryvicker wrote. “We still anticipate a bump from the digital transition, but we are becoming more concerned about the back half of the year given job losses and the depressed housing market. All eyes and ears are on Dish as we await a ruling from the courts regarding TiVo. On Thursday, the Delaware court transferred its case to Texas, consolidating jurisdictions, which may mean a further delay in this ruling. Worst case scenario is Dish has to pull the plug on its 4M DVRs, at which point Dish is likely to partner with TiVo à la DirecTV and Comcast.

Wachovia’s cable and satellite stocks declined 3 percent for the week. Cablevision (NYSE: CVC) performed the best, down only 1 percent. Time Warner Cable (NYSE: TMC) and Comcast (NASDAQ: CMCSA) fell 5 and 3 percent respectively. Dish (NASDAQ: DISH) dropped 2 percent; DirecTV (NASDAQ: DTV) was down 5 percent. — Deborah D. McAdams