Local broadcast TV could see slightly slow ad revenue growth this year, and may not see much at all until around the holidays, according to one analyst.
Jefferies analyst John Janedis said in a research note that meetings with broadcasters during this week’s NAB Show suggest that local core broadcast TV advertising will grow no better than the low single digits this year, with nearly all of the growth in the fourth quarter.
“On the national front, while money continues to get written, it remains close to air date making it difficult to aggressively push CPMs higher. At this point, we still think 2Q CPMs are up low to mid singles above the upfront for many networks. On the upfront, we still expect most networks to post CPM increases in the mid single digits, with tech likely to be one of the healthier categories,” Janedis wrote.
The projections from Jefferies arrive as some broadcasters are beginning to reveal results for the first quarter of 2017. NBC’s broadcast television revenue rose 5.9% to $2.2 billion during the first quarter but advertising revenue stayed mostly flat, up only 0.3% since higher rates were offset by audience ratings declines and lower volume.
Meanwhile, Meredith was only able to slightly increase its quarterly revenues. The company said that growth in retransmission revenues helped offset the impact of cyclical political advertising revenues and the Super Bowl airing this year on Fox instead of CBS, since Meredith's CBS affiliates have a larger reach than its Fox affiliates. Nonpolitical advertising revenues were $84 million, down from $91 million during the year-ago quarter.
If advertising revenues start to flag somewhat, broadcasters can still count on significant money coming in due to retransmission deals with providers.
According to recent statistics from analyst firm BIA/Kelsey, local TV stations’ revenue reached $28.4 billion last year, with $6.8 billion of the revenue stemming from retransmission agreements, a rising source of revenue for broadcasters.
"The dependence on retransmission fees has become incredibly important to local stations and many publicly traded ownership groups because it amounts to nearly one-third of their revenue," said Mark Fratrik, senior vice president and chief economist at BIA/Kelsey, in a statement. "The fees provide a sound financial basis for the stations and have also become the foundation for many of the larger stations. Our analysis also uncovered that even mid-size and smaller market stations are increasingly relying on the income provided by these fees."