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Investment Bank: 6% Broadcaster Rebound In ‘10 - Broadcasting & Cable

Investment Bank: 6% Broadcaster Rebound In ‘10

Alcamo says rebound typically commensurate to severity of recession
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Broadcast revenue should rebound as much as 6% in 2010, according to the media investment bank MC Alcamo & Co. Alcamo crunched the numbers on the 2001 recession and ensuing recovery to shed light on how the broadcast world might fare coming out of the current recession.

"Data from 2002-03 clearly illustrate a multiplier effect for ad-supported broadcast media," said President Michael Alcamo. "Broadcasters saw revenue growth rates that were up to three times the growth rate of underlying GDP [gross domestic product]. We believe that the industry will see similarly outsized growth in 2010-12."

Alcamo notes that the forecast for 2010 GDP growth is 2.8%, which suggests broadcast revenue growth of 5.6% to 6.0%.

While the current recession vastly surpasses the severity of the 2001 spell, Alcamo says the strength of recovery "typically mirrors the depth of the preceding downturn," which hints at a very robust rebound. Throw in some red-hot elections, and things look increasingly optimistic, the firm believes.

"2010 will likely see robust campaigning for at least eight key toss-up gubernatorial races, in California, Florida, Michigan, Minnesota, Nevada, Rhode Island, Wisconsin and Wyoming," he says. "In their recent investor calls, Media General and LIN Television discussed expected strength in political advertising in these areas."

Alcamo also points out that the drastic cost-containment measures put in place at stations over the past few years have put broadcasters in a favorable position to boost profit. "Broadcasters themselves have cut costs-through significant cutbacks in newsgathering, JSAs with other firms, and sales of non-core assets," says Alcamo. "Incremental revenue during the post-recession phase is thus highly profitable. Essentially the only cost-of-goods-sold on this revenue are sales commissions and other sales costs."

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