Three major station groups announced tepid earnings from the fourth quarter of 2007 last week, as the political advertising many stations were banking on largely stayed off the books until 2008.
"The notion that it's a hotly contested presidential race is probably still valid, but it didn't come through in the fourth quarter," said James Goss, analyst at Barrington Research. "Mitt Romney spent some, but I didn't hear much of anyone else."
Goss and other analysts expected a major dip in broadcast earnings for the final quarter of 2007, as the same quarter in 2006 was bolstered by the midterm elections. Still, with the unprecedented clout of an expanded Super Tuesday, many forecasted candidates would start advertising earlier. "Given the fact that so many primaries moved up, we expected to see more spending [in late 2007]," said David Bank of RBC Capital Markets. "We did not see it to the extent that we expected to."
Still, with races tightening in both parties as Super Tuesday approached, candidates weighed last-minute gambits to pour more money into broadcast during the final hours leading up to the primaries. The prospect offered some consolation that those dollars might shift into the new fiscal year, even it's if too late to aid Q4 results.
Media General claimed a 10% drop in total company revenues in the fourth quarter of 2007, compared to 2006, along with net income for the quarter at $9.6 million—precipitously down from $31.6 million in the fourth quarter of 2006. Broadcast-division profit was down 42%, and total broadcast revenue was down 14%.
Over at Gannett, total operating revenues slipped from $2.2 billion in the fourth quarter of 2006 to $1.9 billion in 2007, nearly a 12% slide. Broadcast revenue at the 23-station group was $212 million for the fourth quarter, a 21.7% decline from 2006.
The picture was a little rosier at E.W. Scripps. A strong performance from its cable networks pushed operating income to $205 million for the fourth quarter, not too far off the $214 million posted in 2006. Still, President/CEO Kenneth Lowe chose to look ahead when speaking with investors. "Now we are really looking forward to the second half of 2008," he said, "when we expect campaign spending to really hit its stride."
Indeed, analysts and other industry watchers were anticipating that the media conglomerates' various platforms, such as cable or their interactive divisions, would better offset broadcast's woes. But it largely wasn't the case.
Some say their results are yet another indication of an ailing economy. "In the context of the macro economy, [the broadcasters' performance] is not particularly shocking," says Bank. "It certainly feels like a recession—it's really difficult not to see the pressure on the business."