Slow Economy's Effects Show Up in 2Q Earnings

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The second quarter was a mixed bag for some major broadcasters, as the economy continued to be sluggish and provided tough comparisons with the same period in 2002, when political advertising was flowing steadily.

In terms of growth, local sales fared better than national spot.

So far, TV groups reporting revenue declines for the quarter are outpacing those reporting gains. The profit picture is just as mixed.

Gannett reported last week that second-quarter revenues were up 1% to $192.7 million with a 1% gain in operating cash flow to $102.2 million. The company pointed out that this was achieved at a time when ad demand was suppressed by the war in Iraq.

Soft auto advertising was a factor, Gannett CEO Doug McCorkindale told analysts last week. TV auto advertising was down in the quarter, he said.

At Scripps, which also reported last week, the cable networks division continues to grow by leaps and bounds. But the broadcast TV stations did okay, posting a 4.2% revenue gain, with local advertising up 7% to $48 million and national spot advertising down just over 1% to $26 million.

Profits at the broadcast unit were down 1% to $24.5 million, which the company attributed to increased syndicated programming prices and higher employee-pension costs.

The Scripps cable networks posted a 28% gain in revenue to $142 million on a 70% profit gain to $56 million.

Scripps said it expects third-quarter broadcast advertising revenue to be essentially flat but up 5%-7% if 2002 political advertising is excluded. Ad revenue at the cable networks is expected to be up another 25%-30% in the third quarter, and affiliate fees should climb another 10%, the company said.

Media General
reported a 4.6% drop in TV revenues for the second quarter, to $74 million, largely the result of a $4 million decline in political revenues. Local ad sales were up almost 6%, however, while national spot was down 1.5%. Operating profits for the division were down 11%, due in part to higher payroll and benefits costs. Company Chairman J. Stewart Bryan III indicated last week that Media General's TV unit "continues to experience hesitation on the part of national television advertisers because of the weak economy and flat consumer spending."

reported on July 11 that NBC's revenues dipped 2% in the second quarter to $1.95 billion and for the first half tumbled 14% to $3.4 billion. Part of that fall is due to the absence of the Olympics money it had in early 2002. Operating profits are up, however: 26% in the second quarter to $638 million and 20% for the first half to just over $1 billion.

Hearst-Argyle Television
doesn't report second-quarter earnings in detail until July 30, but earlier it estimated that second-quarter revenues would be down about 2% to roughly $179 million, mainly because of comparisons with 2002, when political advertising helped.