There is light at the end of the tunnel for stations, reports a new study from SNL Kagan. Kagan says station ad revenue slipped 17% this year, but is poised to recover next year, with $18.5 billion in revenue forecasted. That represents a 5.2% gain from 2009's forecasted $17.6 billion.
The study, called "TV Station Deals & Finance", emphasized the importance of non-traditional revenue, such as cash from retransmission consent deals and the Web. Retransmission revenues topped $500 million in 2008 and are projected to grow to $738.7 million in 2009, crossing the billion-dollar threshold by 2011.
Kagan also estimates that stations' online revenues will eclipse $1 billion by 2012.
"Non-traditional revenues have helped to offset some of the revenue softness resulting from the economic downturn," said SNL Kagan analyst Robin Flynn. "In particular, retransmission fee revenue has proven to be a high growth, high margin revenue stream for TV station owners. We've seen broadcasters successfully conclude retrans agreements with multichannel providers over the past several years, which should lead to continued growth for this revenue segment."
The study also looked at the weak state of station deals. The average deal price for 2008 reached an 18-year low of $12.9 million and cash flow multiples fell to 8.0x in the fourth quarter, a benchmark not seen since 1991. Through the first half of 2009, 114 stations sold for $550.1 million or 9.3x cash flow, but the majority were senior lender takeovers in debt-for-equity swaps.
"Although the deal market has been very quiet in 2008-2009 thanks to lack of finance and a slow advertising market, things could begin to improve in 2010 as a pent-up supply of stations comes to market," said Flynn. "Leading TV station properties in attractive markets continue to be highly sought-after assets."
"The SNL Kagan study concludes that retransmission consent payments to broadcasters will double in less than 18 months, a clear demonstration of market power despite one the harshest economic climates in decades," said American Cable Association (ACA) President Matthew Polka in a statement. ACA has long argued that the government needs to step in to fix what it sees as inequities in the system.
"Retransmission consent wasn't intended to become a financial drain on consumers, but that is what it has become. It is broken and needs to be repaired by Congress or the Federal Communications Commission," Polka said.