TV Forecast: Retrans Expands, Core Ad Sales Decline

Next year will see overall “stable” cash flow results for broadcast TV stations, according to Moody’s Investor Service. It won’t come from traditional core advertising, but via retransmission fees.

Looking at major TV station groups, Moody’s expects retransmission revenues to rise 13.4% next year, with advertising revenues declining 3.4%.

“Rising retransmission fees and incremental earnings generated by a strong 2018 political [advertising] cycle will help offset weak advertising revenue for U.S. broadcasters,” says Jason Cuomo, vice president-senior credit officer, Moody’s.

Core-advertising demand continues to decline. For example, TV's biggest ad category -- automotive spending -- expects to drop further.

All this means a total TV broadcast cash-flow improvement -- earnings before interest, taxes, depreciation and amortization -- of 3.1%. Cuomo expects growing mergers and acquisitions as a result.



Big-time pay TV companies -- cable system-centric companies -- will see similar cash-flow hikes, up 4.1%, mostly due to higher revenue from broadband business. Broadband subscriptions were up 4.6% in the second quarter of 2018.

At the same time, Cuomo predicts continued losses when it comes to traditional cable-video revenues as subscribers fall. Video subscribers sank 2% in the second quarter of 2018 -- accelerating from a 1.2% drop in the second quarter of 2017.

Another possible negative for cable companies is the threat of consumers shifting to OTT and 5G wireless broadband businesses.

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