Local TV broadcasters could see a 3.4% decline in core advertising in the next year and a half, according to a report from Moody’s Investors Service.
Core advertising revenues -- which excludes political advertising -- have seen “demand under pressure as audiences shift their media consumption to over-the-top (OTT) streaming video services and advertisers and agencies reallocate their budgets to digital media,” the report says.
This comes as big TV ad categories are seeing lower results for local TV -- car dealers, retail, restaurants.
Moody’s expects total advertising to account for slightly more than half TV stations' revenue.
Magna Global recently said 2020 could see core local TV advertising sink to $17.1 billion. However, when including the expected record-breaking political advertising revenues, this could rise to $21 billion -- up 13% overall from 2019.
Local TV station groups, however, could expect see retransmission fees rising 14% over the next year to year and a half.
Retransmission revenues will grow to represent about a 40% to 50% share of total revenues. Fee increases are driven by annual price escalations in contracts as well as rate increases during new contract renegotiations.
Moody’s says digital and radio assets generally represent about 5% to 10% of total revenue, noting that companies with substantial digital and/or radio assets include: Univision, Entravision, E.W. Scripps, Cox Media Group.
Of the digital/radio assets for TV station groups, Moody’s says there are “low margins, little to no profitability,” and this will “will dampen cash flow.”