Reality Sets in for Media Firms in Q1

Apr 18, 2005  •  Post A Comment

A measure of the degree to which political advertising masked overall weakness in the TV advertising sector last year began to take shape last week as the first batch of companies with television stations reported their quarterly results.

For many station groups, 2004 was a banner year, as a tight presidential race, along with equally competitive local races, helped provide a windfall for those lucky enough to either be in so-called battleground states or in communities with white-hot local races.

And what a windfall it was: Many station groups reported huge gains in advertising revenue, thanks to efforts by campaigns to woo voters. The revenue proved a welcome boost for many television stations, which would otherwise have had a tough year, as other advertising categories, most notably automotive and retail, continued to generate uneven results.

However, with the elections over, TV stations now must deal with the choppy advertising market without any help-and if last week’s results are any indication, things generally will be different in 2005.

What appears to be emerging, based on earnings from Gannett, Emmis Communications, The New York Times Co. and Media General, is that while all the companies’ TV stations are booking far less political revenue than last year, each company is coping with the loss differently.

For example, the eight television stations at The New York Times Co. reported enough of a rise in the automotive, packaged goods and furniture categories to offset the drop-off in political advertising and report a flat year-to-year change in revenue. Emmis’ broadcast revenue was up slightly.

But Gannett and Media General posted weaker revenue figures for the period as advertising in other categories continued to lag.

In the cases of all four companies, the results stand in stark contrast to the firms’ respective publishing divisions, all of which reported strong results in the quarter, driven mainly by advertising gains.

At Gannett, the company’s broadcast group-which includes 21 network-affiliated TV stations and office-building entertainment service Captivate Network-reported a 3 percent decline in broadcasting revenue to $164.6 million, while operating cash flow tumbled 14 percent to $66.4 million. Excluding Captivate, Gannett’s broadcast unit would have reported a 5 percent revenue decline and a 13 percent drop in operating cash flow.

Profit and Loss

However, the weaker results were not enough to offset revenue and operating cash flow gains at Gannett’s newspapers, which include the flagship USA Today.

Overall, the company reported a 3 percent decline in first-quarter profit to $265.7 million, while revenue advanced 4 percent to $1.8 million.

The New York Times Co.’s broadcast group reported revenue of $31.3 million-about the same as the year-ago figure-while operating profit tumbled 17 percent to $4.1 million, as the group was hurt by higher wages and benefit costs, including stock-based compensation.

Overall, the company reported a first-quarter profit of $111 million versus a year-earlier profit of $58.4 million, largely driven by the company’s sale of its current headquarters in New York for $62.8 million and of property in Florida for $5 million. Revenue was nearly flat at $805.6 million, compared with a year-earlier figure of $801.9 million.

Meanwhile, Emmis, which owns 16 television stations, reported that its television division’s revenue advanced slightly to $56.6 million for the quarter and $264.9 million for the year, compared with year-earlier figures of $56.4 million and $235.9 million, respectively.

However, the company fell deeper into the red in its fiscal fourth quarter ending Feb. 28, due to a $303 million accounting charge. The Indianapolis-based company recorded a widened net loss of $266 million, compared with red ink of $21.4 million a year ago. Revenue rose 5 percent to $137.9 million.

For the year Emmis reported a loss of $304.4 million, compared with a year-earlier profit of $2.3 million. Revenue climbed 9 percent to $618.5 million.

Media General’s broadcast group, which includes 26 network-affiliated television stations, posted mixed results. While the division’s overall profit fell 22 percent to $11.3 million, revenue rose 1 percent to $71 million. Local advertising revenue rose 6 percent, while national advertising revenue fell 2 percent. Political advertising sharply declined from 2004 levels.