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For more than two decades local television has been a biennial business, feasting on political ads during even years, fasting during odd ones. This feast/fast nature has become baked into the business and is seen as simply a fact of life. Higher profits during political years, lower profit during odd ones.
But something about the odd/even cycle changed during the fourth quarter of last year. Some of the publicly owned television groups reported not just lower revenue, but actual losses. We’ve seen broadcasters report losing quarters before, but always during severe recessions, not in more normal times.
Wall Street’s reaction was immediate and negative. Several television group shares now trade for the cost of a fast food breakfast.
Part of the problem is the massive fragmentation of national advertising, which is affecting the entire media industry. This is not an aberration, but a seismic shift. With everyone from Netflix to hundreds of FAST channels competing for ad revenue, dollars are spread thin.
But the core issue with last quarter was more than just national advertising, which has been in decline for years. For groups to report a loss, their much more important local sales products must have also underperformed. Local advertising is the backbone of station revenue, so any deficiency is cause for concern.
Local television’s other revenue stream, retransmission consent, is also under attack. Cord cutting, lower vMVPD rates and unfavorable affiliation contracts are