US TV station owners are facing a mixed advertising market, with strength in key categories like local, auto and sports programming offset by weakness in others.
The auto category, historically broadcasters' top local ad revenue driver, continues its long rebound from pandemic-related inventory challenges and chip shortages. Local ad clients overall have continued to spend, helping station groups improve their core advertising standing. However, national spot spending has fallen amid reduced budgets, especially in categories like media, sports betting, healthcare and insurance.
"Local is strong, and it's been strong. The national ad market has struggled pretty much the entire year," said Gray Television Inc. President and co-CEO Pat LaPlatney, adding that the automotive category is "coming back with a vengeance, not just in local but also national spot."
The E.W. Scripps Co. President and CEO Adam Symson on the company's Nov. 3 earnings call said that while the national upfront market was weak across the industry, the company is seeing some green shoots in the fourth-quarter scatter market, where spots are bought much closer to a program's air date. Looking across the major station groups — including Nexstar Media Group Inc., Sinclair Inc., TEGNA Inc., Gray and E.W. Scripps — the broadcast companies by and large expect to finish 2023 with fourth-quarter gains in core advertising.
Core advertising assumes more significance in odd years, when advertisers are not crowded out by political spending.
Shifting gears
In terms of areas of strength, station groups all benefitted from the continued improvement in the auto market.
At Nexstar, the nation's largest operator of TV stations, auto spending was up 13% year over year and was the top core performer. President and COO Michael Biard said there is still runway ahead for the category. Auto ad spending remains below 2019 levels and more vehicles are available for sale. But, Biard noted Nexstar will face tougher comparisons in the fourth quarter because it will lap the category expansion that has occurred for five consecutive quarters.
Auto was also up 7% year over year in the third quarter for Sinclair, the nation's second-largest owner of TV stations.
At E.W. Scripps, auto was ahead 13% year over year. CFO Jason Combs said auto accounted for 18% of the station group's advertising take in the period, its highest share "in quite some time."
The positive auto trend continued into October: COO Lisa Ann Knutson said auto grew 10% during that month. If the category continues on that course, Knutson said it would represent a sixth consecutive period of growth for auto spending.
The improvements come as automakers look to ramp up production and sales in the wake of the pandemic and related chip shortages. In 2022, light vehicle sales totaled 13.8 million in the US, the lowest in a decade, according to S&P Global Mobility. In 2023, that figure is set to jump to almost 15.5 million and then hit 15.9 million in 2024, based on S&P Global Mobility's October forecast.
Scoring with sports
Beyond auto, broadcast station owners also found advertising success with increased live sports programming.
In the year since Nexstar took control of The CW (US), the network has secured rights for LIV Golf; Atlantic Coast Conference Football and Basketball; and most recently, WWE NXT, which is set to begin airing on The CW in 2024. In 2025, The CW will also become the exclusive home to the NASCAR Xfinity Series beginning in 2025
"Ratings of ACC Football on The CW have been very positive, attracting new advertisers to the network," Nexstar CEO Perry Sook said on the company's Nov. 8 earnings call.
Overall, core advertising at Nexstar fell 2.3% to $391 million in the third quarter. COO Biard said excluding The CW, core advertising was down 6.8%.
Scripps is also seeing a benefit from live sports. The company expects local core ad revenue will improve in the low- to mid-single digits in the fourth quarter, benefiting from a 4-percentage-point gain tied to its two local NHL deals: with the defending champion Vegas Golden Knights and the Arizona Coyotes.
"Linear television, specifically broadcast TV, is made for this. The leagues know it, the teams know it, the fans know it and so do distributors and advertisers," Scripps CEO Adam Symson said. "And that's the reason Scripps is leading the broadcast renaissance in live sports."
While sports programming is scoring with advertisers, spending on sports betting was down in the third quarter.
At Gray, sports betting was the category with the biggest decrease. Gray COO Sandra Breland McNamara said sportsbooks that spent heavily last year as their platforms were first launching are now shifting to maintenance outlays.
Testing technology
With sports betting down, Gray highlighted new business gains, as the company's local direct segment registered year-over-year growth in the first, second and third quarters of 9%, 15% and 16%, respectively.
To help navigate some of the soft spots in the ad market, some other station groups are turning to technology.
Sinclair CFO Lucy Rutishauser said the company has been refining its services, tapping a unified ad sales platform tying linear and digital together. The company is also using AI for client prospecting, to construct more tailored communications.
Sinclair's fourth-quarter guidance calls for core advertising to improve in the mid-single digits on a pro forma basis, boosted by digital spending, Rutishauser said.
Of course, technology bets do not always pay off. At Tegna, core advertising was off 2.6% to $312.4 million at the company's Advertising and Marketing Services unit, due in part to the previously disclosed loss of a single national account for Premion, the company's connected TV, OTT ad business.
"Similar to last year, Premion revenue was down year-over-year, impacted by the loss of a single large national account," Tegna CFO Victoria Dux Harker said on a Nov. 7 earnings call. "However, Premion's primary focus is on the growth in local OTT revenue, where it's uniquely positioned to win. Premion local revenue was strong, up double digits year-to-date."