Local TV Economics
2006 Annual Report
Analysts were divided over what direction TV stations’ revenues would take in 2005. Coming off a presidential election and Olympics the year before, a flat or slightly down year would be typical for the industry. That could be even more pronounced given that the 2004 election-year revenues had exceeded expectations, hitting record levels.
But there was something more ominous in the numbers as well. The data also show that news contributed less than before to station revenues — and that newsroom profitability in 2004 hit an all-time low.1
Over all, the forecasts for 2005 were modest for what remains an enormously profitable industry, with its pre-tax margins of 40% and even 50%.
Veronis Suhler Stevenson, a market research firm that analyzes media, projected that total advertising revenue for local TV stations would rise just slightly, to approximately $26 million, in 2005, up 1.6% from $25.6 billion the year before. Local advertising would make up $14.8 billion of the total, while national spot advertising would be approximately $11 billion. That would represent a 1.8% growth year to year for such national advertising, and slightly less, 1.4%, for local.2
TV Station Advertising Revenues
2003 - 2005, All Figures in Billions of Dollars
Source: Veronis Suhler Stevenson 2005-2009 Industry Forecast, p.232
Projections by the other major market research source for the industry, the Television Bureau of Advertising (TVB), however, were for a downturn. As of June 2005, TVB’s analysis of TNS Media Intelligence/CMR’s estimates for the top 100 markets indicated that local broadcast TV’s revenues were down 4.3% for the first quarter compared to the year before. By January 2006, TVB indicated that 2005 third-quarter local revenues were down by 11.7% compared to 2004. The drop was attributed to the fact that the core business growth that was supposed to counteract the lack of political advertising did not materialize. The biggest drop in advertising was in political spending, down by more than half from 2004.3
Still, the local TV business continued to be a lucrative one. To get a clearer sense of that, it is useful to break down the revenue sources of local television by looking at the last year for which complete data are available, 2004.
Revenue in 2004
The campaign and Olympic year of 2004 was a good one for local TV station revenue.
It grew by more than 9%, according to data from BIAfn of 756 local TV stations across the country, from approximately $23.5 million to $25.6 million. That was a big improvement over 2003, when station revenue declined year to year (by 1.7%) from $23.9 million to $23.5 million.4
Financially, big markets dominated. According to the BIA figures, the top 25 markets earned 60% of the total revenue of all markets.5