2005 Annual Report - Local TV Economics
After a flat 2003, revenues in 2004 appeared to have grown slightly, based on partial-year results and projections for the rest of the year.
At the risk of restating the obvious, local news has been enormously profitable, even at a time when most stations are losing viewers. Local news accounted for some 46% of station revenues in 2003, according to survey data, and a majority of news directors consistently report that their stations made a profit. Indeed, less than 10 percent of them reported that their stations lost money in 2003.
Anecdotal reports indicate that station profit margins as a whole are high, often in excess of 40%. ABC was the lowest-rated network in 2003, yet its owned-and-operated stations -- all of which broadcast ABC programming -- had profit margins in the mid- to high-40% range.1 Changes in regulations that have allowed stations to own more than one station in a market (known as duopolies) have also increased profit margins. For example, Fox's duopolies reportedly have margins in the mid- to high-50% range.2
From 1995 through 2000, revenue grew slowly but steadily. The 2001 recession caused a drop, but in 2002 revenue increased slightly. It was flat in 2003; the average station had revenue of $23.8 million, compared with $24 million in 2002.
Part of the stagnation, according to Broadcasting and Cable, may have occurred because concern about the Iraq war led many advertisers, who commit to ad spending weeks or months in advance, to hold back on spending in the first half of the year.3
Revenue for all of 2004 was expected to prove better. The TV Bureau of Advertising, an industry group, released preliminary results showing local TV stations in the 100 largest markets had taken in $13.1 billion in revenue in the first nine months of 2004. This was a 9.8% increase over the same period the year before.4
The 100 largest markets typically account for 90% of all station revenue, so total revenue nationwide for the first nine months of 2004 may have been close to $14.4 billion.
Veronis Suhler, an investment banking company, projected station revenue at $26.1 billion in all of 2004, 7.5% more than the year before ($24.2 billion).
Incidentally, even-numbered years tend to be better for local television stations. That's because of spending tied to the Olympics and political campaigns, and presidential election years are the best of all. Election ad spending in 2004, estimated at $1.6 billion, would account for 80% of the revenue increase, with the remainder coming from growth in regular ad spending.