As indicated by the typical company data, the demand for TV broadcasting advertising service has been weak and declining in the past three years due to shifting of viewers’ habits away from local TV.

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend

1. It seems that demand for local TV commercial advertising service that companies in this sector provide has been weak and declining in the past three years.

2. Increasing retransmission fees seems to partially offset the decrease in commercial ad revenue during the same period.

3. While with help from the Political ad, which has been a strong revenue resource in this sector, the revenue of most companies in this sector may be declining in the next few of years.

4. The struggling demand for commercial ad and increasing programing costs has been hurting those companies’ profitability.

5. Increasing consolidation activities seem to help little in maintain their margins.

Causes behind the trend

1. Changes (from TV to internet) in consumers’ viewing habit may be the major reason for changes in declining demand for TV broadcasting advertising service.

2. Increasing retransmission fees has been a result of industry wide upward trend in fee rate of programming subscription.

Industry Future

1. As the downward trend in this industry continues, companies may continuingly lose commercial advertising revenue. Retransmission fees’ increase will depend on increase in subscription fee rate of cable TV subscribers, which seems to be slowing down in long run.

General Financial Performance of Companies In the Sector

It seems that demand for local TV AD service that companies in this sector provide has been weak and declining in the past three years as a result of ad’s moving away from traditional TV media. Increasing retransmission fees, as a result of increasing rate, seems to offset the decrease in commercial ad revenue. However, it seems revenue of most companies in this sector may be declining. Political ad has been a strong revenue resource in this sector and helps maintain an about 3% annual growth rate in revenue in the past three years.

The struggling demand for commercial ad and increasing programming costs has been hurting those companies’ profitability. Increasing consolidation activities seem to help little in maintain their margins. The typical company in this sector has an about gross margin of 43% in 2018, with a SG&A as percentage of sales of about 27% , the typical  operating margin is 16% down about 600 basis points compared with that in 2015.

The typical enterprise price/EBI ratio is 34 (12 months trailing).

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