[opendtv] Bank Projects Broadcast Growth in 2010
- From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Fri, 30 Oct 2009 16:20:09 -0500
Seems like good news for broadcasting. Especially because what ails broadcast
is nothing more than reduced ad revenues. It's not lack of public interest in
their content. (Much as some people would like to pretend it is.)
Bert
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http://www.tvtechnology.com/article/89570
Bank Projects Broadcast Growth in 2010
10.30.2009.
Broadcast media can look forward to 6 percent growth next year. That's the take
from media investment bank M.C. Alcamo & Co., which analyzed recovery data in
the sector from 2002. In the year following the 2001 recession, revenue growth
in ad-supported media "over-responded" to underlying gross domestic product
growth by a factor of as much as 3-to-1, the firm said.
"Data from 2002-03 clearly illustrate a multiplier effect for ad-supported
broadcast media," said Michael Alcamo, the investment firm's president. "In
that recovery, broadcasters saw revenue growth rates that were up to three
times the growth rate of underlying GDP. We believe the industry will
experience similarly outsized growth rates in 2010-12.
"The consensus forecast for 2010 GDP growth is 2.8 percent. We therefore expect
broadcast revenue to grow at 5.6 to 6 percent. Moreover, after the cost cutting
of the last 20 months, most of that incremental revenue should be margin."
The analysis suggested next year's recovery could exceed the 2002 recovery. The
2001 recession lasted nine months, with unemployment peaking at 6.3 percent.
Expectations are for the current unemployment level to peak at 10.5 percent.
The strength of a recovery typically reflects the extremity of the downturn,
the bank noted.
Several reasons were given for the expected outsized recovery of the broadcast
sector as compared to GDP growth.
"First, in the 'green shoots' phase of the recovery, advertisers in industrial
or consumer retail categories will see outsized gains in EBITDA--in the
downturn, firms tightened their cost structure by over-firing employees and
reducing cost of goods sold. With greater visibility for continued profits,
managers then become more enthusiastic about investing in advertising.
"Secondly, broadcasters themselves have cut costs--through significant cutbacks
in newsgathering, JSAs with other firms, and sales of non-core assets.
Incremental revenue during the post-recession phase is thus highly profitable.
Essentially, the only cost-of-goods-sold on this revenue are sales commissions
and other sales costs.
"Finally, during a recovery, advertisers are enterprising and are competitive;
ad inventory, however, is finite. To hold and expand market share during the
coming cycle, advertisers invest in advertising to mark out territory and block
competitors."
Consequently, television broadcasters and other ad-supported media companies
experience "revenue and EBITDA growth rates far higher than underlying GDP
growth rates," Alcamo said.
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