jackdaw research tv report q2 2015
TRANSCRIPT
Jan Dawson Chief Analyst (408) 744-6244 [email protected] @jandawson
JACKDAW RESEARCH TV REPORT Q2 2015
SEPTEMBER 2015
1 Pay TV Provider trends
2 Cable network trends
3 Broadcast network trends
4 Station owner trends
5 Overview
1
2
3
4
5
1 Pay TV Provider trends
4
• We cover the major US pay TV providers, including the largest public cable, satellite and telecoms providers:
• Cable: Comcast, Cablevision, Charter, Time Warner Cable, Cable ONE, Mediacom, Suddenlink, WoW
• Satellite: DirecTV, DISH
• Telecoms: AT&T, Verizon, CenturyLink, Consolidated Comms, Frontier, Windstream
• We track subscriber numbers and revenue for those that report
PAY TV PROVIDER TRENDSSCOPE OF COVERAGE
5
• Cord-cutting finally seems to be taking hold
• After a period of slowing growth, the last two quarters show declining subscribers, even year on year, when all relevant providers are considered
• The decline is still fairly slow, but it is now noticeable, and composed of declines at most cable companies, flat growth to declines at the satellite companies, and slowing growth at the telecoms providers
PAY TV PROVIDER TRENDSMAJOR TRENDS
6 Source: Company reporting, Jackdaw Research Analysis
REPORTED VIDEO SUBSCRIBERSALL PROVIDERS
Video subscribers, 000s
0
5,000
10,000
15,000
20,000
25,000
30,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
AT&T Cable ONE Cablevision CenturyLink CharterComcast Cons Comms DirecTV DISH FrontierMediacom Suddenlink TWC Verizon WindstreamWoW
7 Source:
REPORTED VIDEO SUBSCRIBERSLARGER PROVIDERS
Video subscribers, 000s
0
5,000
10,000
15,000
20,000
25,000
30,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
AT&T Cablevision Charter Comcast DirecTV DISH TWC Verizon
Source: Company reporting, Jackdaw Research Analysis
8 Source:
REPORTED VIDEO SUBSCRIBERSSMALLER PROVIDERS
Video subscribers, 000s
0
500
1,000
1,500
2,000
2,500
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Cable ONE CenturyLink Cons Comms FrontierMediacom Suddenlink Windstream WoW
Source: Company reporting, Jackdaw Research Analysis
9 Source:
TOTAL VIDEO SUBSCRIBERSALL PUBLIC PROVIDERS
Total video subscribers, 000s
90,800
90,900
91,000
91,100
91,200
91,300
91,400
91,500
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Source: Company reporting, Jackdaw Research Analysis
10 Source:
TOTAL VIDEO SUBSCRIBERSBIG PLAYERS ONLY
Total video subscribers, big players, 000s
85,200
85,400
85,600
85,800
86,000
86,200
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Source: Company reporting, Jackdaw Research Analysis
11 Source:
TOTAL VIDEO SUBSCRIBERSALL PUBLIC PLAYERS PLUS ESTIMATES FOR COX AND BRIGHT HOUSE
Total video subscribers, 000s, incl Cox/Bright House
97,300
97,400
97,500
97,600
97,700
97,800
97,900
98,000
98,100
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Source: Company reporting, Jackdaw Research Analysis
12 Source:
YEAR ON YEAR VIDEO NET ADDSLARGER PLAYERS ONLY
Year on year video net adds, 000s
-1,000
-800
-600
-400
-200
0
200
400
600
800
1,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
AT&T Cablevision Charter Comcast DirecTVDISH Frontier TWC Verizon
Source: Company reporting, Jackdaw Research Analysis
13 Source:
YEAR ON YEAR VIDEO NET ADDSSMALLER PLAYERS ONLY
Year on year video net adds, 000s
-120
-80
-40
0
40
80
120
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Cable ONE CenturyLink Cons Comms FrontierMediacom Suddenlink Windstream WoW
Source: Company reporting, Jackdaw Research Analysis
14 Source:
YEAR ON YEAR VIDEO NET ADDSOVERVIEW
Year on year video net adds, 000s
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Telco Cable Satellite Total Total incl Cox/BrightHouse
Source: Company reporting, Jackdaw Research Analysis
15 Source:
YEAR ON YEAR VIDEO NET ADDSALL PUBLIC PLAYERS
Year on year video net adds, all players, 000s
-300
-200
-100
0
100
200
300
400
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Source: Company reporting, Jackdaw Research Analysis
16 Source:
YEAR ON YEAR VIDEO NET ADDSBIG PLAYERS
Year on year video net adds, 000s, big players
0
100
200
300
400
500
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Source: Company reporting, Jackdaw Research Analysis
17 Source:
YEAR ON YEAR VIDEO NET ADDSPUBLIC PLAYERS PLUS ESTIMATES FOR COX AND BRIGHT HOUSE
Year on year video net adds, 000s, incl Cox/Bright House
-400
-300
-200
-100
0
100
200
300
400
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Source: Company reporting, Jackdaw Research Analysis
18 Source:
QUARTERLY VIDEO NET ADDSALL PUBLIC PLAYERS
Quarter on quarter video net adds, all players, 000s
-500
-400
-300
-200
-100
0
100
200
300
400
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Source: Company reporting, Jackdaw Research Analysis
19 Source:
VIDEO REVENUESBY PLAYER, REPORTED AND ESTIMATES
Video revenues, $m
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
AT&T Cablevision Charter Comcast DirecTV DISH MediacomSuddenlink TWC Verizon
Source: Company reporting, Jackdaw Research Analysis
20 Source:
VIDEO REVENUESOVERVIEW
Video revenues, $m
0
5,000
10,000
15,000
20,000
25,000
30,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Telco CableTotal Satellite
Source: Company reporting, Jackdaw Research Analysis
2
1
3
4
5
2 Cable network trends
22
• We track several major US cable network providers, including standalone providers as well as networks which are part of bigger companies:
• Standalone providers: Starz, AMC, Discovery, Scripps
• Other providers: Comcast, CBS, 21st Century Fox, Disney, Time Warner, Viacom
• For each provider, we track revenues, margins, and revenue composition, as well as financial trends
CABLE NETWORK TRENDSSCOPE OF COVERAGE
23
• Along with the cost-cutting evident from pay TV numbers, the decline in cable network subscribership is beginning to take hold
• Even major networks such as ESPN are seeing declines, which was the major topic of conversation on Disney’s earnings call this quarter
• Advertising seems to be holding up to some extent as a result of higher prices and inventory, but ratings are impacting revenue elsewhere
• Increased investment in content is also negatively impacting margins at some cable networks
CABLE NETWORK TRENDSMAJOR TRENDS
24
Financial trends: • Affiliate fees up 13% year on year,
advertising up 8% year on year • Fox Sports 1 launch drove significant
cost increases for content acquisition but also new revenues
• Some cable networks seeing lower ratings, while others rising
INCLUDING FOX NEWS CHANNEL, FOX BUSINESS NETWORK21ST CENTURY FOX CABLE NETWORKS
Revenue, $m
0
1,000
2,000
3,000
4,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Source: Company reporting, Jackdaw Research Analysis
25
Financial trends: • Ad revenues increasing driven by
higher prices, mostly around a couple of big shows
• Distribution revenues increasing from fee increases, mostly at the AMC channel, also from digital and other licensing of original content
• Increasing programming costs from investment in original programming.
INCLUDING AMC, BBC AMERICA, WE TV, IFC, SUNDANCE TVAMC CABLE NETWORKS
Revenue, $m
0
100
200
300
400
500
600
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Revenue sources as % of revenue
0%
10%
20%
30%
40%
50%
60%
70%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Subs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
26
Financial trends: • Higher revenues from pay-per-view
boxing on Showtime • Higher rates for cable networks
driving higher revenues • Lower ad revenues • Lower content licensing and
distribution revenues
INCLUDING SHOWTIME, CBS SPORTS, SMITHSONIANCBS CABLE NETWORKS
Revenue, $m
0
100
200
300
400
500
600
700
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Showtime Networks subscribers, m
70
72
74
76
78
80
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Source: Company reporting, Jackdaw Research Analysis
27
Financial trends: • Declines in audience ratings for cable
networks, driving lower ad revenues, albeit somewhat offset by higher prices and volumes
• Content licensing revenues fairly volatile due to timing of specific deals
• Many of the larger networks losing 2m or so subscribers year on year
COMCAST CABLE NETWORKSINCLUDING USA, MSNBC, CNBC, SYFY, E!, AND OTHERS
Revenue, $m
0
500
1,000
1,500
2,000
2,500
3,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Revenue sources as % of revenue
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Content licensingSubs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
28
Financial trends: • Distribution revenue up due to annual
contractual rate increases, but offset slightly by declines in subscribers
• Advertising revenue declining slightly as pricing increases (and in some cases slightly higher volumes) offset by lower audience delivery
• Production costs increasing as spending on content is increasing
DISCOVERY CABLE NETWORKSINCLUDING DISCOVERY CHANNEL, TLC, ANIMAL PLANET, AND OTHERS
Revenue, $m
0
200
400
600
800
1,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
EBITDA margin
0%
10%
20%
30%
40%
50%
60%
70%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Revenue sources as % of revenue
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Other Subs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
29
Financial trends: • July earnings call introduced bigger
theme around declining ESPN subs and challenging conditions for cable networks in general
• ESPN ad revenue seems to be doing OK
• Declining subs on cable networks, but launch of SEC Network driving new subs there
DISNEY CABLE NETWORKSRevenue, $m
0
1,000
2,000
3,000
4,000
5,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
INCLUDING ESPN CHANNELS, DISNEY CHANNELS, A&E, AND OTHERS
Operating margin
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Revenue sources as % of revenue
0%
10%
20%
30%
40%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Content licensingSubs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
30
Financial trends: • Advertising revenue flat, reflecting
softness in advertising market, but increases in pricing and units, offset by falling ratings at some networks
• Affiliate fee revenues increasing due to contractual rate increases, falling subscribers offsetting slightly.
• Investment in original programming driving up content costs.
SCRIPPS CABLE NETWORKSINCLUDING FOOD NETWORK, HGTV, TRAVEL CHANNEL, DIY AND OTHERS
Revenue, $m
0
200
400
600
800
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
15%
30%
45%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Operating margin
Revenue sources as % of revenue
0%
20%
40%
60%
80%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Content licensingSubs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
31
Financial trends: • Higher effective rates, partially offset
by lower average subscriptions, leading to higher affiliate fee revenues
• Distribution highly variable • Programming costs for original
programming are increasing, but prior Disney/Sony deal provides savings, which they’re using to finance their investment in original programming.
STARZ CABLE NETWORKSINCLUDING STARZ, ENCORE
Revenue, $m
0
150
300
450
600
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Revenue sources as % of revenue
0%
15%
30%
45%
60%
75%
90%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Content licensingSubs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
32
Financial trends: • Growing rates but falling subscribers,
leading to slightly growing affiliate revenues
• Ad revenues seeing growth in news channels offset in part by lower subscribers for some entertainment networks
• Programming costs shrinking due to getting out of certain categories
TIME WARNER CABLE NETWORKSTURNER NETWORKS – CNN, TBS, TNT, AND OTHERS
Revenue, $m
0
500
1,000
1,500
2,000
2,500
3,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Operating margin
Revenue sources as % of revenue
0%
15%
30%
45%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Content licensingSubs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
33
Financial trends: • HBO raising rates and growing
subscribers domestically and internationally, driving higher revenues
• Spending more on original series and to some extent film acquisition, so programming costs rising
• HBO Now investment only beginning to pay off, so a drag on profits
TIME WARNER CABLE NETWORKSHBO
Revenue, $m
0
250
500
750
1,000
1,250
1,500
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Operating margin
Revenue sources as % of revenue
0%
20%
40%
60%
80%
100%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Content licensing Subs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
34
Financial trends: • Falling ratings (and subscriber
numbers) at cable networks, driving falling advertising revenues (even with some increased volumes), along with falling prices per unit
• Affiliate fees continue to rise in the mid-to-high single digits each year, due to rate increases
INCLUDING NICKELODEON, NICK JR, COMEDY CENTRAL, SPIKE AND OTHERSVIACOM CABLE NETWORKS
Revenue, $m
0
500
1,000
1,500
2,000
2,500
3,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Operating margin
Revenue sources as % of revenue
0%
15%
30%
45%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Content licensingSubs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
35
CABLE NETWORK COMPARISONSREVENUES, $M
0
1,000
2,000
3,000
4,000
5,000
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Discovery Comcast (cable nw) CBS (cable nw) AMC21CF (cable nw) Disney (cable nw) Scripps StarzTime Warner Turner Time Warner HBO Time Warner Total Viacom (cable nw)
Source: Company reporting, Jackdaw Research Analysis
36
CABLE NETWORK COMPARISONSSUBSCRIBER AND AFFILIATE FEES AS A % OF REVENUES
Subs/fees as % of revenue, cable networks
0%
15%
30%
45%
60%
75%
90%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Discovery (cable nw) Comcast (cable nw) AMC (cable nw)Scripps (cable nw) Starz (cable nw) Time Warner Turner (cable nw)Time Warner HBO (cable nw) Time Warner Total Viacom (cable nw)
Source: Company reporting, Jackdaw Research Analysis
37
CABLE NETWORK COMPARISONSADS AS A % OF REVENUES
Ads as % of revenue (cable networks)
0%
10%
20%
30%
40%
50%
60%
70%
80%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Discovery (cable nw) Comcast (cable nw) AMC (cable nw)Scripps (cable nw) Starz (cable nw) Time Warner Turner (cable nw)Time Warner HBO (cable nw) Time Warner Total Viacom (cable nw)
Source: Company reporting, Jackdaw Research Analysis
38
CABLE NETWORK COMPARISONSOPERATING MARGINS FOR THOSE REPORTING
Operating margins – cable networks
0%
10%
20%
30%
40%
50%
60%
70%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Discovery (cable nw) Comcast (cable nw) CBS (cable nw)AMC (cable nw) 21CF (cable nw) Disney (cable nw)Scripps (cable nw) Starz (cable nw) Time Warner Turner (cable nw)Time Warner HBO (cable nw) Viacom (cable nw)
Source: Company reporting, Jackdaw Research Analysis
39
CABLE NETWORK COMPARISONSEBITDA MARGINS FOR THOSE REPORTING
EBITDA margins – cable networks
0%
10%
20%
30%
40%
50%
60%
70%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Discovery (cable nw) Comcast (cable nw) CBS (cable nw)AMC (cable nw) 21CF (cable nw) Starz (cable nw)
Source: Company reporting, Jackdaw Research Analysis
1
2
4
5
3 3 Broadcast network trends
41
• We cover the four major public broadcasters, as part of our coverage of their parent companies:
• ABC (Disney)
• CBS
• Fox (21st Century Fox)
• NBC (Comcast)
• We analyze revenues, margins, and revenue composition, as well as financial trends
• These companies tend to combine performance for broadcasting and owned TV stations, so it’s harder to isolate broadcasting performance alone
BROADCAST NETWORK TRENDSSCOPE OF COVERAGE
42
• Ratings for broadcasters are slipping, though they are pushing for consideration of longer time windows
• Advertising revenue is struggling in most cases, with weak Upfronts for most broadcasters
• Affiliate fees are rising steadily, which is helping to bolster or even grow overall revenues
• Political and sports event-related advertising impacts year on year comparability quite a bit
BROADCASTER TRENDSMAJOR TRENDS
43
Financial trends: • Higher rates (affiliate fees etc.) plus in
some cases higher unit volumes for advertising
• ABC’s ratings have been faring better than some other networks’ – some year-on-year increases, but still broadly down, especially in Q2
• Higher prices in this year’s Upfronts
BROADCASTING (INCLUDING OWNED STATIONS)ABC (DISNEY)
Revenue, $m
0
500
1,000
1,500
2,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Operating margin
0%
5%
10%
15%
20%
25%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Revenue sources as % of revenue
0%
20%
40%
60%
80%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising
Source: Company reporting, Jackdaw Research Analysis
44
Financial trends: • Lower ad revenues, lower Upfront
commit’s, prices up, volumes down • Higher programming expenses,
especially NFL rights • Shift of expense from programming to
production, as they prioritize internal development
• 40% growth in fees received from affiliated television stations
BROADCASTING, RADIO, MOVIE STUDIOSCBS
Revenue, $m
0
500
1,000
1,500
2,000
2,500
3,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
5%
10%
15%
20%
25%
30%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Source: Company reporting, Jackdaw Research Analysis
45
Financial trends: • Lower primetime ratings at Fox • Lower advertising revenues partially
offset by higher affiliate fee revenues • Lower general entertainment
primetime ratings at FOX • Higher retransmission consent rates
for fiscal 2015
INCLUDES BROADCASTING, TV CONTENT PRODUCTION, OWNED STATIONSFOX (21ST CENTURY FOX)
Revenue, $m
0
500
1,000
1,500
2,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Source: Company reporting, Jackdaw Research Analysis
46
Financial trends: • Flat broadcasting revenues, thanks to
higher retransmission fees • Had been talking about increases in
ratings in earlier quarters, little mention of this lately
• Increases in volumes and pricing for advertising
INCLUDES BROADCASTING, OWNED STATIONSNBC (COMCAST)
Revenue, $m
0
500
1,000
1,500
2,000
2,500
3,000
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
-10%
-0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Revenue sources as % of revenue
0%
20%
40%
60%
80%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Content licensing Other
Source: Company reporting, Jackdaw Research Analysis
1
2
3
5
4 4 Station owner trends
48
• We cover the largest publicly traded station owner groups:
• CBS Local Broadcasting
• EW Scripps
• Graham Holdings
• Media General
• Sinclair Broadcasting Group
• TEGNA (formerly Gannett)
• Tribune Media
STATION OWNER TRENDSSCOPE OF COVERAGE
49
• Consolidation continues, with Media General being one of the major drivers over the past couple of years, and the prospect of a merger with either Meredith or Nexstar likely in the coming months
• As with broadcasters, advertising is pressured by challenging ratings
• But retransmission consent fees are helping drive revenue growth for a number of station owners
STATION OWNER TRENDSMAJOR TRENDS
50
Financial trends: • Lower advertising revenues, partially
offset by growth in affiliate and subscription fees
• The lower ad revenues mostly reflect lower political advertising and lower spending by advertisers in several industries, including entertainment, telecommunications and financial services.
INCLUDES BOTH TV AND RADIO STATIONSCBS LOCAL BROADCASTING
Revenue, $m
0
100
200
300
400
500
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Revenue sources as % of revenue
0%
15%
30%
45%
60%
75%
90%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Subs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
51
Financial trends: • Retrans fees roughly doubling from
2014 to 2015 on a pro forma basis as a result of renegotiated contracts and to a lesser extent annual rate increases
• Increased prices and inventory for advertising is helping ad revenues
RESULTS SHOWN ARE FOR TV STATIONS ONLYEW SCRIPPS
Revenue, $m
0
50
100
150
200
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin
Revenue sources as % of revenue
0%
25%
50%
75%
100%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Subs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
52
Financial trends: • Retrans fees growing strongly, as with
other station groups • Advertising revenue overall
challenged by lack of political advertising in 2015, but otherwise holding up OK
• Investments in digital capabilities are impacting operating income
TELEVISION BROADCASTINGGRAHAM HOLDINGS
Revenue, $m
0
30
60
90
120
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
15%
30%
45%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Operating margin
Source: Company reporting, Jackdaw Research Analysis
53
Financial trends: • Media General has been acquiring
(and to a lesser extent divesting) business so quickly, comparisons are challenging
• Retrans fees are rising rapidly, though it no longer reports them explicitly
• Advertising revenue (on pro forma basis) relatively stable, digital revenue rising
STATION OWNERMEDIA GENERAL
Revenue, $m
0
100
200
300
400
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
-10%
0%
10%
20%
30%
40%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating marginNet margin
Revenue composition (no longer reported), gross
0%
15%
30%
45%
60%
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Retransmission LocalNational PoliticalDigital Barter and other revenue
Source: Company reporting, Jackdaw Research Analysis
54
Financial trends: • Retrans fees rising, continuing to enter
new contracts with opportunity to raise prices, forecasting growing revenues
• Growth in advertising revenues in the services, drugs/cosmetics and internet sectors
• Declines in revenues in the political, automotive and telecoms sectors
TELEVISION BROADCASTINGSINCLAIR BROADCAST GROUP
Revenue, $m
0
100
200
300
400
500
600
700
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Operating margin
Source: Company reporting, Jackdaw Research Analysis
55
Financial trends: • Substantial increase in retransmission
revenue (up 23% year on year in Q2 2015) and digital revenue
• Offset in part, by the lower political advertising
• Advertising overall to be challenged in 2015, dragging down overall revenue
BROADCASTING SEGMENTTEGNA
Revenue, $m
0
100
200
300
400
500
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Revenue sources as % of revenue
0%
20%
40%
60%
80%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Subs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
56
Financial trends: • Continue to grow advertising market
share and generate higher retransmission fees
• Core advertising revenues growing • Digital business growing too, partly
thanks to acquisitions
TV & ENTERTAINMENT SEGMENT, INCLUDING WGN NETWORKTRIBUNE MEDIA
Revenue, $m
0
100
200
300
400
500
Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015
Margins
0%
10%
20%
30%
40%
50%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
EBITDA margin Operating margin
Revenue sources as % of revenue
0%
15%
30%
45%
60%
75%
90%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Advertising Subs/distribution/fees
Source: Company reporting, Jackdaw Research Analysis
57 Source:
MARGINSBROADCAST NETWORKS AND STATION OWNERS
EBITDA margins – broadcast and other
-10%
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
21CF (broadcast TV) Comcast (broadcast TV) CBS (broadcast TV) (incl. movies)CBS (local broadcast) Scripps (local broadcast) TEGNA (local broadcast)CBS (total) 21CF (total)
58 Source:
MARGINSBROADCAST NETWORKS AND STATION OWNERS
Operating margins – broadcast
-10%
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
21CF (broadcast TV) Comcast (broadcast TV) CBS (broadcast TV) (incl. movies)Disney (broadcast TV) CBS (local broadcast) Graham (local broadcast)Sinclair (local broadcast) TEGNA (local broadcast)
59 Source:
REVENUE COMPOSITIONBROADCAST NETWORKS AND STATION OWNERS
Subs/fees as % of revenue, broadcast and other
0%
10%
20%
30%
40%
50%
60%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Comcast (broadcast TV) Scripps (local broadcast)TEGNA (local broadcast) CBS (total)21CF (total) Disney (cable + bcast TV)
60 Source:
REVENUE COMPOSITIONBROADCAST NETWORKS AND STATION OWNERS
Ads as % of revenue (broadcast and other)
0%
20%
40%
60%
80%
100%
Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015
Comcast (broadcast TV) Scripps (local broadcast) TEGNA (local broadcast)CBS (total) 21CF (total) Disney (cable + bcast TV)
1
2
3
4
5 5 Overview
62
• Cable networks and station owners have, in general, far higher margins than the broadcasters
• Cable networks are mostly in the 30-40% operating margin range
• Station owners are in the 30-45% range
• Broadcasters are in the 10-20% range
• Margins seem to be declining for the cable networks, for the most part, while they’re a little more stable for broadcasters and station owners
FINANCIAL OVERVIEWMARGINS
63
FINANCIAL OVERVIEWREVENUES, TRAILING 4 QUARTERS
Trailing 4-quarter revenues (to Q2 2015), $m
0
5,000
10,000
15,000
20,000
25,000
30,000
Disn
ey (c
able
nw
)
21C
F (c
able
nw
)
Turn
er (c
able
nw
)
Viac
om (c
able
nw
)
Com
cast
(cab
le n
w)
HBO
(cab
le n
w)
Disc
over
y (c
able
nw
)
Scrip
ps (c
able
nw
)
CBS
(cab
le n
w)
AMC
(cab
le n
w)
Star
z (ca
ble
nw)
CBS
(bro
adca
st T
V)
Com
cast
(bro
adca
st T
V)
Disn
ey (b
road
cast
TV)
21C
F (b
road
cast
TV)
CBS
(loc
al b
road
cast
)
Sinc
lair
(loca
l bro
adca
st)
TEG
NA
(loca
l bro
adca
st)
Med
ia G
ener
al
Scrip
ps (l
ocal
bro
adca
st)
Gra
ham
(loc
al b
road
cast
)
21C
F
Disn
ey
Com
cast
Turn
er
CBS
Cable networks Broadcasting Combined
Source: Company reporting, Jackdaw Research Analysis
Jan Dawson Chief Analyst (408) 744-6244 [email protected] @jandawson
JACKDAW RESEARCH TV REPORT Q2 2015
SEPTEMBER 2015