NEW YORK – An uptick in auto sales helped to influence Moody’s Investors Service’s decision to improve its industry sector outlook for the U.S. Broadcast TV sector to ‘positive’ from ‘stable’.
Forecasting growth in the mid teens for 2010, Moody’s said Wednesday that it expects broadcasters will benefit from the recovery in auto sales, which it says are “likely to have a disproportionate impact on TV advertising on the upside as it did during the downturn”. “Broad based improvement” in advertising across most categories, plus the potential for “epic” political advertising revenue, also factored in to its decision.
Moody’s said that a portion of the cost cuts initiated during the downturn represent a permanent reduction in fixed costs, so the majority of the revenue lift will likely fall through to EBITDA, with as much as 90% of new ad-sale proceeds converting to EBITDA.
Looking ahead, Moody’s predicted that the outlook will likely revert to ‘stable’ as revenues flatten in 2011, and due to the projected cyclical rebound of both auto and core advertising subsides.
