NEW YORK: Ad spending has stabilized this quarter, Media General executives say. The decimated automotive category is showing signs of modest recovery, Media General’s president and CEO Marshall Morton said, providing guidance for the current quarter at the UBS Global Media & Communications Conference in New York today.
“Advertiser spending patterns have firmed in the fourth quarter,” he said. “On the television side, higher automotive spending is mostly coming from the manufacturers, although we’ve seen an uptick in local dealer advertising in some markets.”
Morton said total 4Q revenues for the Richmond, Va., media group would likely be down 14 to 16 percent from last year, “which compares sequentially with an 18 percent decrease in the third quarter of this year.” He cited a decline in political ad revenues for contributing to the overall slide. Political contributed $23 million during 4Q08 and $7.5 million for 3Q08.
“The improvement we’ve seen is primarily in the automotive and retail categories,” he said.
Automotive also showed signs of renewed life on Media General’s newspaper side, with auto classifieds declining more slowly than employment and real estate ads.
The company responded to reduced revenues by cutting operating costs by 19 percent in the first nine months of the year. Morton said he expected the percentage reduction to hold for the full year. Throughout 2009, Media General (NYSE: MEG) eliminated salary increases, suspended the company’s 401k match, imposed 15 unpaid furlough days, froze retirement benefits, suspended the company dividend and cut jobs.
“During the difficult operating environment of the past three years, we’ve reduced our debt by nearly $200 million, or 22 percent, using free cash flow and proceeds from asset sales,” Morton said. “At the end of the third quarter, our debt was $706 million. We expect to reduce debt an additional $6 million to $10 million by the end of the year.”
Capital spending is expected to come in at $20 million for 2009, and around $29 million for 2010.
Morton said tough economic times have “inspired us to stretch in new directions and with great urgency. We’ve placed tremendous emphasis on strengthening our sales culture to drive new revenues, especially for online and mobile platforms.”
Mobile versions of Media General’s local Web sites get about 2 million page views a month from around 400,000 unique visitors, said Reid Ashe, executive vice president and chief operating officer. Digital revenues are expected to be up 8 percent this year to $42 million, accounting for 6 percent of total revenues.
Local direct-billed revenue is Media General’s largest and fastest growing category, up nearly 30 percent this year. Revenues from Yahoo! will total $7 million, with two-thirds of that from HotJobs.com ads. More than 8 million visitors have been directed to Media General Web sites through headlines on Yahoo!
Looking ahead, Media General’s chief financial officer, John Schauss said, “While visibility for 2010 is limited, our view at this point is that total revenues will be flat to slightly up. We expect a low-to-mid single digit increase in broadcast revenues. Key drivers will be political and Olympics revenues, stronger transactional business, and growth in cable retransmission fees.”
MEG expects 2010 political revenues of between $32 million and $34 million. The Winter Olympics is expected to generate $7 million for MEG’s eight NBC affiliates. Retransmission fees will come in between $18 million and $19 million compared to $16 million this year.
No salary increases are expected for the coming year, though no more furlough days are planned. The board will revisit issuing a dividend “at the appropriate time,” Schauss said.
Morton said the company had reached “equilibrium between revenues and expenses. We’re in a strong position to benefit from a recovery.”
More on MEG:
October 21, 2009: “Media General Reports Loss on $84 Million Impairment”
September 17, 2009: “Media General Adds Furlough Days”
July 22, 2009: “Media General TV Revenues Drop 21 Percent”
July 2, 2009: “Gabelli Increases Stake in Media General”
April 17, 2009: “Media General TV Station Profit Plunges”
March 13, 2009: “Media General to Shutter 30-year-old Washington Bureau”
January 29, 2009: “Media General TV Stations Post Profit”
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