Broadcast Radio and Television industry has been suffering from increased cord-cutting despite a spurt in demand for streaming content. However, industry participants like TEGNA ( TGNA Quick Quote TGNA - Free Report) , fuboTV ( FUBO Quick Quote FUBO - Free Report) and AMC Networks ( AMCX Quick Quote AMCX - Free Report) are benefiting from a massive spike in digital content consumption. Diversified content offerings, which are original, regional, short and suitable for small screens (smartphones and tablets); improved Internet speed and penetration and technological advancement benefit industry participants. As monetization and revenues, in terms of ad spending, continue to be subdued, profit protection and cash management, with greater technology integration, have gained significance and are expected to help these companies drive the top line in the near term. Industry Description
The Zacks Broadcast Radio and Television industry comprises companies offering entertainment, sports, news, non-fiction and musical content over television, radio and digital media platforms. These companies generate revenues from selling television and radio programs, advertising slots and subscriptions. These industry players are increasing their spending on research and development and sales and marketing to stay afloat in an era of technological advancements, with increased demand for VR and Internet Radio. The industry is likely to be focused on sustenance at current levels, along with a renewed emphasis on flexibility, which would accelerate the move to a variable cost model and reduce fixed costs.
4 Broadcast Radio and Television Industry Trends to Watch
To adapt to the changes in the industry, companies are coming up with varied content for over-the-top (OTT) services in addition to linear TV. The availability of streaming services on a wide range of platforms is helping these services reach a global audience. It is helping them expand their international user base, attracting advertisers to their platforms and boosting ad revenues. The use of services to help advertisers measure their ROI and enhance their use cases is expected to benefit industry participants. Major leagues and events such as the NFL, NHL, Olympics, European Games, EPL and elections also attract significant ad revenues. Shift in Consumer Preference a Key Catalyst: Many industry participants, either launching their OTT services or acquiring the same, are banking on user insights to deliver the right content. Increased digital viewing makes consumer data readily available to companies, allowing them to apply AI and machine-learning techniques to create/procure targeted content. The move not only boosts user engagement but also allows industry participants to raise the prices of their services at an appropriate time without the fear of losing subscribers. Increased Digital Viewing Aids Content Demand:
: Advertising is a significant revenue source for the Broadcast Radio and Television industry. Industry participants are bearing the brunt of persistently high inflation, rising interest rates, raised capital costs, a soaring U.S. dollar and an anticipated recession, which encouraged advertisers to trim ad budgets and are expected to impact their top-line growth in the near term. Moreover, industry players face stiff competition for ad dollars from tech and social media companies. This has been a significant impediment to industry participants’ growth. Uncertain Macro-Economic Scenario Hurts Production and Ad Demand Increased cord-cutting has forced industry participants to offer “skinny bundles.” These services, available through the Internet, often contain fewer channels than a traditional subscription and, therefore, are cheaper. The move is in line with changing consumer viewing dynamics, as growth in Internet penetration and advancements in mobile, video and wireless technologies have boosted small-screen viewing. The alternative services are expected to keep users glued to their platforms, increasing the need to produce additional content. However, the low-priced skinny bundles are likely to dampen the top line for industry players. Low-Priced Skinny Bundles Affect Revenues: Zacks Industry Rank Indicates Bright Prospects
The Zacks Broadcast Radio and Television industry is housed within the broader Zacks
Consumer Discretionary sector. It currently carries a Zacks Industry Rank #86, which places it in the top 34% of more than 250 Zacks industries. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Before we present some stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture. Industry Beats Sector and S&P 500
The Zacks Broadcast Radio and Television industry outperformed the broader Zacks Consumer Discretionary sector and the S&P 500 Index in the past year.
The industry has gained 16.2% over this period compared with the S&P 500’s return of 16.1% and the broader sector’s rise of 7.2%. One-Year Price Performance
Industry's Current Valuation
On the basis of trailing 12-month EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization), which is a commonly used multiple for valuing Broadcast Radio and Television stocks, the industry is currently trading at 9.33X versus the S&P 500’s 13.15X and the sector’s 8.03X.
In the past five years, the industry has traded as high as 42.47X and as low as 7.21X, recording a median of 28.91X, as the chart below shows. EV/EBITDA Ratio (TTM)
3 Broadcast Radio and Television Stocks to Buy
TEGNA: This Zacks Rank #1 (Strong Buy) company is benefiting from accretive acquisitions, a consistent spike in subscription revenues and a resurgence in advertising revenues. The company enjoys a stable subscriber base and higher rates. The company operates 64 television and two radio stations in 51 U.S. markets, catering to 39% of TV households in the United States. Tegna reaches about 50 million consumers on air and about 35 million digitally each month. TEGNA plans to reprice nearly 30% of its traditional subscribers by the end of this year, which improves visibility.
TEGNA’s buyouts of local TV stations that comprise the Big Four affiliates, along with aggressive spending on political ads, are likely to aid the top line. Moreover, higher streaming consumption is driving demand for Premion, TEGNA’s OTT advertising solution. The focus on regional content is aiding subscription revenues from traditional cable, satellite operators and OTT providers. New station acquisitions also aid the expansion of the customer base.
The Zacks Consensus Estimate for 2023 earnings has moved north by 1.1% to $1.79 per share in the past 30 days. TGNA’s shares have declined 28.3% year to date.
Price and Consensus: TGNA fuboTV: This Zacks Rank #2 (Buy) company’s strengthening sports streaming offerings are expected to continue driving the top line in the near term. Strength in advertising demand on the streaming platform, along with strong attachment rates on value-added services, such as cloud DVR storage and the ability to stream on multiple devices, is expected to drive top-line growth in the near term. The company has partnered with Super Hi-Fi, the leader in AI-powered radio services for broadcast and digital media platforms, to launch 10 fully branded FAST channel radio stations on Fubo in the United States. It is the first radio experience created from the ground up for an OTT service, with a TV-first interface and incredible music programming explicitly designed for Fubo’s audience. FuboTV has partnered with the Buffalo Sabres for the 2023-24 NHL season. The deal marks Fubo’s first pro sports marketing partnership in the Buffalo region following recent agreements with professional sports teams and conferences including the Boston Bruins (NHL), Boston Red Sox (MLB), Cleveland Guardians (MLB), Florida Panthers (NHL), Nashville Predators (NHL), Pac-12 Conference (collegiate), St. Louis Cardinals (MLB), Seattle Mariners (MLB) and Chicago Sky (WNBA). Fubo has quickly become one of the leading streaming platforms in Canada, offering consumers exclusive sports content, including English Premier League and Italy’s Serie A and Coppa Italia, expansive sports coverage through content partners like OneSoccer and live entertainment and news channels — at a fraction of the cost of cable TV. This is expected to attract both audience and sponsors for the network. The Zacks Consensus Estimate for 2023 loss has remained steady at 85 cents per share over the past 30 days. FUBO’s shares have jumped 83.3% year to date. Price and Consensus: FUBO AMC Networks: This Zacks Rank #2 company is benefiting from a rising focus on high-quality programming and strong partnerships, which in turn is driving subscriber growth and ad revenues. In addition to introducing an ad-supported version of AMC+, AMC networks has extended leadership in TV advertising through the launch of programmatic buying on the company’s linear networks which is expected to boost revenues in the near term. This fall, the company partnered with Warner Bros. Discovery to put seven previous seasons of its original series on the Max streaming service for two months as a promotional pop-up designed to raise the visibility of shows and promote sampling. Titles like A Discovery of Witches, Fear the Walking Dead, Dark Winds and Anne Rice's Interview with the Vampire consistently occupied multiple slots on Max's daily top 10 series list. This resulted in viewership and acquisition spikes for several shows on AMC+ as a result of the increased exposure. The company also secured interim agreements with SAG to complete production on the second seasons of two of its marquee shows, Anne Rice's Interview with the Vampire and The Walking Dead: Daryl Dixon. Both of these successful series are now back in production in Europe. Markedly, the stock has declined 1.9% year to date. Notably, the Zacks Consensus Estimate for the 2023 loss has remained steady at 98 cents per share over the past 30 days. Price and Consensus: AMCX