The NFL’s TV rights negotiations are about to HEAT UP. Standing in the way is the collective bargaining agreement (CBA) between the league and the players, which the NFL reportedly hopes to wrap in the next few weeks (despite the CBA running through the 2020 season, or another 18 months). According to today’s WSJ, the NFL wants to lock down a new deal ASAP, as ratings were strong this year on the back of young new stars – plus the league wants to get in front of any potential economic downturn or the 2020 Presidential election, which could dampen ratings and hurt its negotiating leverage (i.e. ratings fell 8% in 2016). From the studios’ perspective, we think getting a deal done sooner rather than later would remove an overhang for the stocks – as some investors still question if a meaningful portion of the rights will go to digital players (we strongly disagree).
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MDP had come under significant pressure over the past 1-2 months on news that it may get dropped out of State Street’s SPDR S&P Dividend ETF, which caused shorts to pile in. As a result, the stock was down 16% from 12/16 into the 2/6 print (vs. the S&P +4%), but recovered 13% on 2/6 (vs. the S&P +0.3%) after reporting a substantial 10% EBITDA beat. Although MDP didn’t raise its F’20 guide ($640-675MM), the improvement in the National (magazines) business was enough to instill some much-needed confidence. While we did raise our F’20 modestly (1% to $661MM, vs. pre-earning Consensus’ $652MM), we would like to see MDP rope together a few good quarters before we get more constructive. We maintain our Peer Perform and $35 Price Target.
The hottest names this week were ETM (866 bps better than the S&P), MDP (652 bps), NFLX (375 bps), SSP (299 bps), and GTN (199 bps).
Total revenue beat at $810. 5MM vs. our $795MM & Consensus’ $793MM. The beat was in National (Magazines) where advertising came in nicely ahead for both print and digital. Local (Broadcast) was just a touch light with retrans coming in a bit lower than our expected step-up post the DISH renewal. However, political was stronger ($4.4MM vs. our $2.1MM), which likely displaced some non-political (+2% vs. our +5%).
We had a chance to tour ETM’s Studio down in TriBeca with a group of investors, followed by meetings with management (CEO CEO David Field, CFO Rich Schmaeling, Chief Digital Officer J.D. Crowley and NY Regional President, Susan Larkin). Our biggest takeaway is how the narrative for the company has finally taken a turn. We didn’t get a single question about USTN or legacy CBS Radio stations. Rather, investors were most interested in ETM’s multi-platform audio strategy – i.e. how ETM plans on integrating its newly acquired podcast platform with its core business, radio.com and its analytics group – along with capital allocation (some thought ETM should be buying back more stock) and the 2020 political opportunity.
The hottest names this week were BBGI (893 bps better than the S&P), CABO (628 bps), OUT (521 bps), NFLX (455 bps), and LAMR (272 bps).
The hottest names this week were GTN (797 bps better than the S&P), SSP (753 bps), TGNA (695 bps), SBGI (623 bps), and NXST (140 bps).
As many of you have already heard, Marci has taken the plunge and left Wall Street after an exemplary 17 years to join Comcast as Senior Vice President, Investor Relations. We wish her the absolute best of luck in this new chapter of her career.
As we have done in every even-numbered year since 2002 (which is exactly when Marci entered the sell-side at the young age of 17), we are digging into the upcoming political cycle to determine which geographies are likely to have the most hotly contested races; and which of our broadcast/O&O companies have the highest exposure to such hotly contested races.
The hottest names this week were ETM (627 bps better than the S&P), CCO (597 bps), BBGI (589 bps), LAMR (326 bps), and GTN (231 bps).
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