Broadcast Radio and Television Industry Navigates Change Amid Streaming Growth
The Zacks Broadcast Radio and Television industry is facing the challenge of increasing cord-cutting while experiencing a significant rise in streaming demand. Companies such as Netflix NFLX, Gray Media GTN, Fox Corporation FOXA, and TEGNA TGNA are capitalizing on a substantial increase in digital content consumption. These firms thrive by offering a mix of original, regional, and short-form content designed for smaller screens like smartphones and tablets. With advancements in Internet speed and wider access, industry players are benefiting. As advertising revenues grow at a modest pace, strategies focused on protecting profits, managing cash, and integrating advanced technologies are becoming crucial for these companies, facilitating top-line growth in the near future.
Industry Overview
The Zacks Broadcast Radio and Television industry includes companies producing entertainment, sports, news, non-fiction, and musical content across television, radio, and digital platforms. Revenue sources consist of selling television and radio programs, advertising slots, and subscriptions. As technological advancements arise and demand for virtual reality and Internet radio grows, industry players are boosting investments in research, development, and marketing to stay competitive. A focus on sustaining operations alongside increasing flexibility is anticipated to accelerate a shift toward a variable cost model, helping reduce fixed costs and increasing adaptability amidst changing market conditions.
Four Key Industry Trends to Monitor
Changing Consumer Preferences Drive Content Diversification: To navigate the shifting landscape, companies are broadening their content offerings for both traditional television and over-the-top (OTT) services. Streaming options across multiple platforms enable them to reach a global audience, enhance the international user base, and attract advertisers, ultimately leading to increased ad revenues. Tools that assist advertisers in measuring returns on investment and improving use cases will benefit industry players. Major sports leagues and events, including the NFL, NHL, Olympics, European Games, EPL, and elections, play crucial roles in ad revenue generation.
Surge in Digital Viewing Boosts Content Demand: Many companies are either launching their own OTT services or acquiring existing platforms, utilizing user data to tailor their offerings. The increase in digital viewership has made consumer data easily accessible, allowing businesses to apply artificial intelligence (AI) and machine learning techniques to develop or procure targeted content. This strategy not only boosts user engagement but also enables companies to strategically raise service prices without risking subscriber loss.
Macroeconomic Factors Challenge Production and Ad Spending: Advertising remains a vital revenue stream for the Broadcast Radio and Television industry. However, high inflation, rising interest rates, and elevated capital costs are challenging industry players. Additionally, a strong U.S. dollar and the potential for a recession have led advertisers to tighten their budgets, negatively impacting top-line growth. Intense competition for advertising dollars from technology and social media firms further complicates the industry’s growth prospects.
Impact of Low-Cost Bundling on Revenues: The rise in cord-cutting has driven companies to introduce “skinny bundles”—Internet-based services that offer fewer channels at lower prices than traditional subscriptions. This trend reflects shifting consumer viewing habits, as increased Internet penetration and innovation in mobile, video, and wireless technologies have enhanced small-screen viewing experiences. While these budget-friendly services help retain user interest, they may dampen overall revenue growth for industry players.
Zacks Industry Rank Signals Positive Outlook
The Zacks Broadcast Radio and Television industry falls within the broader Zacks Consumer Discretionary sector, currently holding a Zacks Industry Rank of #41, placing it in the top 17% of over 250 Zacks industries.
This rank reflects a cautious yet positive outlook, supported by an aggregate earnings projection for its constituent companies. Analyst revisions suggest optimism regarding this group’s growth potential, with earnings estimates for 2025 increasing by 9.3% since April 30, 2024.
Before highlighting specific stocks that may be worth considering for your investment portfolio, let’s examine the industry’s recent market performance and valuation insights.
Industry Performance Compared to Sector and S&P 500
Over the past year, the Zacks Broadcast Radio and Television industry has outperformed both the broader Zacks Consumer Discretionary sector and the S&P 500 Index. The industry gained 54.4%, significantly outpacing the S&P 500’s growth of 2% and the sector’s increase of 1.5%.
One-Year Price Performance
Current Valuation of the Industry
Currently, the industry is trading at a trailing 12-month Enterprise Value/ earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio of 15.35X. In comparison, the S&P 500 stands at 15.19X and the sector at 9.47X.
Historically, the industry’s EV/EBITDA ratio has ranged from a high of 21.6X to a low of 4.74X over the past five years, with a median of 9.99X, as illustrated in the following chart.
EV/EBITDA Ratio (TTM)
Top Broadcast Stocks to Consider for 2025 Growth
4 Broadcast Radio and Television Stocks to Buy
Fox Corporation: As a Zacks Rank #1 (Strong Buy) stock, Fox Corporation stands out as a promising investment for 2025. In the second quarter of FY2025, the company achieved a record EBITDA of $781 million, more than doubling year-over-year due to a 20% increase in revenue. Fox’s focused portfolio of high-demand sports and news content contributed to a 6% growth in affiliate revenue, while subscriber declines have positively shifted for two consecutive quarters.
Fox News leads the market with a record audience share, capturing over 60% of primetime cable news viewership and attracting more than 100 new major national advertisers. The company plans to launch a direct-to-consumer service, aimed at cord-cutters without incurring significant new rights costs, which could drive further growth. Tubi is following suit with a 31% increase in ad revenue and upcoming Super Bowl exposure. Coupled with efficient capital allocation returning $7.9 billion to shareholders, Fox represents significant value in the rapidly changing media landscape. The Zacks Consensus Estimate for fiscal 2025 earnings has risen 0.9% to $4.42 per share within the past month, though FOXA shares have decreased by 0.8% year to date.
Price and Consensus: FOXA
TEGNA: Another Zacks Rank #1 company, TEGNA is firmly on an impressive transformation path through modernization and resource sharing. The company anticipates annualized savings of $90-$100 million by the end of the year. With $693 million in cash and a low 2.7x leverage, TEGNA is strategically positioned for both shareholder returns and potential acquisitions amid expected FCC deregulation.
The company’s digital transformation is showing results, especially with Premion’s expanded Connected TV capabilities and new partnerships in the sports domain contributing to revenue diversification. Noteworthy broadcast agreements, like the expanded partnership with the Indiana Fever, highlight TEGNA’s potential to monetize live sports content effectively. Established subscription revenue, new strategic leadership hires, and a strong political advertising cycle further enhance the company’s appeal. The Zacks Consensus Estimate for 2025 earnings has remained steady at $1.86 per share, although TGNA shares have declined 14.1% year to date.
Price and Consensus: TGNA
Netflix: Following its first-quarter 2025 earnings report, Netflix emerges as a strong investment option. The streaming giant reported revenues of $10.54 billion, marking a 12.5% increase year-over-year, along with a remarkable 54.8% rise in earnings per share to $6.61. Netflix is steadily growing its subscriber base, and over 55% of new customers in eligible markets come through its advertising subscription tier.
This Zacks Rank #2 (Buy) company has set a goal to double its revenues by 2030 and achieve a $1 trillion market capitalization, fueled by its diverse content strategy that includes international programming, live events, and gaming. With operating margins expanding to 31.7% and free cash flow of $2.66 billion, Netflix illustrates solid financial management while ensuring growth. Its anticipated 2025 content lineup, including highly popular series like Squid Game, Wednesday, and Stranger Things, places the company well in the competitive streaming sector. The Zacks Consensus Estimate for 2025 earnings increased by 1% to $24.82 per share in the past month, and NFLX shares have risen 16.7% year to date.
Price and Consensus: NFLX
Gray Media: As a Zacks Rank #2 stock, Gray Media’s strategic initiatives are on track for substantial shareholder returns. The company has advanced its local sports portfolio, partnering with teams like the Atlanta Braves, Minnesota Twins, and St. Louis Cardinals, which will provide viewers with free over-the-air games across its 113-market footprint. Beyond sports, Gray has effectively shown financial discipline by reducing its debt by $520 million in 2024 while maintaining strong cash flow.
Gray’s Assembly Atlanta studios continue to gain traction with popular shows such as Grosse Pointe Garden Society and Beyond the Gates. The company is also expanding its digital distribution through Local News Live. Regulatory changes anticipated from FCC ownership rule reforms and decreased network affiliation costs, alongside innovative collaborations with groups like the Military Basketball Association and Major League Pickleball, position Gray Media favorably in the market. The Zacks Consensus Estimate for Gray Media’s 2025 loss remains unchanged at 27 cents per share over the last month, while shares have increased 3.5% year to date.
Price and Consensus: GTN
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Netflix, Inc. (NFLX): Free Stock Analysis report
Fox Corporation (FOXA): Free Stock Analysis report
Gray Media Inc. (GTN): Free Stock Analysis report
TEGNA Inc. (TGNA): Free Stock Analysis report
This article originally published on Zacks Investment Research (zacks.com).
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