With a reported 20 percent drop in automotive television advertising, many TV stations are in peril.

Sinclair Broadcasting Group, Inc. one of the largest U.S. broadcast companies, owns or services 58 television stations in 35 U.S. markets that represent 22 percent of the U.S. TV audience. Company executives reported to the Securities and Exchange Commission that they might consider filing for bankruptcy protection if Sinclair is unable to pay its $488.5 million in debt coming due soon. Heavily dependent on automotive advertisers for revenue, Sinclair realized a net loss of $85.7 million in Q1 2009, as compared with a $15 million profit Q1 2008.  Its automotive advertising dropped from an historic 25 percent of ad revenue to a current 14 percent.
 
Bloomberg.com studied the issue extensively, reporting local TV station auto ad revenue plunges as low as 52 percent in Q1 2009. The price of TV commercials has tumbled as a result.  Across the U.S. a 30-second TV commercial has dropped about 20 percent. This has made TV advertising affordable to some new advertisers, such as mortgage brokers, pawn shops,  and landscapers.

“A lot of local retailers, like the portrait shop or the pet store, haven’t advertised on TV before because they think they can’t afford it,” said Robert Prather, president of Atlanta-based Gray Television, Inc, in the Bloomberg article.  “We’re out just beating bushes that we should have been [beating] a long time ago.”

TV group Nexstar, suffering a 40 percent first-quarter drop in auto advertising, has sold airtime to pawn shops, plastic surgeons and mortgage businesses in the Northeast and to ranches in the West. Nexstar operates or provides services to 63 stations in various U.S. states. 

The problem, of course, is that these smaller advertisers, paying lower-than-usual prices for their TV spots, are not going to make up for the lost auto advertising anytime soon, if ever. “The big issue is that it takes 10 or 12 small [advertisers] to make up for some of the big car dealers we’ve had in the past,” Robert Prather told Bloomberg.com. That would seem to be the crux of the problem ahead for broadcast television. 

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