Disney’s ABC broadcasting network has a significant reliance on advertising income, despite of the fact that it is the only major network that does not carry NFL programming. It should be noted that sports programming accounts for more than one-third of advertising income for the major broadcasting networks. Of late, advertisers have been spending more on online and social platforms, thereby reducing television’s share in overall spending. While this has impacted media companies in the past few quarters, broadcasting networks have rather done well with high growth in the scatter market ad pricing.   We expect ABC to post steady growth in advertising in the near term, driven by upcoming events that will impact the overall ad marketplace and garner higher ad pricing for ABC. Ad spending usually follows uneven trends, driven by factors such as sports and political events. Hence, this will turn in favor of broadcasting networks in the near term due to the Presidential election and the 2016 Olympics. This latter event will primarily benefit NBC, as it has has telecast rights for the Olympics through 2032. Regarding the former, 2016 election ad spending on television is expected to grow 16% to $4.4 billion, as compared to the 2012 elections, according to a research by Kantar Media.   And most of the election ad spending on television goes to broadcasting networks and ABC will surely benefit from its proportional share. The figure below highlights the changes in ABC’s revenue and EBITDA over the next three years, according to our estimates.

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