A NATPE panel offered predictions on the future of retransmission consent at stations. Deb McDermott of Young Broadcasting said that she was not opposed to sharing the retrans revenue with the networks "as long as it is the right division of revenue — as long as they don't get greedy." And Nexstar’s Perry Sook suggested that even sending half of the revenue to the networks is not unreasonable.
Sook: Stations Could Get $2 Per Sub Retrans
There is still plenty of upside in retransmission consent, even though the broadcast networks are demanding big shares of the revenue, according a panel of top TV station group executives at NATPE.
Stations could eventually receive as much as $2 per sub per month from cable and satellite operators for granting them the right to carry their signals, said Nexstar Broadcasting CEO Perry Sook.
“If you look at the viewership of broadcast television stations in an MVPD home, they collectively get 40% of the viewership, and as of last year we capture 5% of the revenue. There is a huge inequality in that …. But I suspect the gap will close over time.”
A network-affiliated TV station is like a regional cable sports network, which gets as much as $3.50 in programming fees, he said. But, he added, a station can’t expect to do quite as well as that since it doesn’t give the operators advertising time as the cable networks do.
Paul Karpowicz, president of Meredith Local Media Group, agreed that $2 was a possibility. “If you look at the viewership of our stations versus some of the cable channels and you look at what they are getting paid … you say why not, why wouldn’t we?”
Deb McDermott, president of Young Broadcasting, said that she was not opposed to sharing the retrans revenue with the networks “as long as it is the right division of revenue — as long as they don’t get greedy.”
Sook suggested that even sending half of the revenue to the networks in not unreasonable.
“If I came to anybody in the room and said, ‘Listen, I have a incremental revenue stream at a 50% margin, are you interested?’ I think we would all say where do I sign?”
Sook said that NBC’s proposed “proxy” plan, under which it would negotiate with operators on the affiliates’ behalf and share the proceeds, may be the best way to go on retrans. “I think that can get us to $2 faster than we can under our own power negotiating MSO by MSO, market by market.”
With the bulk of revenue still coming from advertising, the broadcasters all were looking for the U.S. economy to pick up some stream, but they conceded such macroeconomics were beyond their control.
What they felt they could do to improve their prospects was to bring in the best possible managerial, sales and creative people and give them the best possible tools and training, especially as stations try to exploit new media.
“My concern is not monumental, earth-shattering issues,” said Vince Sadusky, CEO of LIN Media. “It’s really around finding terrific, creative people who understand how digital works and are really curious about digital.”
McDermott and Brian Lawlor, SVP of television for E.W. Scripps, put it in terms of leadership. “We need great leaders — leaders who are not afraid to take risks, who are willing to challenge the way we have done business for a long time and who aspire to make our communities better,” said Lawlor.
Coming out of the recession, McDermott said TV stations worked hard to take costs out of the business. “We have automated everything we can automate … [and] we have right-sized our companies as we went through the difficult time.
“Now we need to step forward and really pursue how will be better at what we are doing. How can we be entrepreneurial? How can we be innovative?”
Another challenge that broadcasters face as they try to exploit new media is the lack of an accurate way of measuring usage, said Lawlor. “We’ve got to know who’s consuming, where they are consuming and how long they are consuming.”
All five broadcasters on the panel were, not surprisingly, optimistic about the broadcasting business, noting the relatively new and growing retrans and new media revenue streams.
“Our company and a lot of these other companies have had their best cash flow ever in 2010 and will record their best odd-year cash ever in 2011,” said Sadusky.
But they also conceded that it’s been difficult to sell Wall Street and other investors on the business’ positive prospects.
“It’s the fear of the future and the fear of the unknown,” said Sook. “As people are evaluating us, they are asking where we are going to be in five years.”
Sadusky said that TV broadcasting’s problem is the “lack of scale.” Investors are still skittish about putting their money into anytime other than large, blue-chip companies, he said.
Sadusky and Sook agreed that another around of consolidation would help in the financial markets.
But Karpowicz was doubtful Congress or the FCC would relax regulations and permit that round. “I don’t see them opening their arms and saying, ‘Go ahead guys, you can get as many TV stations as you want in a market.’ But the reality is, we should.”