Speaking at separate times at a Goldman Sachs media conference this week, Time Warner CEO Jeff Bewkes and CBS CEO Les Moonves asserted that they deserved bigger shares of the $30 billion that cable and satellite operators pay out to programmers each year. Bewkes would like to see the money concentrated among the top 40 networks; Moonves, among the top four. “If you are really paying for eyeballs and ESPN is getting $5 and we are watched by four times as many people," Moonves asked, "what do you think?... We are entitled to ask for more and we are starting to get more.”
Bewkes, Moonves: Redo Carriage Fees
Time Warner CEO Jeff Bewkes and CBS CEO Leslie Moonves sat for one-on-one interviews at the Goldman Sachs Communacopia Conference in New York yesterday and had interesting things to say about carriage fees — or retransmission consent fees as they are known in broadcasting circles.
Bewkes sounded like a bona fide broadcaster during his turn.
What he said, in essence, was that cable and satellite operators have to stop pitching nickels and dimes at every dinky network that comes along and start paying serious dough to the top 40 networks that people actually watch.
Bewkes was putting the operators on notice that Time Warner’s top 40 networks — CNN, TBS, TNT and others — would be demanding a larger share of the $30 billion operators shell out each year to programmers.
“We have a higher proportion of channels in the top 40, and in the top 10, of anybody and our wholesale charge is relatively modest, which is why we’re going to correct it,” he said.
“What you’re going to see is basically a reallocation of the $7 billion of money going to failing channels into successful channels. That will probably be good for consumers because then the money can go into the highly watched programming.”
For the past several years, broadcasters have been saying the same thing, except that the money should be diverted to the top four networks (ABC, CBS, NBC and Fox) rather than the top 40.
According to SNL Kagan, operators are currently paying $1.21 per sub per month for TNT and nearly 60 cents each for TBS and CNN. If, in Bewkes’ words, those fees are “relatively modest,” than I say the 40 cents or so that they are paying for broadcast signals is dirt cheap.
Moonves would agree. CBS expects to clear at least $250 million in retrans fees from its O&Os this year. But that’s just for starters, he said during his Communacopia session.
“If you are really paying for eyeballs and ESPN is getting $5 and we are watched by four times as many people…, what do you think? $20 a sub? I know that is an absurd number, but as the marketplace gets down to paying for eyeballs, we are entitled to ask for more and we are starting to get more.
“When people talk of smaller packages, they have to have us. We are the No. 1 network, we have the NFL, we have the [NCAA] basketball tournament, we have Big Bang Theory, we have 60 Minutes…. You have to have us in any package.
“I would venture to say that the four networks are the most have-to-have products. So, the sky really should be the limit.”
Mr. Bewkes, please note: That’s four networks, not 40.
Moonves said he expects the CBS retrans pot to grow to more than $1 billion by 2016 or 2017, but that also includes the share of affiliates’ retrans revenue that CBS is now getting. (In its 2Q conference call, CBS told analysts that it will take in more than $100 million in so-called reverse comp in 2013.)
It’s nice to know that CBS is flush with straight-to-the-bottom-line retrans cash. CBS deserves it. Moonves, along with a few station group execs, aggressively went after retrans in the mid-2000s and created the revenue stream for all broadcasters.
What must be discouraging for all the affiliates, however, is seeing none of the windfall going into programming. To boost the stock price, CBS is using its excess cash to fatten dividends and buy back stock.
The strategy is apparently working. CBS stock is now trading at its highest level since splitting off from Viacom in 2006. It was up to $38.04 at 2:37 p.m. today.
But CBS could have invested the money into programming, particularly sports. In its NCAA hoops renewal in 2010, it gave up the Final Four every other year to Turner and just this month it walked away from baseball, allowing Bewkes’s Turner and Fox to renew their deals.
CBS has an array of great sports. In addition to the NFL and a piece of March Madness, it also has SEC football, the Masters and other major PGA events and U.S. Open tennis. According to Moonves, all are profitable — even football — based solely on advertising. In other words, no retrans or reverse comp dollars are being used to subsidize the sports CBS now has.
I guess you have to keep Wall St. happy, especially when your job and $70-million-a-year salary depend on it, but it might have been nice for the affiliates had Moonves dipped into the dividend and stock buyback fund to buy the rights to broadcast the World Series again.
It would also have been nice for CBS’s long-term prospects. Moonves likes to boast about how well CBS primetime is doing, but he’s been around long enough to know it won’t last. When prime is down, sports can carry a network.
Just ask the folks at NBC.