Stations’ retransmission consent revenues have been rising steadily for the past decade and for much of that time, network affiliates retained more than half, with the rest going to the networks. But over the past several years, Big 4 networks have demanded — and received — an increasingly bigger chunk. Now, Wells Fargo analyst Marci Ryvicker is predicting the networks’ take could hit 65% of stations’ $12 billion in retrans money by 2019.
Retransmission revenues could hit nearly $12 billion by 2019 and Big 4 networks can expect to take up to 65% of that, according to Marci Ryvicker, managing director of equity research at Wells Fargo.
Retrans revenues have been rising steadily for the past decade and for much of that time, network affiliates retained more than half, with the rest going to the networks.
But over the past several years, Big 4 networks have demanded — and received — an increasingly bigger chunk. The split has been roughly 50-50 until recently. In just the past three to four years, that’s changed.
Ryvicker, a leading broadcast-cable analyst, told participants in today’s TVNewsCheck webinar Forecast 2015: Spot, Retrans, Digital that she used CBS projections and other selected data points to arrive at that number. (To listen to the webinar and download the PowerPoint presentation, click here.)
“If CBS is expecting to get $2 billion of retrans — half from their stations and half from reverse compensation — by 2020, $1.30 [per MVPD subscriber] is what station groups will be paying,” Ryvicker said.
Wells Fargo projects a 21% compounded annual growth rate for all retrans revenues for 2015-19. Of the two key components of those revenues — network O&O retrans and affiliate retrans — affiliate retrans will grow the most, nearly doubling.
The flip side, at least where affiliates are concerned, is that reverse compensation to top networks looks to increase from about $1.5 billion in 2015 to just under $3.5 billion in 2019.
“My view over time is that 65% of Big 4 retrans will go to networks,” Ryvicker said.
The retrans split issue gained high-beam visibility several years ago with Fox taking a tough stance with affiliates in a private letter that became public.
Fast forward to February of this year, when CBS boss Les Moonves projected that the network would generate $2 billion in retrans revenue by 2020.
While networks’ increasing reverse comp demands create economic challenges for broadcasters, whose overall ad revenue growth projections are at best tepid, networks face their own increasing costs, noted Bishop Cheen, independent consultant and analyst for SNL/Kagan.
Noting that Fox, CBS and ABC face ever increasing costs for sports programming, particularly the NFL, Cheen said: “The mantra from the network is I cannot do all this heavy lifting myself, I need some help here.
“The costs of programming move in one direction, up,” he added. “I think retrans does a whole lot to help carry that extra cost burden.”