SNL Kagan researchers and broadcasters at the SNL Kagan conference in New York agreed that retrans revenue — projected at $6.3 billion this year and $7.2 billion next year — will continue to grow at least through 2021.
According to the latest research from SNL Kagan, TV station groups with network O&Os or affiliates are averaging more than $1 per pay-TV subscriber per month in retransmission consent fees. Sinclair, for instance, is getting $1.39; Tegna (formerly Gannett), $1.30; and CBS, $1.22.
But those fees could go much higher, said a couple of speakers at the SNL Kagan TV and Radio Finance Summit Thursday in New York. Randy Bongarten, CEO of Bonten Media Group, said he sees a day in the not-too-distant future when cable and satellite broadcasters pay “$4, $5, $6” for the privilege of carrying broadcast signals.
That would be in line with the upward trajectory retrans fees have been on for the last six years, back to when stations “weren’t getting anything,” he said.
“The good news is we have a very valuable product, and the negotiations with the MVPDs are basically very simple,” Bongarten said. “How many customers are they going to lose if they don’t have us? Its no more complicated than that.”
Brian Brady, CEO of Northwest Broadcasting, agreed that local broadcasters could soon see more retrans cash. He believes station groups are in the position to command $2 in the next negotiation cycle and $3 in the one after that.
“I think the rates are going to continue to go up,” he said.
The optimism of Bongarten and Brady jibes with the latest figures from SNL Kagan, which paints a brighter picture of retrans growth than it has before. The research firm projects retrans revenue of $6.3 billion this year, $7.2 billion in 2016 and continued steady growth for as far as it can see — 2021 — when revenue is expected to hit $10.3 billion.
That’s not to say it will be easy, Brady said. “It’s going to be a struggle” for affiliates to get what they want as the pay TV business continues to grow in strength with consolidations, such as AT&T’s purchase of DirecTV.
“Smaller companies like ours have to be determined, and have to go toe-to-toe with them,” he said. “Their business model is predicated on growing revenue per subscriber,” he says. “They can do that in two ways – either charge subscribers more or pay us less money. And they want to pay us less.”
Several broadcasters at the conference made the point that they are still not getting as much as they deserve — that their share of the total that cable and satellite operators pay for programming is not commensurate with the audiences they deliver.
Other SNL Kagan figures support their contention. The broadcasters’ 2015 retransmission consent take amounts to only 12.5% of the $43.9 billion that cable and satellite operators will pay out to cable networks during the year. In 2016, retrans will account for 13.1% of $47.6 billion.
“We are pleased but not satisfied,” said Kevin Latek, Gray Television’s SVP of business affairs. “We should be compensated for the ratings we’re delivering,”
Media General CEO Vincent Sadusky agreed, comparing affiliates’ diverse, original programming lineups to the succession of off-network shows on major cable networks like USA. “Our value proposition is very good and we have a long way to go to close that gap.”