Continued Growth Seen For Retrans Revenue

Look for retransmission consent revenues to grow faster than advertising for years to come, Carl Salas, VP-senior analyst at Moody’s Inc., told the SNL Kagan TV and Radio Finance Summit today. He’s forecasting that retrans will total $6 billion by 2020. That will boost the new revenue stream to around 25% of total TV station revenues, up from only 2% in 2005 and 11% in the current year.

One factor driving revenue growth is the move by the major networks to claim a share of retrans. That wasn’t initially well received by many station owners, but Steve Pruett, CEO of Communications Corp. of America, said the price demanded by Fox achieved its goal of getting the affiliates to go after the money in their negotiations with MVPDs. Pruett is also chairman of the Fox Affiliate Television Stations Board of Governors, and he says the network is living up to the commitments it made to share in retrans. “They are now treating us better in terms of exclusivity,” he noted, and added that the Fox Network’s relationship with its affiliates is getting better.

With highly-rated stations in its markets, SJL Broadcast Management Corp. President-CEO Brian Lilly said his company tries to have good relationships with its MVPDs, although it isn’t always easy, and just wants to be paid for what it is delivering. “We’ve done a good job of getting cash. We don’t think it’s anywhere near the value of what we are delivering, but that is a process and we’re working on that process,” Lilly said.

“On the flip-side, I should say we’re actually happy to share that with our network friends. I think they do a good job and I think that relationship is a lot better than maybe it historically was,” Lilly said of having to share retrans with the networks. “They’ve always valued and, I think, seen the value of the relationship and what we can deliver as local affiliates. But certainly it solidifies the relationship when we’re sending them healthy checks every month,” he noted.

As chief of the FCC’s Media Bureau, William Lake stayed away from the financial aspects of retrans. He did note one development this year in that arena. For the first time, two of the complaints filed with the commission were from TV stations accusing an MVPD of “bad faith” in retrans negotiations. In the past all such complaints had come from the MVPD side of the bargaining table. But despite such complaints, the government official noted that the overwhelming majority of retrans contracts are concluded without any blackout of signal delivery to consumers.

Lake also said there appeared to be a trend toward longer retrans contracts, which he suggested might indicate a move toward equilibrium in the demands by broadcasters and what pay TV operators are willing to pay for their programming.

“We hear a lot of people saying I just want to get what ESPN has, because I have better ratings than they do,” Lake noted of the FCC’s current retrans proceeding. So he wants to know, “whether in fact what drives prices in these deals is ratings or must-have.” He noted that some preferred content might be replaceable in the view of the consumer, but “if I’m a sports fan and I lose my favorite team I may be unlikely to subscribe to any MVP that can’t give me that team.”

As for where pricing is now, Pruett said it appears that the industry will achieve the benchmark of $1 per subscriber monthly in the next retrans negotiation cycle, which is $4 for each MVPD to have the Big Four networks. Thus, it will continue to be a “heated, vehement battle.”

Even so, the MVPDs need the broadcasters’ content, so Moody’s Salas said he expects to see double-digit percentage growth in retrans revenues continue for the next few years.