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.
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Nets’ Share Of Affils’ Retrans Fees To Hit 65%
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.
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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.”
Comments (19)
John Bagwell says:
September 4, 2014 at 7:42 pm
Here comes more blabbering and incoherent comments from Ted, who posts what he wants but then doesn’t answer the hard questions.
Wagner Pereira says:
September 4, 2014 at 9:15 pm
Of course, because either 1) He does not know the answer and only reads from the talking points given him or 2) He knows the answers will blow up his assertions. And for what it is worth, we also found out 2 weeks ago from WISH/Indianapolis that a CBS Affiliation adds $100 per TVHH to the value of a station, obviously through higher ratings than a non-affiliate, so why shouldn’t the Network get their share of the retrans dollars?
Don Thompson says:
September 4, 2014 at 10:24 pm
After Rockefeller-Thune Local Choice becomes law, the FCC has promised to give me new TV station KASH in Fort Knox, Ky., to show the NAB cashcasters that only a fool sniffs at an opportunity to turn his business into a subdivision of the U.S. Mint. Once TV stations realize that they will make far more money under Rockefeller-Thune Local Choice’s free market formula than under the government-administered morphine drip of retransmission consent, the real problem will come into focus, which is the networks’ effort, led by Air Marshal Moonves at CBS, to rob the local stations of the revenue they have rightfully won from the consumer in a competitive marketplace established by the Rockefeller-Thune reforms …. Please follow me on Twitter @TedatACA …..
P.S. The New York Post had a great story showing how NBC is using your “reverse comp” dollars
“NBC pays for Matt Lauer’s helicopter rides to work”
By Emily Smith/New York Post
NBC is so determined to keep “Today” host Matt Lauer happy after its rocky patch with the show, it’s agreed to foot the bill for helicopters to fly him to the Hamptons and back. In June, Lauer extended his lucrative $20 million-a-year deal with NBC News to remain a “Today” co-host through 2016, following speculation that he would leave the show in the wake of the storm over the brutal departure of Ann Curry in 2012. As part of the deal, NBC agreed to pay for Lauer to chopper out to the Hamptons, where he has a 40-acre horse farm in Water Mill and a nearby mansion, reportedly worth $15 million, in which he lives year-round with his wife, Annette Roque, and their children. A source told us: “NBC News chiefs want to do everything to keep Matt happy. They believe ‘Today’ has turned a corner and he is the key to its continuing success. They agreed to pay for his helicopter flights to the Hamptons and back, so he can spend more time with his family.” While NBC sources are whispering Lauer could be choppering to the Hamptons and back up to three times a week, other insiders insist his flights there are fewer. But NBC does pick up the tab. He’s been spotted hopping on flights on Liberty Helicopters, HeliFlite and Blade from the city. Lauer, who also has a Manhattan apartment, previously told Hamptons magazine he’s been spending time on the East End his whole life. He told interviewer Hoda Kotb, “I think the image that people have is that it’s all polo fields and cocktail parties. And the fact of the matter – my experience and Annette’s experience . . . is about parent-teacher conferences and Little League and music lessons.” He continued, “We have a painfully normal existence . . . We go to the local drugstore, and we walk the dog on the beach . . . and take pony-riding lessons . . . very much small-town America – it just happens to have a reputation and a name like the Hamptons.” A “Today” rep insisted, “On rare occasions, Matt will fly home, but most of the time you’ll find him stuck in traffic on the Long Island Expressway with everyone else.”
Wagner Pereira says:
September 5, 2014 at 1:06 am
As stated in the other thread that you ignored, Matt Lauer was making $25M. He took at 20% haircut to $20M a year. In return for the $5M savings, NBC gave him UP TO 3 Helicopter flights a week from the city to his home, valued at $1300 per flight or MAX of $3900 per week – over 50 weeks is $195k. So they paid $195k for a $5M savings. Big Whoop. Perhaps ACA members should also look at how to cut 20% of expenses to save customers money!!!!!…. Please follow me on Twitter @NotTedatACA
John Bagwell says:
September 5, 2014 at 7:42 am
Ted’s posts are now worse than James Ciehola’s. He really is making a fool out of himself.
Wagner Pereira says:
September 5, 2014 at 5:27 pm
There is a rumor they are actually one in the same.
Michael Ford says:
September 5, 2014 at 5:45 pm
The viewing public doesn’t want Local Choice, they want Total Choice which means no more shopping networks, no more channel bundling, no more ACA!
Wagner Pereira says:
September 5, 2014 at 10:38 pm
You do realize that shopping channels do not cost you money, they actually save you money as they PAY the MVPD to be on the system, so it costs you less?
kristin serman says:
September 14, 2014 at 10:41 pm
Actually they want total choice , and choices of where to get their network stations from, also national network feeds just the network programming, sports programming , and nightly news , and some other network programming to fill in the rest of the time slots.
I think you would get a lot of folks happy if that system is in place this system that favors broadcasters, and providers not so much anymore.
We need to move into a different system fitting the 21 Century Model and that puts the consumer first.
kendra campbell says:
September 5, 2014 at 8:18 am
The model assumes subscribers are going to accept insane increases for marginal programming with an insulting commercial glut. Pigs eventually get slaughtered.
Don Thompson says:
September 5, 2014 at 8:34 am
“Matt Lauer was making $25M. He took at 20% haircut to $20M a year.”
Would that we all had to take such a severe 20% “haircut.”
Wagner Pereira says:
September 5, 2014 at 12:26 pm
If Today constantly performs well against GMA, there is not 1 Affiliate that will be upset with NBC paying $195k a year for his transportation. On the other hand, perhaps the public is more concern at TWC making a $8.5B agreement with the LA Dodgers increasing their MVPD bill $4 a month, when multiplied by the TV HH in LA makes $195k look like pennies!!!!……Please follow me on Twitter @NotTedatACA
Dale Godfrey says:
September 5, 2014 at 10:17 am
Matt Lauer is as ‘yesterday’ as Dave Garroway.
Regina Cantu says:
September 5, 2014 at 11:30 am
To paraphrase Abe Lincoln, there are too many network pigs for the teats. Reverse retrans will accelerate the death of local broadcasters. It takes money away from local operations which means newsrooms will continue to get squeezed and reduced. It drives up cable and satellite bills which equates to declining pay TV subscriber number nationally and means less people will be watching broadcast TV. It will drive customers and ultimately content to the Internet, and that is bad for local broadcasters who operate in the over the air and linear TV space. I have said it before and I will say it again, local broadcasters should be cutting a deal with Rockefeller and Thune to support Local Choice in exchange for legislative protections from reverse retrans. The other alternative is to watch the eyeballs disappear as retrans revenue, mostly in the form of reverse retrans, climbs to $12B by 2019.
Wagner Pereira says:
September 5, 2014 at 12:35 pm
A much better solution and much easier to do is legislation that requires 25% of all cable revenues to be put into a giant pot of money. Any network that so chooses will be paid out of this fund dependent on ratings which all ACA members can determine via STB. Any networks that choose not to be part of this fund based on actual viewing can go a la carte, such as HBO, Showtime, PPV, NHL Center Ice, MLB EI, NBA, etc. A simple solution that is fair and equable. Forces all channels to put their best effort towards programming that gets eyeballs and networks that are just pile ons can disappear. No Blackouts. No Negotiations needed. Just straight forward fair distribution of fees. And every channel can choose if they want to share in the fund or go a la carte……Please follow me on Twitter @NotTedatACA
Regina Cantu says:
September 5, 2014 at 1:23 pm
The pot of money idea is actually not a bad one. I think you could even get the cable companies to agree to an even bigger pot of money than 25%. I think most cable companies would trade a $25 per sub per month video access fee for the system that we have today. You could say $25 goes to cable company access, $25 goes to the pot of monthly that gets split based on ratings and every thing else is sold a la carte.
Mark Sherman & Jennifer Loven says:
September 5, 2014 at 12:59 pm
Best solution of all is not “Local Choice”, but “Total Choice.” Total a la carte, the market can decide what they want to watch and how much they will pay. Just how many shopping channels do we really need!!
Ellen Samrock says:
September 5, 2014 at 1:12 pm
Well, we haven’t heard much from the affiliates about all this. And, really, what can they say? With networks like Fox questioning the very need for affiliates and some of the highest rated shows coming from the big 4, the affils have been cowed into silence and acceptance. In the major markets, they can pass on some of the loss of retrans revenue to advertisers but in other markets, where the business climate is not that good, the affiliates have to suck it up and economize. Where I am, local businesses are still climbing out of the ’08 depression and are carefully counting how they spend their ad dollars with many having already cut back on television. From what I heard, one local network affiliate has asked their news anchors to accept a 20% cut in salary which they’ve accepted. A couple of them are now selling real estate on the side to compensate. It’s a crazy new reality out in broadcast TV land.
Wagner Pereira says:
September 5, 2014 at 5:30 pm
Out of curiosity, if networks are supplying up to 4 hours of programming in the morning, 2 or so hours in the afternoon, 3 1/2 at night and 2 hours plus late nite (11 1/2 hours not counting ~2a-6a- or up to 13 1/2 hours if one includes overnight), what percent of retrans do you think a Network should get?