Station Retrans Fees Up, But ESPN Still King

While broadcasters’ retransmission fees are expected to rise, over-the-air TV will likely never get the size of fees paid to ESPN, which, at the top of the heap, gets more than five times what broadcasters do.

“The audience for ESPN is probably the most passionate out there, and if all of a sudden a carrier drops ESPN, that audience will leave,” Robert Folliard, a Dow Lohnes associate who works with affiliates, said Thursday morning. “With broadcast, people will leave but you don’t have that passion.”

Folliard was part of a panel that addressed issues surrounding retransmission fees — and ways TV stations can grow that revenue — at the SNL Kagan TV and Radio Finance Summit in New York.

Currently, broadcasters get about $1 per month for each subscriber from the television service providers that carry their stations. ESPN gets $5.54, according to SNL Kagan Associate Director Robin Flynn.

Broadcasters may, however, be moving toward parity with other cable channels, which individually earn more in retransmission fees than broadcasters do but not as much as ESPN, they say.

“I do think we can get there,” Robert Dunlop, the EVP of operations at Fisher Communications, said.

According to SNL Kagan’s latest research, TV stations’ retransmission consent revenue will grow from $3 billion to $4.9 billion in 2016.

And despite cable operators’ complaints that retrans fees are too high, said SNL Kagan’s Robin Flynn who presented the research at the summit, they are “dwarfed” by the fees that the operators pay to basic cable networks.

Those fees will grow from $31.7 billion in 2013 to $40.8 billion in 2016, said Flynn. Retrans amounts to just 9.5% of the basic networks’ 2013 take and just 12% of their 2016 take.

The research also shows that retrans has become a significant contributor of station groups’ total revenue (and has grown substantially over the past three years).

The top five in retrains as a percentage of total revenue:

Sinclair, 20% (up from 16% in 2009)

News Corp., 19% (up from 8%)

Univision, 19% (up from 11%)

CBS, 18% (up from 7%)

Nexstar, 16% (up from 10%).

For the most part, only network affiliates have been able to negotiate from retrans. But they have had to share a portion of the fees they collect to their networks.

According to the research, the “reverse comp” that affiliates pay networks will amount to 46% of their retrans take of $1.6 billion in 2013 and increase to 54% of their take of $2.9 billion in 2016.