Barclays Capital analyst Anthony DiClemente told clients that the retransmission consent deal that CBS Corporation announced with Comcast was a surprise, since the old deal was not set to run out until the end of next year. He’s applauding the deal for CBS and running some numbers on what it might mean financially.
Here’s what DiClemente said in a note on Monday:
“CBS announced today a 10-year deal with Comcast to distribute the signals of the CBS network, the CBS TV stations, College Sports TV, Showtime, and the Smithsonian Channel. We note that this news is somewhat unexpected as the prior deal was not set to expire until the end of 2011. This agreement provides CBS with a long-hoped-for second revenue stream for what has historically been a purely ad-supported business.
Deal terms satisfy market expectations – Although financial terms of the deal were not disclosed, we project CBS will earn approximately $0.50 per subscriber per month in fees from Comcast starting in 2012, which should help CBS to meet or exceed its previously stated target of $250M in total retransmission fees from all distributors for FY 2012. We believe the deal also includes healthy escalators which would step up pricing in later years such that CBS will receive well more than $1 per sub by the end of the time horizon. Assuming more than 12M CBS owned-and-operated subscribers within the Comcast footprint, this would imply roughly $75M of payment from Comcast to CBS in 2012.
CBS maintains flexibility surrounding content usage – We believe CBS contractually maintains the ability to show its content though alternate distribution channels (i.e. internet and mobile). We also believe that should CBS offer its content in alternative distribution outlets, Comcast retains the right to offer that content via its on-demand platform. We hope to hear more about the agreement when CBS reports 2Q earnings tomorrow after the market close.”