Moody’s Affirms What We Know About TV’s Revenue Plan


A newly released study from Moody’s Investors Service has made official what most broadcast TV industry professionals are well aware of: The outlook for the industry remains stable. But, that’s not thanks to advertiser demand. It’s all thanks to the surge in retransmission fees—a trend the American Cable Association (ACA), a slew of MVPDs and DirecTV and DISH Network are hardly pleased about.

In its review of the key publicly traded broadcast TV companies, including Nexstar Media Group, Gray Television, Sinclair Broadcast Group, TEGNA and The E.W. Scripps Co., Moody’s finds that advertising demand “will be suppressed” over the next 12 to 18 months by several factors, offsetting a slight increase in core ad sales.

But, Moody’s says, broadcasters will benefit from continuing to include more retransmission fees in their revenue mix.

Jason Cuomo, Moody’s VP and Senior Credit Officer, expects core ad sales to grow between 1.4% and 1.6% over the next year or so, supported by a rise in U.S. GDP.

“While ad sales usually closely track GDP growth, our more cautious outlook takes into account displacement of core advertising by political ads during the midterm elections, the ongoing loss of market share to digital, a soft automotive market and weak ad pacing in the first-quarter of 2017,” Cuomo said.

Despite soft advertising demand, U.S. television broadcasters are benefiting from a shift in their revenue mix to recurring, high-growth, high-margin distribution, or “retransmission” fees.

Moody’s forecasts these fees, which are paid by cable, satellite and telecom providers to local broadcasters to air their content, to grow in the low teens over the next 12 to 18 months, and to account for about 30% of their revenue by the end of 2018.

At Nexstar, for example, its solid Q1 2017 results saw retransmission fee revenue surge 138%, to $231.9 million.

While Nexstar has had few problems in reaching new carriage agreements from DBS and MVPD players, others have not had such luxuries.

The first quarter proved to be a difficult start to 2017 for several companies seeking a new retransmission fee agreement with the AT&T-owned DirecTV. In April The Manship family’s Louisiana Television Broadcasting became the latest broadcast TV station owner to run into a brick wall with DirecTV. Their two TV stations, ABC-affiliated KRGV-5 in McAllen-Brownsville-Harlingen, Tex.; and ABC-affiliated WBRZ-2 in Baton Rouge; went dark on DirecTV April 7 as no new deal was reached before the end of its most recent accord.

Another family-owned broadcaster, News-Press & Gazette Company, saw its 18 TV stations across the nation go dark on DirecTV on Jan. 12. A resolution came Jan. 20.

On March 16, AT&T U-Verse dropped all Raycom Media-owned stations from its channel lineups in 23 different markets. A new agreement was reached March 26.

Then there’s Hearst Television, which saw its 31 broadcast television stations and their digital multicast partners across 26 markets go dark on the DBS provider on New Year’s Day. A new deal was reached on Jan. 7.


Demand for political advertising, which produces a significant revenue spike during election cycles but also displaces core ad sales, will be strong in 2018, notes Cuomo.

After an unusually thrifty 2016 Republican presidential campaign, spending will be higher during the upcoming midterm elections due to the number of highly-contested congressional seats up for grabs.

Meanwhile, Moody’s tallied the FCC Spectrum Auction revenue being collected by rated broadcasting companies. In total, some $1.7 billion (pre-tax) of spectrum was sold. Proceeds are expected to be used for M&A and debt repayment, helping to increase scale and lower leverage, Cuomo says.

A loosening of FCC ownership regulations, starting with the “UHF discount” presently under review in a D.C. Federal court, would also promote consolidation and stronger market positioning, with limits on foreign ownership, caps on domestic audience reach and restrictions on local market dominance subject to favorable change, he said.