As the pioneer in seeking retransmission consent cash from cable systems, Nexstar CEO Perry Sook was asked at Tuesday’s Wells Fargo Securities Technology, Media & Telecom Conference about what he sees for the future of retrans. Just how big will the payoff be?
Noting that his company started the retrans fight in 2005, Sook said Nexstar is now in “round two economics.” Of the 213 MVPDs covered by the footprint of Nexstar’s stations, agreements have been struck with all but 13 and these are in negotiations expected to wrap up by the end of the year. And he noted that all of the big five MVPDs for Nexstar are in that done category.
“We have been able to convince the distributors that the market was different than it was in 2005 when we were the only race car on the track – that we’re now drafting behind, perhaps, CBS and Fox. And I think the new normal has been established in rates that are multiples of what they were the first time around,” Sook said.
“If you look at the $32 billion of distribution revenue that flows from MVPDs to content producers and you look at broadcasting television taking approximately 40% of the viewing, you know we’re talking about the retrans aggregate number to broadcasters cresting a billion dollars this year. Maybe we should be skating toward a pot of $12-14 billion, as opposed to trying to grow a billion to $1.5 billion or $1.2 billion,” Sook suggested. “Having said that, I think there’s maybe another two cycles of double-digit growth for our company before it levels out at more rate of inflation type growth, because I think that by that point we’ll be in the north of a dollar neighborhood.”
Is $1 per subscriber a month pie in the sky? Nope.
“I’ve signed agreements this year that in the third or fourth year of the contract they’re a dollar per sub per month – cash, no value exchange, just pure payment. And I think that we’ll sign more of those and then 2011 starts the renegotiation of the three-year deals done in 2008,” Sook said. “We’ll have over 100 of our agreements that will expire at the end of 2011.”
As you would expect, Sook was also asked about the networks seeking a share of that retrans cash. According to the Nexstar CEO, the networks aren’t really interested in having affiliation deals include a percentage of retrans, where the network would then have to audit all of the local agreements with MVPDs. Rather, they just want increases in the fixed amounts of reverse comp that the stations have already been paying. And, since affiliation deals are relatively long term, those increased expenses are being phased in gradually for Nexstar.
