Study: Lots of room for retrans growth


Money TreeExecutives at CBS and NBC have talked about large sums of money coming in from retransmission consent and reverse compensation right now – and have also touted the likelihood that it will go even higher in upcoming years. An SNL Kagan report takes a look at where the ceiling might be.

CBS’s Les Moonves recently told an industry gathering that it’s expecting its total income from this stream to be in the $250M range this year, with potential to hit $1B by 2017.

NBC’s Steve Burke said that he expects all of the Big Four networks to reach the same level of compensation in due course.

And according to Kagan, the numbers show ample room for growth. It cites the work of Todd Juenger at Sanford C. Bernstein. He believes MVPDs are paying a total of about $33/sub in program fees right now. Despite a 40% audience share, broadcasters are earning only $1.25 of that total – about 3.8%. Basic cable gets $22, $5-$6 goes to premium channels, $2 is earmarked for VOD and regional sports nets claim $2.

It would not be surprising at all if broadcast hit $4/sub by 2025, and still have room to grow. Although the growth projection is complicated by the free availability of broadcast off-air, it could be even higher. However, Juenger believes that $2/sub would be a good goal, giving broadcasters a 7% growth rate, a small enough bite to keep MVPDs reasonably happy.

SNL’s Robin Flynn added a bit of historical perspective, pegging total retrans at an estimated $215M in 2006, to $1.46B in 2011 – and a 2017 projection of $4.86B. Flynn agreed with Juenger’s comment that $2/sub by 2025 was a goal that may be acceptable to both sides.

RBR-TVBR observation: There is a side to this that you never hear MVPDs discuss. They complain about the rapid growth in broadcast fees – neglecting to mention that the high percentage points involved are due to outrageous demands by broadcasters but because the fees were either ridiculously low or non-existent to begin with – and also rarely expressing any dismay over what they pay to some basic cable channels (American Cable Association members excepted).

With all the hooting and hollering we are hearing from MVPDs right now, according to Kagan broadcasters are providing 40% of viewership and receiving less than 4% of the compensation. In short, broadcasters are an incredible bargain.

Clearly broadcasters deserve a bigger piece of the pie, which means that MVPDs must figure out which basic services are receiving compensation far above what their viewership warrants to bring their own bottom lines into balance.