Retransmission agreements have probably been one of the most contentious issues for the US TV market over the last year, with screens going blank from time to time, but also hugely lucrative as shown by data from SNL Kagan.
Retrans fees have continued to grow in importance for TV station owners, and the analyst calculates that retrans revenues disclosed by public companies rose from $631 million in 2009 to $766 million in 2010. For the pure-play TV station owners that it analysed, SNL Kagan estimates that the revenue stream was equal to 52% of stations’ cash flow on average in 2010 and in some cases rises to as much as 76% of cash flow.
Looking forward, the analyst forecasts that despite fewer estimated multichannel subscriptions, and TV station owners' share of retransmission dollars under siege— and even potential future growth of multichannel subs due to over-the-top (OTT)substitution—revenues will continue to rise thanks to the steady upward pressure on the monthly fees paid by multichannel operators to TV stations.
Overall for the industry, argues SNL Kagan, there is no turning back from the push for higher retrans fees, given the continued strong differential between the fees paid for certain cable networks versus what broadcast network owned and operated (O&O) stations with significantly more viewers receive.
SNL Kagan’s analysis shows that or 2011 alone retrans fees could rise 28% from $1.14 billion to $1.46 billion, thanks to more agreements being struck at progressively higher levels between distributors and carriers. It believes that because of the number of subscribers, most of the fees are being paid by cable MSOs, which could pay more than $824 million in retrans fees this year, versus $484.2 million for DBS and $147.1 million for telco TV operators.
In one case, SNL Kagan estimates that in 2011 ESPN/ESPN HD will receive $4.76 per average sub per month, rates much higher than the fees received by network O&O stations in major markets which it considers will be in the region of less than $0.75/sub/month.
Going forward, SNL Kagan projects total industry retrans fees could increase from $1.14 billion in 2010 to $3.61 billion by 2017, with average per-sub fees for cable MSOs potentially more than doubling over time from their 2010 levels through 2017