Pay-TV retrans hikes expected to double in next 5 years

Michelle Clancy | 06-11-2012

Pay-TV operators have taken broadcasters to task for asking for "extortionist" amounts of money for carrying local television feeds, often in spats that result in blackouts for consumers, but research suggests the fee hikes have only just begun.

SNL Kagan expects that TV station owners' retransmission fee revenue could reach $5.50 billion by 2017 and eclipse $6 billion by 2018, versus the $2.36 billion projected for 2012.

Those projections have been revised to be higher than what SNL Kagan expected when it made forecasts last year, suggesting that the pace of price escalation is accelerating. Before, it projected that retrans fees would reach just $4.86 billion by 2017. "The increased projections are due to the success of a wider range of TV station owners in securing sequentially higher retrans fees from multichannel operators over the last year of negotiated deals," the firm said.

By 2015, that $4.28 billion approaches 10% of the total $43 billion that multichannel operators are projected to pay in affiliate fees to basic cable and regional sports networks. SNL Kagan analysis indicates that by 2018, the projected $6.05 billion of retrans revenues would represent approximately 23% of the expected $26.2 billion in TV station ad revenue.

SNL Kagan projects that by 2018 the average fee paid per TV station will be slightly less than $1, while each multichannel subscriber will be responsible for aggregate retrans fee revenue of $4.86 per sub per month.

To put that in perspective, the fees are significantly less than what operators pay for cable nets. For all five major broadcast networks combined in 2015, multichannel providers are expected to pay $3.49 per month, or an average retrans fee of 74 cents per TV station per month, which is significantly below the $6.37 per sub per month that multichannel providers are projected to pay for ESPN, $1.50/sub/month for TNT or the $1.49 sub/month for NFL Network.