US retrans fees set to explode over next five years

Editor | 24-11-2013

Giving an indication as to why all of the rows are worth it, new research data from SNL Kagan is forecasting that retransmission fees from US TV station owners will reach $7.6 billion by 2019.

This would represent a huge increase on the projected level of $3.3 billion by the end of 2013 with growth based based on rising per-month sub fees for TV station owners in recent negotiations, as well as the consolidation of the business over the last couple years. This situation, added SNL Kagan, has often led to higher retrans rates after acquired stations are brought under larger groups' umbrellas.

Looking at how the revenues will grow over the years, the analyst expects retrans revenues to rise to $7.15 billion by 2018, as against the company's original projection of $6.05 billion from last year.

Whereas its 2012 multichannel subscribers were projected to grow from 100.4 million at year-end 2011 to 103.7 million in 2018, this year SNL Kagan projects that in 2018 the multichannel industry will serve 100.6 million video subscribers.

SNL Kagan has also updated its reverse retrans projections, which project the funds flow from the affiliate and O&O stations back to their network partners, estimating such funds coming back to the networks could increase from $1.02 billion in 2014 to $2.25 billion in 2019. SNL Kagan shows reverse retrans payments back to the networks growing to 50% of affiliates' retrans payments over time, even as affiliates' monthly fees increase in the coming years.

Explaining the recalculations, SNL Kagan said that in the 12 months since it last updated its projections, the business environment has improved for TV station owners, who have increasingly obtained rates they believe are closer to the value they bring to multichannel video services.

In addition it says that the negotiation of digital rights has added complexity to retrans negotiations, with terms associated with distribution by the multichannel operator often more complicated to agree upon than the per-subscriber fee.

As it made it calculations, the analyst advised affiliate groups that they must secure the rights to grant digital and second-screen distribution from their network partners when renegotiating their affiliation agreements, and there is not yet a cohesive industry approach.