Nexstar Pulls In $40M from Retrans Deals
By Linda Moss -- Multichannel News, 1/19/2006 12:35:00 PM
Nexstar Broadcasting Group Inc. will reap in excess of $40 million, most of it in cash, from its most recently negotiated retransmission-consent deals with 145 cable operators, the company’s CEO said Thursday.
During a Bear Stearns & Co. Inc. conference call on retransmission consent, Perry Sook talked about his company’s lengthy battle last year with Cox Communications Inc. and Cable One Inc., during which his stations lost carriage with 75,000 cable subscribers in four markets for almost one year.
Those disputes took a toll in the short term, according to Sook -- “a several-million-dollar hit” in ad revenue in those markets. But he added that Nexstar’s hard stance on retransmission consent for its stations will pay off over the long term, creating a new revenue stream going forward with the rash of new deals he just completed.
During the call, Bear Stearns also estimated that Hearst-Argyle Television Inc. is getting paid $11 million for a just-completed retransmission-consent deal for its stations from EchoStar Communications Corp.
Hearst-Argyle usually ties retransmission consent of its stations to carriage of its sister service, Lifetime Television. But without the help of the broadcaster’s leverage, Lifetime has found itself being dropped by EchoStar’s Dish Network in a dispute over license-fee increases.
In the case of Nexstar, it negotiated retransmission-consent renewals at the end of last year, with three- to five-year terms, that add up to “contracted cash” in excess of $40 million during the span of the contracts, according to Sook.
“The ad-sales component is less than one-third of the total revenue” in all of those contracts, he said. This means most of them will entail actual cash changing hands, not a cable operator or station getting ad time or bartering back and forth for ads.
Some of the recent retransmission-consent deals also involve Nexstar stations licensing some of their local news to be used by cable operators for local video-on-demand, Sook added.
To date, Nexstar has closed retransmission-consent deals covering 4 million cable subscribers. The broadcaster hasn’t reached renewals with 10 cable systems, meaning that its stations have lost carriage in 20,000 cable homes, according to Sook.
Bear Stearns is estimating that Nexstar is getting on average an 11.5-cent-per-subscriber, per-month license fee for stations that are affiliates of the “Big Four” broadcast networks. This year alone, the company will bring in about $10 million as a result of retransmission-consent deals, accounting for 12% of its cash flow, according to Bear Stearns.
The Wall Street firm projected that Sinclair Broadcast Group Inc. will reap about $20 million in cash and ad support from retransmission consent.
Bear Stearns also projected some retransmission-consent numbers for CBS.
“We think CBS is probably taking somewhere between $30 million and $40 million in retransmission-consent dollars, which is being allocated to them from Viacom [Inc.] for their ability to help Viacom increase distribution, increase fees, increase the number of new cable networks on the air,” analyst Victor Miller said.
Down the road, Bear Stearns estimated that CBS could ultimately collect $150 million in retransmission-consent fees after it does renewals for contracts that expire as far out as 2010.
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