Revving Up Retrans

Nexstar Broadcasting reported a strong increase in retransmission-consent revenue in 2007, and expects that pace to continue through 2008 and 2009 as it strikes deals with telephone companies and other video service providers.

Nexstar reported $17.2 million in retransmission-consent revenue in 2007, up 25% from $13.7 million in 2006. The broadcaster reported fourth-quarter retrans revenue of $4.6 million, up from $4.1 million in the same period in 2006, fueled by new agreements and increased subscriber counts tied to existing deals.

“We expect more of the same in store for 2008 and 2009,” Nexstar CEO Perry Sook said on a conference call with analysts on March 6.

Sook said that coupled with the growing presence of telephone companies in the video market and deals that come up from renewal in 2008, 25% growth and above is more than achievable in the next two years.

Sook pointed to Nexstar’s Fort Wayne, Ind., market, its first with Verizon Communications’ FiOS TV service. He said that in less than six months of offering service, FiOS has captured about 10% of the TV households in that market.

“We know because we get a check every month, multiplied by a certain number per subscriber, and that’s pretty phenomenal growth,” Sook said. “We now derive more revenue in Fort Wayne from Verizon than either of the satellite companies individually and at a substantial rate per subscriber related to Comcast, which is the major cable operator in the marketplace. As the phone companies continue to populate markets, we see that as a revenue driver for us.”

Sook added that several existing retrans deals, representing about 40% of the total retrans revenue related contract dollars, are set to expire in 2008.

“As we negotiate those and renegotiate those — and we’re not the only race car on the track this time around — we expect our per subscriber yield to continue to increase,” Sook said.

Total revenue for the quarter was $71.6 million, compared to $77.2 million in the same period in 2006. Cash flow for the quarter was $24.1 million compared to $29.3 million in the prior year.

With Nexstar’s results in, all of the major TV station groups reported strong gains in retrans revenue. Sinclair Broadcasting reported $59 million in retrans revenue in 2007, a 23% increase; Hearst-Argyle reported retrans revenue of $21.6 million, up from $17.9 million in 2007 and LIN TV more than doubled its retrans take from $7.2 million in 2006 to $14.9 million 2007.