Study: Retrans Fees Boost B’cast Revenue

1/02/2009 7:00 PM Eastern

Retransmission-consent revenue climbed more than 30% for a handful of broadcasters in the first nine months of the year, and according to SNL Kagan data, it’s only going to get bigger.

According to SNL Kagan data, retransmission revenue in the first nine months of 2008 rose 32% to $124 million for the six publicly traded station groups. That’s up from $94.1 million in the first three quarters of 2007.

Retrans Rising
Sources of retransmission-consent revenue (in millions):
2008 2012
SOURCE: SNL Kagan data
Cable $160.7 $668.2
DBS $287.2 $462.2
Telco $39.6 $201.4
Total $487.5 $1,331.8

But it’s just the beginning of explosive growth that Kagan predicts for retrans in the coming years. Retransmission-consent dollars, according to Kagan, are on pace to top $1.3 billion by 2012, up nearly three times from the $487.5 million the company predicts will be generated in 2008.

Cable operators will continue to pay the bulk of those fees — according to Kagan, cable operators shelled out $160.7 million to broadcasters in 2008 and will dole out $668.2 million by 2012, roughly 33% and 50% of the total amount of retrans cash generated. Everyone will pay more as the year’s progress — satellite-TV providers will contribute $287.2 million in 2008 and $62.2 million in 2012 and telcos will pay $39.6 million in 2008 and $201.4 million by 2012, according to Kagan.

Cable operators will foot 33% of the retrans bill in 2008, rising to 50% by 2012, according to Kagan data. Telephone companies’ share of the costs also will go up — from 8% in 2008 to 15% in 2012. But satellite-TV providers like DirecTV and Dish Network will see their share of the bill decline, from 59% in 2008 to 35% in 2012, according to Kagan.

That discrepancy is mainly due to changes in subscriber counts — both telcos and satellite TV companies are expected to gain customers in the next four years.

Retrans cash has become an increasingly important revenue source for broadcasters, as affiliate fees from networks have all but dried up and advertising revenue has been hit hard by the recession. According to Kagan, 2008 is shaping up to be a rough year for broadcasters on the advertising front — ad revenue is expected to decline about 6.9% for the year, almost unheard of in a presidential election year. Without the boost of political spending in 2009, ad revenue is expected to decline 11.2% for that year.

Already, many of the major station groups have managed to significantly increase their retransmission-consent revenue. Sinclair Broadcasting Group has led the charge, more than doubling its retrans compensation from $25.4 million in 2006 to $58.9 million in 2007. And the station group appears to be on track to outpace last year, generating $56.3 million in retransmission consent compensation for the first nine months of this year. The company has said publicly that it expected to generate about $72 million in retransmission consent revenue in 2008, an increase of 22%.

Belo Corp., which owns about 20 stations in the Southwest, Northwest and Mid-Atlantic regions, generated about $23 million in retrans compensation in 2007 — through the first nine months of 2008 the group took in about $22 million in retrans revenue. Hearst-Argyle generated about $19.9 million in retrans revenue through the first three quarters of this year, on a path to beat the $21.6 million it generated in all of 2007.