Burke: NBC Retrans Revenue To Reach $200M in 2013

NBCU Chief Says Dual Revenue Stream Will Last ‘Long Time’

NBC Universal CEO Steve Burke said he expects retransmission consent revenue at its flagship NBC broadcast network will rise to $200 million in 2013 and should begin to close the monetization gap with its peers over the next several years.

Burke, speaking at the Bank of America Merrill Lynch Media, Entertainment and Communications conference in Los Angeles Wednesday, said in terms of profitability, NBC currently is between $500 million and $1 billion behind its broadcast peers CBS, Fox and ABC. He added that retrans revenue – up from virtually $0 about two years ago – coupled with higher CPMs for advertising once ratings improve, should go a long way toward closing that gap.

Retrans  has been a hot button issue for both broadcasters and distributors – the industry just weathered a month-long blackout of CBS stations in New York , Los Angeles and Dallas to Time Warner cable customers.  Burke acknowledged that  higher retrans fees probably won’t be too good for Comcast Cable, NBCU’s parent and the largest distributor in the country, but added that it has become an inevitability.

Burke added that he expects in three or four years, NBC will begin to close the retrans gap between it and CBS, Fox and ABC. CBS, the undisputed leader in retrans cash, has said it expects to reach $1 billion in retransmission consent revenue by 2017.

“Over time as we reopen and renegotiate deals, what’s happening is there is becoming a rate card for retransmission consent the negotiations that CBS FOX ABC and we are having the market place is settling around numbers,” Burke said. “We will, as contracts come up, get those revenues the same way as CBS, ABC and Fox have. There may be a little bit of a lag, because our contracts may come up at a later date than some of the other broadcasters, but we have gone from essentially zero a couple of years ago to $200 million this year. I see no reason why we won’t draft behind the other broadcasters and get paid in a similar fashion to the way they get paid in the future.”

That desire to get paid also extends to NBCU's cable networks. Burke said that he believes there is a "monetization gap" between what NBCU cable channels receive from distributors and what its peers receive of  between 20% and 25%, which he intends to close over time.

"We are not paid as much as we think we should be given our ratings and our positioning by cable and satellite companies," Burke said.

NBCU isn’t that worried about over-the-top threats to its broadcast business – he believes Aereo is going to be found unlawful -- and he added the dual-stream broadcast model is here to stay.

"My bet is what’s happening here is that the broadcast channels are turning into dual revenue stream businesses and they will remain dual rev stream business for a long time," Burke said. "ABC, NBC, CBS and Fox aggregate the biggest audiences in the country and those audiences are valuable. Now there is a marketplace establishing itself. We need to get the same kind of retransmission consent dollars that ABC, CBS and Fox get if we want to be competitive with them and invest in programming the way they do. I think that is now part of the ecosystem and I would be surprised if that changes.”

Burke also said improving ratings at the broadcaster will be essential to its success. He added that because its ratings are not as strong as its broadcast peers, NBC’s advertising CPMs (cost per thousand) are about 20% lower than CBS and Fox. While NBC saw some improvement in the recently completed upfront – Burke said that in some cases its rates were higher than the other broadcasters except for CBS – he expects further improvement as ratings grow and the network is able to heavily promote shows during the upcoming 2014 Winter Olympics in Sochi, Russia.

Burke said that during the 2012 Summer Olympics in London, NBC used the Games to promote its fall lineup and  will likely do the same for its spring shows with the Sochi Olympics.

“We feel like we’re putting ourselves in a position to do better this fall and spring,” Burke said.