Burke: NBCU Is on Path To Retransmission Parity - Multichannel

Burke: NBCU Is on Path To Retransmission Parity

MAY ALSO SEEK HIGHER CABLE AFFILIATE FEES
Author:
Publish date:

With the high-profile retransmission-consent battle between CBS and Time Warner Cable still fresh in the industry’s mind, NBCUniversal CEO Steve Burke said his company’s broadcast stations expect to take their annual cash haul from distributors beyond this year’s expected $200 million toward parity with other broadcast networks in coming years.

Burke, speaking at the Bank of America Merrill Lynch Media, Entertainment and Communications conference in Los Angeles Wednesday, said Comcast-owned NBCU lags $500 million to $1 billion a year behind broadcast peers ABC, CBS and Fox on the retransmission front.

He said retransmission revenue from the NBC owned-and- operated stations — raised from virtually zero about two years ago — coupled with higher charges for advertising once ratings improve should go a long way toward closing that gap. NBCU also expects to seek higher affiliate fees for its big stable of cable networks, which Burke also sees as undervalued.

HIGH-PROFILE ISSUE

Cash payments to retransmit broadcast signals has been a hot-button issue for both broadcasters and distributors, especially recently, what with the month-long blackout of CBS stations in New York, Los Angeles and Dallas to Time Warner Cable customers.

Burke acknowledged that higher retransmission fees probably won’t be too good for Comcast, the largest multichannel video programming distributor in the country, but said they are inevitable.

In the next three or four years, as it moves through a cycle of affiliate renewals, NBC could begin to close the retransmission-revenue gap between it and CBS, Fox and ABC, Burke said. CBS, the undisputed leader in retransmission cash, has said it expects to reach $1 billion annually in that revenue category by 2017.

Burke said that as contracts have come due the past several years due and broadcasters have struck deals for cash payments — instead of the cable-network distribution or other non-cash compensation that had been the norm in the past — a rate card of sorts is being developed on retransmission fees.

“We will, as contracts come up, get those revenues the same way as CBS, ABC and Fox have,” Burke said. “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.”

Later in the conference, Time Warner Cable chief operating officer Rob Marcus said the nation’s second-largest cable provider likely lost some subscribers due to the conflict with CBS, but would not give specifics.

CBS went dark to about 3.2 million TWC customers in New York, Los Angles and Dallas on Aug. 2, returning a month later on Sept. 2. While carriage fees were at the initial heart of the matter — CBS had originally wanted $2 per subscriber per month from TWC — the battle morphed into a fight over digital programming rights.

“The absence of CBS O&Os in New York, Los Angeles and Dallas, and the absence of Showtime across our entire footprint, definitely had a subscriber impact,” Marcus said. “It suppressed connects on the front end and it increased disconnects of existing customers. But the issues that were at stake in this negotiation had such significant implications, and long-term implications, that we felt like we were left with no choice.”

CONTENT COSTS DIP ANYWAY

Surprisingly, Marcus said that even with the added CBS retransmission fees — analysts estimated the new rates start at $1.50 per subscriber and escalate to $1.90 later — TWC’s total programming costs will actually be a little lower than expected this year.

TWC had said earlier that it expected programming costs per subscriber to rise by 10% this year. Now, Marcus said, the expected increase is about 9%.

TWC also incurred some costs during the fight, paying for antennas for some subscribers to watch CBS programming over the air, issuing customer credits like free movies and gift cards and increased marketing, as well as paying for programming like the Tennis Channel and others that filled the CBS slot during the blackout. Marcus said those were expenses worth taking.

“While those are short-term hits that are not insignificant, we felt that it was justified based on the goal of achieving longer-term objectives,” Marcus said. “At the end of the day it is fair to say we ended up in a much better place than we started. ”

Later in the conference, CBS CEO Les Moonves said the financial impact from the TWC dispute was “virtually nothing.”

“There was no harm done financially to CBS Corp. from this,” Moonves said.

TAKEAWAY

NBCUniversal CEO Steve Burke says NBC expects to close the retransmission-consemt gap with its Big Four counterparts.

Related