Kagan: Retrans Fees to Reach $11.6B by 2022

Researcher predicts annual high-to-low single-digit percentage increases

Retransmission-consent fees could nearly double in the next five years to $11.6 billion, as broadcasters are pressured to give back larger and larger pieces of their distribution haul to their affiliated networks, according to SNL Kagan.

SNL Kagan predicts that stations will receive about $7.7 billion in retransmission consent fees in 2016, up about 20% from the $6.4 billion in 2015. Kagan said that while TV station owners have been able to secure higher fees in recent negotiations with distributors, margins have shrunk as network programming expenses have risen. Kagan also predicts that station groups will have to send back about $2.1 billion in so-called reverse retrans fees to their network affiliates in 2016, up 36% from the estimated $1.5 billion in reverse retrans fees in 2015.

Kagan still predicts that net affiliate retrans revenue should grow at a high-to-low single-digit percentage rate annually over the next 10 years, with reverse retrans as a percentage of affiliate gross retrans expected to rise in each renewal from 44% in 2016 to 60% by the end of 2022.

Monthly retrans fees per subscriber should climb from $1.40 in 2016 to $2.21 by 2022, according to Kagan, with major network owned and operated stations, those in larger metro markets and station groups in smaller markets with multiple Big Four broadcast affiliations could attract even higher rates in 2016, Kagan noted.

Despite the increases, Kagan said that by 2019, the projected $10.1 billion in retrans fees would represent just 18.7% of the $53.9 billion that we project U.S. multichannel operators will pay to basic cable networks and regional sports networks (RSNs) that year, despite the much higher TV viewing share for the Big Four broadcast networks.

Still, the average $1.87 retrans fee that Kagan predicts the industry will receive by 2019 puts TV stations above all but three U.S. basic cable networks in terms of affiliate fees per subscription per month, with only ESPN ($9.17), TNT ($2.59) and Disney Channel ($1.88) projected to be higher. Most RSNs are projected to command monthly affiliate fees per subscription significantly above the average retrans fee benchmark for broadcast stations, with six RSNs whose fees should top $5.00 in 2019, led by YES Network ($6.50), FOX Sports Detroit ($6.41), FOX Sports Arizona ($5.20), Comcast SportsNet Philadelphia ($5.15), New England Sports Network ($5.15) and Time Warner Cable SportsNet/Deportes ($5.03).