Some TV stations have already put demands for cash on the table in advance of the Oct. 1 federal deadline for broadcasters to tell cable operators whether they plan to negotiate retransmission-consent deals for carriage of their signals.
While the official cutoff date looms, a number of broadcasters have already made their so-called “elections,” notifying multichannel pay TV distributors whether they are demanding carriage of their stations — so-called must-carry — or if they will only “consent” to carriage after negotiating terms, according to Matt Polka, president of the American Cable Association, a lobbying group for independent operators.
In fact, some broadcasters have gone ahead and notified cable systems of their demands, including cash compensation, in exchange for carriage of their TV signals, Polka said. “I have seen the gamut of requested fees so far ranging from 40 cents to $1.10 per station, per subscriber, per month,” he added.
Stations that opt for must-carry can’t seek payment from distributors. Many retransmission-consent contracts are on a three-year cycle that ends Dec. 31, but some deals expire earlier, as is the case with LIN TV and Time Warner Cable. The day after the so-called “election” letters are due, 15 stations owned by LIN TV could be pulled from the cable operator’s systems. Their contract expires Thursday, Oct. 2, and LIN TV spokeswoman Courtney Guertin said both parties are currently negotiating.
The LIN TV stations carried by Time Warner operate in Austin, Texas; Buffalo, N.Y.; Columbus, Ohio; Dayton, Ohio; Fort Wayne, Ind.; Green Bay, Wis.; Indianapolis; Mobile, Ala.; Springfield, Mass.; Terre Haute, Ind., and Toledo, Ohio.
Time Warner represents about 19% of LIN TV’s 14.7 million-subscriber pay TV footprint, according to slides the company made available on its Web site from the Deutsche Bank Leveraged Finance Conference last week.
LIN TV, according to its presentation, has already signed deals with Comcast, Cablevision Systems, Cox Communications, Charter Communications, Mediacom Communications, DirecTV, Dish Network, AT&T and Verizon Communications. It said that negotiations with Buckeye CableSystem in Toledo, Ohio, are about to commence.
According to the broadcaster’s 10-Q quarterly financial filings with the Securities and Exchange Commission, digital revenue (which includes retransmission consent and Internet revenue) doubled in the first half of this year to $11.6 million from $5.8 million.
“Telco subscriber growth will drive the next renewal cycle much higher,” LIN TV said at its Deutsche Bank presentation.
LIN TV’s expected gains in retransmission-consent revenue are part of a trend. The Television Bureau of Advertising is projecting that stations will increase their retransmission-consent revenue over the next couple of years. The trade group for local broadcasters, whose membership includes TV broadcast groups, ad-sales rep firms and over 600 TV stations, estimates that local stations will see this stream more than double from $450 million this year to $1 billion in 2010.
As a result, TVB forecasts that retransmission consent as a percentage of station revenue will grow from 1.7% in 2008 to 3.5% in 2010.
One of the more aggressive retransmission-consent gambits is coming from stations owned by Spanish-language media giant Univision Communications, which has historically opted for must-carry. However, since going private in 2007, Univision has let it be known that it would seek as much as $1 per month, per subscriber for its 63 stations, whose contracts expire at year-end.
In June, the company filed letters indicating it is opting for retransmission consent, a push that could prove particularly costly to Time Warner Cable. Pali Research media analyst Rich Greenfield in a July report estimated that Hispanic households represent about 1.8 million households, or 14% of the operator’s 13.3 million subscriber footprint.
Time Warner has a large presence in such Latino strongholds as New York, Los Angeles, Dallas, San Antonio and Austin, Texas. Greenfield wrote that if Univision secured contracts with monthly subscriber fees of 50 cents, it would whittle the operator’s cash flow by $80 million next year.
Univision officials would not disclose their retransmission-consent asking price, but said it was continuing to negotiate with distributors, including Time Warner.
In the past, Sinclair Broadcast Group has arguably been one of the most aggressive station groups on the retransmission-consent front, and according to its Deutsche Bank presentation, has more than 140 retransmission-consent contracts in place. Those deals renew between Dec. 31 of this year and the middle of 2011, the company said.
Sinclair generated about $59 million of retransmission-consent revenue in 2007, a 132% increase over 2006, and expects it to rise another 15% (about $10 million) in 2008. For the first six months of the year, Sinclair generated about $38.3 million in retransmission-consent revenue, up 49% from the $25.6 million generated in the first half of 2007, according to SEC filings.
Mike Farrell contributed to this report.