MONTEREY, Calif., June 19, 2017 /PRNewswire/ -- According to
Kagan, an offering of S&P Global Market Intelligence, U.S. TV
station owners' retransmission (retrans) fees from multichannel
operators and virtual service providers are now expected to reach
nearly $12.8 billion by 2023, versus
the projected $9.3 billion this year,
up 18% from $7.9 billion in 2016.
While recent negotiations with multichannel operators have seen
TV station owners continuing to secure higher retrans fees,
including annual dollar-per-sub rate step-ups, station owners'
margins have compressed due to their affiliation renewal contracts
reflecting larger network programming expense increases. Kagan's
reverse retrans projections call for major affiliate station group
owners to send back $2.9 billion to
the major broadcast networks in 2017, up 34% from an estimated
$2.2 billion in reverse retrans in
2016.
Net affiliate multichannel retrans revenue growth is still
expected to be in the low-single digits over the projection period,
with reverse retrans as a percentage of affiliate gross retrans
expected to rise in each renewal from 50% in 2017 to 53% in 2018,
54% in 2019 and 59% by the end of 2023. While the networks are
getting more aggressive in affiliate negotiations, TV station
owners' retrans contracts with the multichannel operators are
renewed every three years. Their affiliation agreements average
four to five years, so they have some visibility on their net
retrans until the next renewal.
According to recent investor presentations and executive
guidance in quarterly earnings calls, TV station owners are
currently asking multichannel operators for $1.50 to $2.00 per sub per month on average for
Big Four affiliates in major markets (ABC, CBS, NBC, FOX),
increasing toward $2.00 to $2.50 with
annual rate step-ups over the course of the contract.
But despite that growth, by 2020, the projected $11.4 billion in multichannel retrans and virtual
service providers (VSP) carriage fees are expected to represent
just 20.7% of the $55.0 billion Kagan
projects multichannel operators will pay to basic cable networks
and regional sports networks (RSNs) that year – this despite the
much higher TV viewing share for the Big Four broadcast networks
(ABC, CBS, NBC, FOX).
The average $2.10 retrans fee that
we anticipate the industry will receive by 2020 puts TV stations
above all but two basic cable networks in terms of affiliate fees
per sub per month, with ESPN ($9.50)
and TNT ($2.71) still above that average mark. Seven RSNs
are projected to be above the $5.00
mark, led by YES Network ($6.74), FOX Sports
Detroit ($6.69), MSG Network ($5.69), SportsNet
LA ($5.60), FOX Sports Arizona ($5.48), Comcast
SportsNet Philadelphia ($5.32), and Spectrum
SportsNet/Deportes ($5.08).
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SOURCE S&P Global Market Intelligence