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Wednesday, June 29, 2016

SNL Kagan Releases Updated Retransmission Projections

SNL Kagan Releases Updated Retransmission Projections

U.S. TV Station Owners Retransmission Fees Expected to Reach $11.6B by 2022

MONTEREY, Calif., June 29, 2016 /PRNewswire/ -- According to estimates from SNL Kagan, an offering of S&P Global Market Intelligence, U.S. TV station owners' retransmission (retrans) fees from multichannel operators are now expected to reach $11.6 billion by 2022, versus the projected level of $7.7 billion this year, up 20% from $6.4 billion in 2015.

While TV station owners have continued to secure higher retrans fees in recent negotiations with the multichannel operators, including annual escalations in dollar-per-subscription rates, their margins have compressed due to larger increases in network programming expenses impacting station owners' affiliation renewal contracts. Our reverse retrans projections call for major affiliate station group owners to send back $2.1 billion to the major broadcast networks in 2016, up 36% from an estimated $1.5 billion in reverse retrans in 2015.

Net affiliate retrans revenue should still post annual growth in the high to low single digits over the ten-year projection period, with reverse retrans as a percentage of affiliate gross retrans expected to rise in each renewal from 44% in 2016 to reach 60% by the end of 2022. While the networks are getting more aggressive in affiliate negotiations, TV station owners typically have staggered their retrans contracts with multichannel operators for renewal every three years, whereas their affiliation agreements span an average four to five years, providing station owners some visibility on net retrans until the next renewal.

Our projections call for the average TV station's retrans fee per subscriber per month to rise from $1.40 in 2016 to $2.21 by 2022. Some major network owned-and-operated stations, large-market affiliate stations and smaller-market stations with multiple Big Four networks will be above that average in 2016, with some affiliate groups talking of rates starting in the range of $1.40 to $1.50 in year one of their new contracts, with built-in annual step-ups of 5 to 10 cents per year.

But despite that growth, 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 we anticipate the U.S. TV station 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 exceed the TV station average that year. However, 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).

For more details from the full report, or to speak with one of our analysts, please contact Christina Twomey at

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