TV Station Groups See Higher Programming Costs Coming
TV station groups will begin paying higher fees for network programming. The timing of when stations will begin paying so-called reverse network compensation will vary company to company, executives said this week during quarterly earnings teleconferences. “The networks are being pretty aggressive,” in seeking fees, said Robert Prather, president of Gray TV.
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The expiration of affiliation agreements will determine when stations begin paying such fees, executives said. Gray executives said the company is lucky to have renewed its major affiliations before the networks began seeking reverse comp. It expects to negotiate a new agreement with NBC this year, ABC in 2013 and CBS in 2014, Prather said. The trick will be to keep retransmission consent fees from pay-TV distributors higher than programming cost payments, Prather said. “Right now, it’s real good for us."
Programming fees to networks are building up over time at Sinclair, said Chief Financial Officer David Amy. “Think of it as a catch up,” he said. “The expense is starting to catch up to the revenue line.” Sinclair expects to announce a new affiliation agreement with Fox before June, Amy said. Its affiliation agreements with ABC expire in 2015 and its CBS affiliates, many of which it acquired in recent deals, have agreements with the network that are staggered through 2017, he said. Sinclair will begin a new round of retrans negotiations beginning with Dish Network this year, and DirecTV in 2013, he said.
NBC has largely dropped plans to negotiate retrans fees for all affiliates and is now talking to individual stations and station groups, Prather said. “That’s pretty much off the table right now."
Most of CBS’s agreements with affiliates expire next year, CEO Leslie Moonves said. That’s when investors will begin to see a rapid rise in deals where the network will get about half the retrans revenue its affiliates take in from distributors, he said. CBS has also been successful in negotiating retrans for the TV stations it owns, said CFO Joseph Ianniello. At a recent investor day, CBS told investors that it expected its own retrans revenue and the fees it collects from affiliates to be about $250 million a year, he said. “Every negotiation is a bit different, but the good news is I think we were conservative.”