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CBS, Sinclair Toss Fuel on Retrans Fire

3/03/2006 7:04 PM Eastern

The campaign for retransmission-consent cash gathered steam last week, as two prominent broadcast executives predicted that cash payments to their companies from cable operators carrying their signals would increase significantly in 2006.

CBS Corp. CEO Les Moonves, speaking at the Bear Stearns & Co. Media Conference on Feb. 28, said the first cash-for-retransmission deal for his network’s owned-and-operated stations could be announced as early as next month. Moonves wouldn’t name the operator — despite hinting it could involve about 3 million to 5 million subscribers — nor say how much his company would receive.

How Sinclair Sees It
Sinclair Broadcasting has seen its revenue from retransmission consent grow since 2004 and expects bigger things in future.
Source: Sinclair
2004 Retransmission Rev. $3.5 million
2005 Retransmission Rev. $19.2 million
2006 Retransmission Rev. (est.) $25 million
2009 Retransmission Rev. (est.) $80 million to $100 million
2005 Overall Revenue $692.1 million

“You will hear of a deal within six weeks,” Moonves said. “I can’t comment on how much, but if some of the cable networks that have half our material get 25 cents [per subscriber, per month], we should be worth more than that.”

CABLERS DENY IT’S THEM

The identity of that mystery cable operator remained unknown last week, as virtually every major cable operator that approached the 3 million to 5 million subscriber size that Moonves alluded to denied that it would pay cash for retransmission consent.

Officials at Comcast Corp., Time Warner Cable, Cablevision Systems Corp., Charter Communications, Cox Communications Inc. and Adelphia Communications Corp. all denied that they were the subject of Moonves’ comments.

All have said that they have already completed retransmission deals with CBS, none of which included cash payments.

Cable operators have resisted paying cash for broadcasters’ signals and have been able to avoid it mainly by agreeing to carry less popular cable networks owned by the major broadcasters.

CBS took that route when it was part of Viacom Inc., eschewing cash for carriage of less-popular networks within Viacom’s stable, which includes MTV Networks.

Since CBS was spun off as a separate company on Jan. 1, the network has been unshackled from its cable cousin and is free to seek deals on its own terms. Moonves estimated that there are about 60 million cable subscribers within CBS owned-and-operated markets, all of which could eventually be paying cash for retransmission consent.

Moonves said CBS’s major retransmission deals don’t come due until 2008 to 2010. “If you start figuring out what that money could be, it comes to a very significant figure,” he said. “And we really believe we’re going to get that, we’re going to get cash for that.”

But while Moonves said he did not expect other broadcast networks to follow CBS’s lead — mainly because they are getting high fees for their cable networks — the flip side appears to be true for independent station groups.

Earlier at the same conference, Sinclair Broadcasting Group CEO David Smith said his company boosted its retransmission revenue to $19.2 million in 2005 from just $3.5 million in 2004. He expects retransmission revenue to climb again, to $25 million in 2006. He said he expected retransmission revenue to reach between $80 million and $100 million annually by 2009.

Sinclair, based in Baltimore, owns 58 television stations in 36 markets across the country.

Smith said the question isn’t whether cable operators will pay cash for retransmission, but when and how much.

“It is very clear to us that everybody is going to pay,” Smith said at the conference. “The true market forces in our view are going to mandate that that happens, otherwise there will likely be substantial losers on the cable end of the equation.”

SMITH CITES COLUMBUS

Smith pointed to Sinclair’s Columbus, Ohio market, which has two satellite companies (DirecTV Group Inc. and EchoStar Communications Corp.) and three cable operators (Time Warner Cable, Insight Communications Co. and WideOpenWest). Regional Bell operating company AT&T Inc. (former SBC Communications Corp.) also has plans to offer video in that market, Smith said.

“The reality of that marketplace is if Time Warner elects not to do a retransmission deal that we can both agree on, they have no place to go but down, because SBC by definition is going to pay, and everybody else already is,” Smith said.

Smith said that eventually, retransmission fees could reach $4.50 per month per subscriber, although he didn’t say whether Sinclair would charge that much.

In a statement, America Cable Association president and CEO Matt Polka said that fees that high could lead to the end of retransmission rules all together.

“If broadcasters want to use the public airwaves and federal rules in such a way — never intended — to harm consumers and increase rates, then all of their behavior, rates, terms and forced conditions should be made completely public so that Congress, the FCC and the public can decide whether their stations are worth as much as they claim and whether the current retransmission consent rules should be changed to stop this egregious behavior,” Polka said in the statement.

POLKA: 'PROFITEERING’

Polka added that a $4.50 retransmission fee only “advances Sinclair’s corporate financial interests and nothing more. Congress never intended the retransmission consent rules to be abused in such a way to guarantee corporate revenues and profiteering off of the backs of the viewing public.”

Linda Moss contributed to this report.

 

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