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Policy

CBS: We’re In The (Retrans) Money!

6/22/2010 11:01 AM Eastern

New York — CBS chief financial
officer Joe Ianiello made it
plain at an SNL Kagan conference
last week: When it comes to
retransmission consent, broadcast
networks are taking the
cake. And CBS wants every last
crumb.

CBS is on track to generate
about $100 million in retrans revenue
in 2010, based on an average
rate of 50 cents per subscriber
per month. But Ianiello said at
the SNL Kagan TV and Radio Finance
Summit last week that total
amount could grow exponentially
— to as much as $250 million to
$500 million over time as rates
rise to $1 per subscriber and CBS
gains an increasing share (upwards
of 50%) of its affiliates’ retransmission-
consent fees.

While that may not sit well with
station-group owners, some of
whom have resisted such overtures
in the past, Ianiello said
that it reflects the value that network
content brings to local TV
operations.

And though the network could
bypass the stations altogether by
offering content to distributors
directly, Ianiello said that would
be leaving some ad revenue on
the table. “We want both,” Ianiello
said of advertising and retrans
revenue. “People say, ‘You
want your cake and you want to
eat it too.’ Who wants cake and
not to eat it?”

CBS has about 28 ownedand-
operated stations in the
top markets in the country. The
broadcaster has been one of the
more aggressive station owners
in demanding cash for retransmission
consent.

Ianiello said that CBS already
has about 60 retransmissionconsent
deals in place with distributors
— including long-term
agreements with Time Warner
Cable, Verizon Communications
and Cablevision Systems — and
it still has some deals to complete.
While Ianiello would not
say which deals are expiring, he
said that CBS will strive to extract
fair value for its stations.

“We want as much as we can
get,” Ianiello said.

In search of as much value as
possible from retrans, CBS and
other networks could be helping
to push rates into the stratosphere.
At a later panel session,
Kepper, Tupper & Co. president
John Tupper said that CBS’s
stance will likely cause smaller
station groups to increase their
fees accordingly.

“It is going to force the station
to get a number that is going to
turn out to be probably twice as
large as what the network is asking
for,” Tupper said.

Total retrans fees are expected
to rise 44% to $1.1 billion this year,
with cable operators carrying the
biggest load ($573 million). By
2016, total retrans fees will reach
$2.6 billion, with cable operators
accounting for more than half
($1.5 billion) of that amount.

Ianiello also addressed a movement
by some cable operators to
get the federal government involved
in retrans negotiations
as the battles grow more contentious.

“If others would like to get the
federal government involved,
I say, let’s go one step further,”
Ianiello said. “If you’re worried
about consumer choice, let’s go
a la carte.”

Ianiello added that in that scenario,
most subscribers would likely
take the four broadcast networks
and a handful of cable networks.

“In that model, we make a
whole lot more than $1,” Ianiello
said.

September