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Stations Score Retrans Fees

3/23/2010 9:33 AM Eastern

Station groups continued
to haul in big retransmission-
consent dollars in 2009,
with tiny Gray Television reporting
a five-fold increase in fees
paid by distributors last week.
But the train may be slowing going
forward, as contracts enter
their second cycles, according to
some analysts.
Atlanta-based Gray, which has
36 stations in 30 smaller markets
in the South and Midwest, released
preliminary fourth-quarter earnings
on March 15, reporting $15.6
million in retransmission-consent
revenue in 2009, up 414% over the
$3 million it received in 2008.
Gray has been late to the retrans
game — it only started
breaking out such revenue in
2007 and became more aggressive
this year, as it attempted
to leverage its ratings weight in
many of its markets.
Most other broadcasters had
more manageable increases,
ranging between 29% and 68%
for the year, compared to 25% to
95% increases in 2008.

LEVELING OFF

Benchmark Co. media analyst
Edward Atorino believes those
increases will continue to level
off . “I think the big boom in
retrans is probably over going
forward,” he said. “I don’t think
you are going to see any gigantic
ramp-ups from the current
levels.”
While no other station group
came close to Gray’s percentage
gain for the year, retransmission
revenue continued to be an important
— and still-growing —
segment for the publicly traded
station groups.
All of the larger groups reported
gains, even retrans pioneer
Sinclair Broadcast Group, which
settled a potential battle with Mediacom
Communications in Iowa
in January.
In an effort to avoid a lengthy
battle, the two agreed on a one-year
deal for an undisclosed amount
that will expire at the end of 2010.
Sinclair, one of the first broadcast
station groups to seek cash
for retransmission consent, no
longer separates retransmissionconsent
revenue from its overall
results. On a conference call with
analysts in February, Sinclair
CEO David Smith said breaking
out the number no longer serves
a purpose for the broadcaster.
“I think for the last couple of
years, we felt that it was important
for not only our shareholders
to understand what we were accomplishing,
but it was probably
equally, if not more, important for
the entire industry to understand
that Sinclair was effectively the
leader in getting retransmission
dollars from these multichannel
fellows,” Smith said on the February
call. “And I think it’s fair to
say without tooting our horn one
iota, that the industry is where it
is today in terms of what it gets
because of our efforts.
“Now that everybody is essentially
feeding at the trough,
it’s no longer necessary for us to
stand out in front of it all and say,
‘Look how much we get versus everybody
else.’ That doesn’t necessarily
serve our purpose.”
Although Sinclair declines to
break out retrans numbers, Wells
Fargo broadcasting and cable analyst
Marci Ryvicker estimated
the haul for 2009 was about $100.7
million for the company, a 36.3%
increase from the previous year.
Atorino said that Sinclair’s decision
to downplay its retransmission-
consent increases could
have other motives.
“They don’t want to antagonize
the cable companies,” Atorino
said. “Plus, knowing Dave Smith,
he doesn’t want Wall Street to focus
on the wrong thing.”
For example, Atorino said that
while Wall Street is focusing on
retrans and possible spectrum
auctions, ad revenue is beginning
to crawl back at many station
groups after years of 20% to
25% declines.
Other station groups continued
to report double-digit
retrans increases, including
Nexstar Broadcasting, which reported
retrans revenue of $24.3
million, a 68.5% increase over
the previous year. Belo Corp.,
which owns 20 stations in 16
markets, increased its retrans
take by 29% to $42.6 million in
2009 and LIN TV, owner of 27
stations in 17 markets, reported a
48% increase in retrans revenue
to $43 million for the year.

NEXSTAR RISING
While Atorino doesn’t expect
overall retrans increases to hit
the stratosphere, Nexstar, which
with Sinclair was one of the
pioneers in attracting cash for
retransmission consent, said its
retrans revenue growth is showing
no signs of slowing.
On a conference call with analysts
earlier this month, Nexstar
CEO Perry Sook said the station
group completed several retrans
renewal deals in 2009 with robust
built-in escalators. He added
that the broadcaster has about
a dozen deals to complete in 2010,
most near the end of the year,
which also should bring healthy
increases.

“Our retransmission revenues
will be up a substantial doubledigit
percentage amount again
in 2010 as we have escalators in
all of our contracts on their anniversary
date and by and large
those anniversary dates are on a
calendar year basis,” Sook said
on the conference call. “And
looking forward, we will have
the full year benefit of all of our
new agreements, their escalators
and the new per sub rates
for 2011 so this will be a growing
revenue stream for us continuing
into 2011.”

 

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