Despite a continued decline in multichannel video subscribers, retransmission consent revenue is expected to more than double to $3.6 billion by 2017, with cable operators footing the bulk of the bill, according to research firm SNL Kagan.
In a report released Wednesday, Kagan estimated that total retrans fees will rise from $1.14 billion in 2010 to $3.61 billion by 2017. The retrans bill is expected to increase about 28% in 2011 to $1.46 billion from $1.14 billion in 2010. Cable operators, who have traditionally paid the bulk of retrans costs, are expected to continue that trend. According to SNL Kagan's analysis, cable operators will pay an estimated $824 million in retrans fees this year, compared to $484.2 million for satellite TV service providers and $147.1 million for telco TV operators.
Despite declining subscriber rolls and the increasing threat of over-the-top providers, Kagan said the driving force in the increases is there rising importance for broadcast station owners. Kagan estimated that retrans fees for publicly traded station owners rose from $631 million in 2009 to $766 million in 2010. In addition, for the pure play station owners, Kagan estimated that retrans accounts for 52% of their cash flow and in some cases as much as 76%.
"Overall for the industry, there is no turning back from the push for higher retrans fees, given the continued strong differential between the fees paid for certain cable networks versus what broadcast network O&O stations with significantly more viewers receive," Kagan said in a statement.
To illustrate that point, Kagan noted that cable sports network ESPN is expected to receive affiliate fees of $4.76 per subscriber per month in 2011, versus about 75 cents per subscriber per month for broadcasters with substantially higher viewership.
"The disparity between viewership and retrans fees is going to keep up the pressure from broadcast networks and their owned-and-operated stations for higher fees," Kagan wrote. "O&O station execs very much see the growth of retrans fees as a work in progress and expect to get what they feel to be appropriate value for their stations over time."
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