Total U.S. TV retransmission fees expected to reach $12.8B by 2023, Kagan says

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Kagan said that TV station owners are getting higher retransmission fees, including annual dollar-per-subscriber rate step-ups, but their margins have shrunk due to their affiliation renewal contracts reflecting larger network programming expense increases.

The total amount of retransmission fees collected by U.S. broadcasters from traditional and virtual MVPDs is expected to reach $12.8 billion by 2023, according to analyst firm Kagan.

That’s up from the projected $9.3 billion this year, and up 18% from $7.9 billion in 2016.

Kagan said that TV station owners are getting higher retrans fees, including annual dollar-per-subscriber rate step-ups, but their margins have shrunk due to their affiliation renewal contracts reflecting larger network programming expense increases. As a result, Kagan estimates reverse retrans will reach $2.9 billion in 2017, up 34% from an estimated $2.2 billion in reverse retrans in 2016.

Over the projection period, Kagan expects reverse retrans as a percentage of affiliate gross retrans will rise in each renewal from 50% in 2017 to 53% in 2018, 54% in 2019 and 59% by the end of 2023.

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“While the networks are getting more aggressive in affiliate negotiations, TV station owners' retrans contracts with the multichannel operators are renewed every three years. Their affiliation agreements average four to five years, so they have some visibility on their net retrans until the next renewal,” the firm said in a news release.

Citing recent investor presentations and executive guidance, Kagan estimated that TV station owners are currently asking multichannel operators for $1.50 to $2 per subscriber per month on average for ABC, CBS, NBC and FOX in major markets. That will jump toward $2 to $2.50 over the course of the contract thanks to annual rate step-ups.

By 2020, the projected $11.4 billion in multichannel retrans and virtual service providers (VSP) carriage fees will account for 20.7% of the $55 billion MVPDs will pay to basic cable networks and regional sports networks (RSNs).

The average $2.10 retrans fee Kagan sees broadcasters getting in 2020 puts TV stations in third in terms of affiliate fees per sub per month, behind only ESPN ($9.50) and TNT ($2.71) still above that average mark. Kagan anticipated seven RSNs—YES Network ($6.74), FOX Sports Detroit ($6.69), MSG Network ($5.69), SportsNet LA ($5.60), FOX Sports Arizona ($5.48), Comcast SportsNet Philadelphia ($5.32) and Spectrum SportsNet/Deportes ($5.08)—are projected to come in above the $5 mark.