NBCU 'Catching Up' in Retrans/Reverse Compensation Fee Race, CEO Says

NBCUniversal's retransmission and reverse compensation fees -- zero five years ago -- should hit $800 million this year, CEO Steve Burke said at a Bank of America Merrill Lynch investor conference Wednesday. He also said the unit of Comcast is "catching up" with other major broadcasters in retrans and reverse compensation revenue, but "I wouldn't anticipate us zooming past anyone else." CBS has said it's on track to take in more than $1 billion in retrans and reverse compensation revenue this year (see 1607290022). Burke said NBCU signed some large retrans deals last year and has a couple left this year.

Meanwhile, pointing to NBCU investments in Vox and Snapchat (see 1608080036), Burke said the company is "increasingly looking for business opportunities in the digital space." NBCU experimented with direct-to-consumer distribution with the Tour de France, "and you will see us experiment more in the future," he said.

The over-the-top market has some inherent weaknesses as a direct competitor to multichannel video programming distributors offering traditional bundles, Burke said. "OTT sounds like a better business than in reality it is," he said, saying he doesn't foresee sizable consumer demand for skinny bundles of 25 channels at $40-$60 a month. That won't stop NBCU from licensing content to OTT distributors, he said, as long as the deals are comparable or better to what it would make selling to MVPDs.

Despite a ratings decline, the Rio Olympics was "a tremendous success" as NBCU made more than $250 million, compared with the $200 million the company had lost at one time in the past on Olympics broadcasts, Burke said. He didn't specify which Olympics that was. The profitability came from NBCU's long-term rights deal and ad sales up more than 20 percent from the London Games, Burke said: "All the advertisers we have talked to can't wait to come back." He said the ratings decline came in part from NBCU competing against itself by showing Olympics programming on multiple of its networks simultaneously, and that based on total audience delivery, ratings were down by a single-digit percentage from the "very successful" London Olympics. "We are not concerned in any way," Burke said.

In a separate presentation at the conference, Chief Financial Officer Howard Averill said Time Warner is taking a territory-by-territory approach as it looks at its VOD strategy, launching subscription VOD services in some regions -- such as an OTT service in Spain -- and licensing its content in others. Averill said TW sees "big opportunities" in HBO revenue growth by increased subscriber fees as it renews most of its contracts with distributors over the next couple of years.

TW has started reduced advertising loads for new shows on TNT, and is "pretty encouraged by it," Averill said, pointing to increased consumer satisfaction, increased intent to buy and increased brand awareness. Starting in Q4, TBS plans to cut prime-time ad loads by half and give advertisers new opportunities for native advertising and ads of different lengths, he said. Virtual MVPD networks, meanwhile, likely will have lower ad loads than traditional MVPDs, but more IP-delivered video opens the door to more dynamic ad insertion and targeting capabilities, he said.