Broadcasters' Retrans Fees Under Pressure

Broadcasters, multichannel video programming distributors and pay-TV industry experts see retransmission consent fees increasingly facing price pressure. In recent earnings calls, some local broadcast chains said they are seeing slowdowns due to cord-cutting among MVPD subscribers.

For example, noting pay-TV trends, Gray said it was cutting $25 million off its 2024 retrans revenue expectations. In a call with analysts, General Counsel Kevin Latek said that while Gray was "more optimistic" earlier in the year, declines in the traditional MVPD subscriber base warranted lowering expectations. "We have seen probably a peak decline in our retrans this quarter," he said. "Going forward, we should see the declines should be less and less." Tegna CFO Julie Heskett also predicted stable retrains revenue going forward after declines in the first half of the year in the mid-single digits. Scripps said its Q2 distribution revenue was flat year over year. Entravision said its Q2 revenue was off year over year in part due to retrans issues.

Local TV stations generated $15.1 billion in retransmission fees from MVPDs and virtual MVPDs last year, up from $12.3 billion in 2020, BIA/Kelsey Managing Director Rick Ducey blogged last month. While local stations have come to rely on that revenue, "the dynamics are in flux" due to cord-cutting and viewers increasingly shifting to connected TV and over the top streaming, he said. BIA/Kelsey expects local TV stations' MVPD and virtual MVPD distribution revenue to flatten in 2024-2028, Ducey said. S&P predicts local TV broadcasters' retrans revenue peaking next year and then starting a slow decline due to such factors as the high cost of pay TV, shrinking audiences and networks increasingly putting exclusive content on their streaming platforms (see 2404150033).

DirecTV Chief Content Officer Rob Thun told us last week that the slowed growth in retrans is due in part to DirecTV's pushing back against broadcasters. "We are sort of the main agitator in the marketplace against broadcasters," he said. "We took on Tegna, we took on Nexstar. We have not been afraid to tie up with broadcasters." He said part of the problem is station groups "not fighting hard enough" with networks. "The whole way that reverse retransmission consent is set up, they jam the broadcast station groups with these crazy high rates, and then they have no choice but to come after us. So, the network's kind of hanging in the wings." Networks "are watering down what they're giving us yet expecting these crazy increases. So, salad days are over for broadcasters."

"This is a transformational time for the broadcast television industry," an NAB spokesman wrote in an email. "The video marketplace continues to evolve, making the role of our local stations even more important to consumers who rely on our free, trusted service. We want to ensure that local stations are available anywhere and everywhere viewers seek us – from the TV in their living room to streaming platforms and online. Particularly on the cusp of the 2024 elections, there is perhaps no time in history that our newsrooms’ trusted reporting has been more important."