Analyst Sees Station Mergers Affecting Reverse Compensation

The wave of TV station consolidation that is driven in part to extract larger retransmission payments from cable and satellite operators, might also help broadcasters push back against network demands for reverse retransmission payments.

In a new report, analyst Michael Nathanson of MoffettNathanson Research says that retransmission payments to the Big Four broadcasters has increased seven-fold to more than $1.5 billion over the past five years. The network’s owned and operated stations command much bigger retransmission payments than other affiliate owners.

Nathanson estimates that Fox stations got retransmission payments of $1.01 per home in 2013. CBS' stations got 90 cents, NBC’s got 87 cents and Disney’s generated 83 cents, he figures. Non-O&O station groups earned retransmission payments ranging from almost $1 for Nexstar to 25 cents for Tribune. Getting fees closer to what the O&Os get is one factor driving station mergers.

But the networks are looking to grab a piece of their affiliates growing retransmission fees. “By most accounts, the expected rate of reverse retransmission payments for a Big Four station in one of the Top 100 markets is between $0.50-$0.75 per subscriber, which would mean that station owners would be forking over a majority of their own current retransmission payments,” Nathanson says in the report.