Reverse Comp Projected at $1 Billion by 2014

CHARLOTTESVILLE, VA.: Networks are poised to take about half of retransmission revenues being collected by affiliate stations. That’s the assessment from Robin Flynn and Justin Nielsen of SNL Kagan. The pair said reverse-compensation models are now emerging among the networks, with many having affiliate agreements coming up for renewal in the 2014-15 period.

“Networks that procure major sports rights, such as NBC's deal to acquire TV rights for the Olympics, could use the content to bolster their leverage with affiliates,” they said.

Even so, stations are expected come out of reverse retransmission in the black. In 2010, for example, non-owned-and-operated affiliate stations took in $17 million, while O&Os took in $627 million, boosting the network total to $645 million. This year’s total for non-O&Os is projected at $146 million, while O&Os are expected to bring in $861 million, bringing the network total take to more than $1 billion. The 2015 figures are $1.3 billion for non O&Os; $1.7 billion for O&Os; and nearly $3 billion for the networks--Fox, MyNetworkTV, CBS, The CW, NBC, Telemundo, ABC and Univision.

Two models are emerging among the Big Four networks for reverse retrans--25 cents a sub per month, or 50 percent of the total that stations take in. Fox has been particularly aggressive in collecting reverse compensation--so called because networks used to pay TV stations to carry their programming. Nexstar stations split the sheet with Fox over reverse comp. The Fox formula is 25 cents per for the top 125 markets, increasing to 50 cents over four years; and 15 cents a sub in smaller markets rising to 25 cents in four years. Flynn and Nielsen said that while once such figures were “inflammatory,” they’re now “accepted as a relatively market-level rate.”

ABC has been charging some affiliates “programming fees” for some time, and is institutionalizing reverse comp. CBS chiefs have said the network will seek half of affiliates’ retrans fees. NBC, acquired by Comcast in January, is in the early stages of developing a reverse-comp plan, the analysts said. The network will propose negotiating on behalf of the affiliates and providing stations a payment of 25 cents per sub per month.

Univision initiated the joint-affiliate negotiation model in 2009. Entravision, one of its biggest affiliate groups, said it took in $13.7 million in retrans for 2010, comprising around 10 percent of TV revenues. This year’s total is expected to reach $16.8 million according to the contracts in place.

~ Deborah D. McAdams