Sinclair Broadcasting Says Retrans Revenues Will Rise

The days of cable and satellite operators offering the local Fox or ABC affiliate without paying for the rights appear to be heading for a sunset. Sinclair Broadcasting Group, which operates 58 local stations, said Wednesday it expects retransmission consent compensation to increase 89% this year to the $48 million range.

Many of those dollars are expected to result from new deals with Time Warner Cable, which offers Sinclair channels to 6 million of its subscribers, and Mediacom, which offers them to 700,000.

Retransmission consent has become a catch-all term referring to payments that local station groups are demanding from cable and satellite operators to offer their network affiliates along with packages that include ESPN, CNN and the Military Channel.

Groups like Sinclair are arguing that they are entitled to payment for their highly viewed channels if programmers offering outlets such as the Military Channel are getting paid for them to be carried.

"When you look at what the cable guys pay for content that, frankly, nobody watches," said Sinclair CEO David Smith, "if you were to ascribe those prices on a per-subscriber basis to us, you would not believe the numbers."

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Sinclair now has deals with 75% of the operators that offer its channels, company officials said. Mediacom only recently reached an agreement with Sinclair after more than a year of contentious negotiations.

The forecasts for the retrans revenues came on a conference call Wednesday to announce fourth-quarter results for the station group, which reaches 36 markets from Baltimore to Milwaukee to Tampa.

Like most station groups, revenues jumped on the backs of political advertising--by 8.8% to $171.8 million. But taking out $21.6 million in political dollars, revenues would have decreased versus a year ago by $7.7 million.

While retrans dollars are increasing, there are signs that the local station business is under duress as the bread-and-butter local news telecasts appear to be losing viewers (particularly younger ones) to the Internet. Full-year 2006 revenues for Sinclair rose only 3.5% to $635.8 million, and that came with $32 million in political dollars, again propelling the increase.

But with the 2008 presidential campaign already heating up, Sinclair officials expect another political cash infusion later this year.

In the fourth quarter, local ad revenues were down 4%, when political dollars are stripped out. However, the cash-rich political advertising could have crowded out other high-spending marketers.

Strong categories included telecom and foreign autos, officials said, with softness in soft drinks and restaurants.

So far this year, spending in the highly competitive telecom category is up 30%, and officials said they expect it to keep growing.

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