Commentary

Broadcast Networks Could Become 'Cable' Networks, By At Least One Measure

Before the Supreme Court’s Aero ruling in June, CBS said that if Aereo won, it would turn into a cable network.  An Aereo win would have meant that the service would not have to pay CBS and other broadcast networks for retransmitting their signals. Aereo is no longer a worry for broadcast stations and networks, so they are in no need of an immediate transformation.

Still, in as little as five years, broadcast networks will still morph into looking like cable networks, at least by one financial measure.

Some $25 billion a year in advertising revenues currently goes into the coffers of the five big English-language broadcast networks. By 2019, those networks are expected to grab an additional $8 billion coming from retransmission fees – or 24% of broadcast networks’ total revenues.

Marci Ryvicker, managing director of equity research at Wells Fargo, says total retransmission revenues could hit nearly $12 billion by 2019, with the big broadcast networks -- through their station affiliates -- expected to grab 65% of that total.

For decades, cable networks have counted on a 50/50 financial model, with around half of their yearly revenue coming from advertising and the other half coming from subscriber fees, which distributors pay to carry the networks.

With broadcast networks heading toward a 75/25 advertising-to-retransmission revenue split in five years, they say there is a lot more to do.

ESPN now tops all networks -- cable  and broadcast -- with a fee of $5 per subscriber per month.  Broadcast networks, which now get around $1 to $2, say that if carriage fees were based just on viewership, they would get more money than ESPN.

But broadcast ratings continue to erode, as they have done for a couple of decades.

In five years time, will CBS and other broadcasters be able to make the claim they are the most viewed networks, demanding even higher retransmission dollars?

3 comments about "Broadcast Networks Could Become 'Cable' Networks, By At Least One Measure".
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  1. Ed Papazian from Media Dynamics Inc, September 8, 2014 at 4:33 p.m.

    There is no doubt that retransmission fees paid by cable systems and other distribution sources are, and will become an ever increasing source of revenue to the broadcast TV networks. However, where did that $25 billion estimate as the broadcast networks' current ad revenue take come from? They only garnered $8.5 billion in the just completed upfront for prime time and that's a "gross" figure, including agency commissions. Add in all other dayparts and the grand total rises to roughly $15 billion, again, including agency commissions.

  2. Michael Kaplan from Blue Sky Creative, September 8, 2014 at 9:37 p.m.

    Is there a reputable source for the amount cable companies pay (or get paid) for carrying certain cable channels? I've seen the $5 figure for ESPN on multiple websites, but I've never seen a source.

    I'm wondering -- what does HBO charge per customer? Or USA? Or Syfy? And who pays who for all the shopping channels, religious channels and music channels that clutter my remote control?

  3. Leonard Zachary from T___n__, September 10, 2014 at 11 a.m.

    Marci Ryvicker's anlaysis and research is flawed since it does not acknowledge the infrastructure position of "competitors" today who were not there 5 or 10 years ago. These competitors include the cable companies, wireless carriers and over the top content providers. On the latter, pick one and that competitor will have cash on balance sheet larger than all the broadcast networks combined. Reliance on government laws to support cable carriage while the free market competitors are taking eyeball share is not a sustainable model nor fight the broadcast networks can win in their current form and infrastructure position on the converged TV market landscape.

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