Todd Juenger of Bernstein Research believes we should be thinking about this more. He writes: “In a Netflix world, nobody watches reruns anymore, and cable networks are replacing reruns with original programming.”
In particular, Juenger believes CBS could be hurting in this regard: “Syndication is [about] 25% of CBS revenue and we think it is in significant structural decline.” He says that while deals with subscription video-on-demand services are growing fast, this may mask the problems with U.S. domestic off-network marketplace.
Juenger writes: “Syndication continues to pressure earnings. The only thing holding us back from recommending CBS, given where the stock is currently trading, is syndication. Cord-cutting/shaving doesn't really affect CBS materially. Retrans will still be fine. Showtime is fine.”
But there is a silver lining, looking at the broader TV picture: “Advertising is suffering from the same problems as the rest of the industry, but CBS still has a reach advantage that makes them better off than most peers.”
Looking specifically at the U.S. syndication business, it still brings in sizable profits, from program license fees and national advertising revenues. According to Statista, national syndication ad revenues were $2 billion in 2013 and 1.88 billion for 2015 — but poised to drift down to $1.76 billion by 2019.
Harder to ascertain is the drop in the U.S. license fee revenues -- a much bigger pool of money. Executives estimates overall U.S. license fees brings in two-thirds of all syndication revenue; one-third coming from national TV advertising revenue.
Syndication executives say many big license fees -- especially for first-run shows -- have been slowly sinking. Not only that, but cable networks are replacing reruns with original programming. So, if this is the case, other big movie studio-based syndication units must be in the same fix.
When Juenger says that “nobody watches reruns anymore,” it could look like history repeating itself.
A couple of decades ago, TV stations were worried when the same movie studio syndication divisions starting selling the same off-network reruns to national cable networks, believing U.S. station syndication ratings and revenues would take a hit.
Overall, studios now talk up this broader view of syndication: Not just U.S. station syndication deals, but “syndicated” shows to U.S. cable networks, international cable networks, as well as host of digital streaming networks/platforms.
The question is, what will be the key pieces of additional new revenue, and what older segments, if anything, will lose out?