Gray Television Inc. Message Board
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Moody's Retrans Report
Also, from a November 4th article regarding GTN's upcoming negotiations with NBC....
"Although Gray Television’s network affiliation agreements don’t start to come due until next year, the company expects to start talking with NBC by the end of the month, Robert Prather, Gray president-COO said during this morning’s third-quarter earnings conference call.
Gray’s 34-station group includes 10 NBC affiliates.
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A key part of the affiliation talks will be a discussion of reverse compensation — what affiliates pay networks to carry their programming.
Increasingly, reverse compensation and retransmission fees are intertwined. As station groups negotiate retrans fees with cable and satellite operators, networks are seeking a piece of the action.
“The good news is we have some time,” Prather said of the affiliation talks. “The bad news is most of market will be set by then. We think we’ll be able to maintain retrans growth on the cable side to more than offset payments to the networks.”
Prather said about 45% of Gray’s retrans deals are up this year and he hopes to have those concluded by year end.
NBC reportedly is seeking to split retrans fees with affiliates 50-50. It has floated the idea of being affiliates’ proxy in retrans negotiations with cable and satellite operators. But details of how the proxy arrangement would work remain fluid.
“We’ve been told by the affiliate relations people at NBC that they have not come up with plan yet — they’ve asked for patience,” Prather said. “I think personally it’s such a difficult thing … they’ll have a hard time coming up with something that works for all the affiliate stations. Right now, there’s nothing on the table.”
The reverse comp issue is one of the overhangs on valuations for the sector. How it is ultimately resolved - especially for more leveraged companies - could drive valuations meaningfully in either direction.-
The main point of this article is that 45% of retrans for GTN is up within 30 days or less which means massive retrans growth in 2012 as higher rates kick in for more than half their customers. The article also mentions 57% growth from 2006-2010.....and 300% by 2017. Do that math. That means almost 6 times as much retrans growth in next 5 years as in the 4-5 years of 2006-2010.....the pie is getting 6 times bigger. A slice to the 4 biggies is virtually nothing when all this considered. Plenty of future growth. DaninFW
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Once again wrong on so many fronts. It's 54% growth over 4 years, which actually leads to a cumulative growth rate of 462% from 2006-2010. That is in the past and that is what has helped broadcasters grow the retrans portion of their revenues from ~2% of total revenue to approximately 11% of the industry's total revenue today. However, during the last year, the industry only paid back to the networks less than $150mm of the collective $1.2B in retrans revenue collected. Prior agreements allowed them to pocket much of this revenue during this time and it fell to the bottom line (or to free cash flow). This relationship is changing. Now, going forward, the networks want a bigger slice of the retrans through the new reverse comp agreements, as they feel it is their network audiences that are driving the retrans dollars for the station groups. The retrans dollars are expected to grow 300% (~25% per year) over the next 5 years - not the 6x you suggest. However, broadcasters will be giving up as much as 50% - perhaps even more if you are a smaller broadcaster with less negotiating leverage.
So, assume industry retrans grows 25% in 2012 to $1.5B and assume TV broadcasters are forced to give 50% to the networks, they would net $750mm.... which is more than 25% less FCF than the $1B+ they are netting currently. Maybe not the end of the world, but it is not growing in the near term.
Depending how the agreements are structured (some are being structured to pay less reverse comp upfront and a much greater % on the back end), while retrans revenues will grow significantly, many broadcasters might not make the same retrans FCF they are making this year, until 2016 or 2017. It is no secret that some companies that have already done a couple of deals, refuse to disclose what they are paying in reverse comp as they have just lumped this line item in with programming expenses. Regardless, in 2013 when political revenues drop and reverse comp kicks in bigger, FCF could be impacted for the more levered companies.
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