CBS Signs Retransmission Deals

Feb 22, 2007  •  Post A Comment

CBS appears to have signed retransmission deals with nine cable operators calling for cash retransmission fees.

The broadcast company on Thursday sent out an unusual press release: It disclosed neither terms of the deal nor the operators involved, citing confidentiality agreements with those operators.

CBS CEO Les Moonves told an investor conference last month that the company expected to get cash subscriber fees for retransmission. “Within the next couple of months you’re going to see a couple of announcements that we have with cable operators. . . . It could be $0.50 a sub.”

Mr. Moonves declared in Thursday’s announcement, “Clearly there is a new paradigm in the marketplace – one that recognizes the value of the content that we bring to our various audiences. This is a trend that bodes well for us going forward as future retransmission deals are negotiated.”

A clearer picture of the deals could emerge next week when CBS announces its earnings.

Getting subscriber fees from cable operators who carry their signals would be a huge financial gain for the broadcast networks, which barely break even on a single stream of advertising revenue.

Historically, cable operators tried to avoid paying direct retransmission fees to broadcasters, opting instead to launch cable channels owned by broadcasters’ parents, such as ESPN2, FX and MSNBC, and paying fees for those. Some of the benefits from CBS’s retrans consent used to go to Viacom’s cable networks before CBS was split off into a separate company.

But lately broadcasters, such as Sinclair Broadcasting, have been flexing their muscles lately, pulling their signal off cable until the operator caves.

The broadcasters also have been helped by competition from satellite and the telephone companies.

CBS said the cable operators with which it made the retrans deals cover more than 1 million subscribers and that some of the operators are among the top 25 MSOs. The agreements include the analog, digital, multicast and high-definition rights to programming on CBS owned-and-operated television stations.

At the investor conference, Mr. Moonves said CBS’s contracts with the bigger cable operators won’t expire until 2009 or 2010.

He said retransmission fees will bring in incremental revenue beginning this year.

“So when you look at a Verizon, who will give us approximately $10 million, and then you look at some of the smaller cable groups that will also be $5 million here, $10 million there, they will go right to the bottom line. So it will be significant,” he said. “Then in ’09 you’ll get into, hopefully, the hundreds of millions.”

(Editor: Horowitz)