Network
Comcast expects to pay those fees, the Philadelphia-based company said in regulatory filings, without projecting how much. Its bid to take control of NBC Universal from General Electric Co. may take a year or more to win the approval of regulators including the U.S. Federal Communications Commission, a window that broadcasters may use to win more favorable terms.
“The last thing Comcast will want is to be seen as the heavy when it comes to negotiating with TV stations,” said Mark Fratrik, vice president of BIA/Kelsey, a TV station consultant in Chantilly, Virginia. “For the next 12 to 15 months, Comcast has to be on its best behavior.”
With advertising sales down this year, the broadcasters are asking cable and satellite services to pay for retransmission rights for the first time, saying stations deserve to be compensated for supplying TVs most-watched shows, including “NCIS,” “American Idol,” “Sunday Night Football” and “Desperate Housewives.” In the past, the networks traded those rights to gain distribution for their new cable channels.
CBS Corp., based in New York, is the only major network that gets some retransmission fees, receiving about 50 cents a month for each pay-TV subscriber in some markets, Robin Flynn, a consultant with SNL Kagan in Monterey, California, said in an interview. Broadcasters such as News Corp.s Fox may seek $1 a month or more as current deals expire, she said.
CBS, owner of the most-watched TV network, aims for $250 million a year in such fees, Chief Executive Officer Leslie Moonves said last week at a UBS AG conference in New York, suggesting the big four broadcasters could seek as much as $1 billion a year from the pay-TV industry.
Considerable Amount
CBSs current deal with Comcast expires in 2011, Frederic Reynolds, the companys former finance chief, said on a June 4 conference call. Talks between networks and cable carriers can last a year or longer.
“We are getting paid a considerable amount and those deals are coming up,” Moonves said. “It was very good to hear the Comcast guys, now that they are going to own a network, support re-trans for networks. Its a very good thing.”
CBS also plans to band together with its affiliates to pressure pay-TV systems. The company would seek a slice of the higher revenue, Moonves said on a conference call last month. ABC and Fox are also holding talks with affiliates about negotiating together.
CBS, controlled by Chairman Sumner Redstone, rose 25 cents to $14.06 on Dec. 11 in New York Stock Exchange composite trading. GE, based in Fairfield, Connecticut, advanced 31 cents to $15.92. Comcast added 6 cents to $17.64 on the Nasdaq Stock Market, while News Corp. Class A gained 24 cents to $12.76.
Biggest Markets
The largest U.S. pay TV service, with 23.8 million subscribers, Comcast faces negotiations in 10 of the biggest U.S. TV markets where it offers cable service and seeks to acquire NBC stations, Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview.
That may pressure Comcast to moderate its traditional hard line in such talks, Moffett said.
Every Move
“Comcast has 300 million media experts in the country now who will be watching its every move to make sure that they are not flexing their market power,” Moffett said.
In past negotiations, broadcast networks allowed pay-TV services to retransmit their signals for free to gain distribution for new channels, Chase Carey, News Corp.s chief operating officer, said last week at the UBS conference.
Today that approach doesnt make sense, according to Carey, whose company owns the F/X, Fox News and Fox Business News cable channels in addition to Fox broadcasting. Pay-TV systems must provide compensation to broadcasters, he said.
“We need to have a business model that recognizes the value Fox brings to the marketplace,” Carey told investors, describing retransmission talks as “imminent.”