Times sure have changed.
In the old days, TV stations loved being network affiliates. That’s because the networks compensated them to carry national programming, which was a steady source of revenue in addition to the local spots they sold.
But now the tables have turned, and the big broadcast webs increasingly are seeking reverse compensation from stations to help defray rising programming costs.
This reverse compensation will mostly offset the growing retransmission fees affils get from cablers airing their content, according to a recent report by Moody’s Investors Service. The credit-rating agency reports that retransmission fees have now become the second-largest source of local broadcasters’ revenue, after advertising.
From 2006 through 2010, Moody’s says that revenue from retransmission fees increased by a compounded 54% annually for the pure-play TV broadcasters whose debt the company rates.
Retransmission revenue will continue to increase, but higher reverse compensation costs will negate near-term growth in this revenue source. Still, because 2012 is an election year, increased political advertising revenues will mask the effects of reverse compensation costs.
But, says Moody’s, starting in 2013, the stress of reverse compensation fees will be more obvious.
The accompanying table shows how Moody’s rates the debt obligations of four local broadcast groups.