Battle stations: Tribune deal lends firepower to retransmission war
That’s CEO Peter Liguori of Tribune, the largest independent owner of TV stations, taking it to the cable industry as the media war over like “retrans” fees heats up. (Landov)
Let the retransmission war begin.
Tribune Co.’s $2.73 billion deal to buy 19 Local TV Holdings stations sets the stage for a major battle over the “retransmission” fees cable and satellite operators pay to carry stations.
Tribune CEO Peter Liguori opened a new front yesterday, making it known the company will be gunning for bigger licensing fees for its growing stable of network-affiliated stations around the country.
Just a few months out of bankruptcy, Tribune will become one of the largest TV-station owners in the country. The deal — which gives Tribune a total of 42 stations — comes about 18 months before some of its deals with distributors are set to expire.
As added ammunition, Ligouri will try to package Tribune’s lone cable channel, WGN America, with local stations to gain greater leverage in negotiations with pay-TV providers.
The promise of higher retransmission fees is fueling a rash of recent station mergers. The Tribune transaction follows similar deals between Media General and Young Broadcasting and Gannett and Belo.
In general, the owners of stations in bigger markets are banking that they can apply the same fee structure to newly acquired stations in smaller markets.
During a call with analysts yesterday, Tribune CFO Chandler Bigelow predicted that retrans dollars would jump from 10 percent of revenue to 20 percent over an unspecified time frame.
Justin Nielson, local broadcast analyst at SNL Kagan, estimates Tribune’s combined station revenue will be between $200 million and $240 million.
Nielson thinks Tribune and Local TV will likely earn 40 cents to 50 cents per subscriber a month.
He said Tribune will add around 12.5 million subscribers for a total of 52.5 million TV households.
SNL Kagan predicts retrans fees for the overall industry will leap 37 percent this year, to $3 billion.
But the fight for bigger content fees won’t be waged without some pushback from cable operators.
The American Cable Association blasted Tribune last year for retrans disputes that led to the blackout of Tribune stations on Cablevision for two months and DirecTV for several days.
“From its history already, Tribune appears to think that blackouts and threatened blackouts lead to higher profits,” ACA’s CEO, Matthew Polka, told The Post.
“With a 42-station stable of stations, that threat to consumers now becomes even worse.”
Tribune clashed with Cablevision last fall, costing cable customers the CW network and WPIX. Tribune ended up losing $18 million in ad revenue, but offset that with $23 million in retransmission fees in 2012, according to filings.
“Both Tribune and Local TV have some room to grow on renewals,” said John Tupper, of investment bank Kepper, Tupper and Co., adding that political ad dollars turned stations into a “cash flow growth machine and revived them from premature death.”