Cable companies could wind up spending $1.8 billion a year in retransmission fees, adding up to 5 percent of basic revenue, per a report from SNL Kagan. Though the cable industry is far from that number now, that could change if the industry standard retransmission fee rises to 50 cents per subscriber.
Most TV groups have struck deals at 20 cents to 30 cents per subscriber, but several TV networks, such as CBS and News Corp., have managed to strike deals for 50 cents a subscriber per month. Networks are also getting involved in affiliate retransmission deals, increasing the possibility that cable MSOs will have to pay more to air broadcast signals.
"These players [not only] have more negotiating power, but also more revenues to risk than the affiliate groups that have dominated historic retrans agreements," said Michelle Ow, an analyst for SNL Kagan.
Several high-profile retrans deals between the largest MSOs and major TV network groups are just months away. Time Warner and ABC's contract is up in August; Comcast and News Corp. are also up this year. Comcast and CBS are due up in 2011.
There are also several contracts up this year between MSOs and major TV groups, including Time Warner's agreements with Sinclair Broadcast Group and Belo.
Going forward, Kagan's Ow believes that shorter-term deals may become more commonplace as both parties try to avoid mutually disadvantageous blackouts. Over the last decade, the average length of retrans contracts has dropped from five, seven and 10 years to three to five years. One-year extensions are also becoming more commonplace.
Both Mediacom and Time Warner Cable recently signed one-year extensions with Sinclair through 2010.
Related: Cable Firms File Retrans Petition With FCC