Moonves: Advertisers, TV Affils Will Pay More for CBS

CBS CEO Leslie Moonves put two groups on notice Tuesday that they will be paying the network more in the future than they have in the past.

Advertisers will pay more in the form of higher prices for commercials. And the network’s local TV affiliates will pay more too, in the form of substantial portions of the retransmission consent fees they receive from cable operators—or they will risk losing their network affiliations.

Moonves made his remarks at Credit Suisse investors conference in Florida.

The CBS chief turned up the volume on the pre-upfront posturing, insisting that the scatter market was commanding greater than 30 percent increases over last year’s upfront market. And it’s not just CBS, Moonves reported, but Fox and NBC as well that are commanding such increases.

“I’ve never seen the scatter market as strong as it is right now,” he told the conference attendees.

In fact, he said, the market is so strong that the network is handing off additional time to the sales department normally reserved to promote the network’s own programming.

Moonves insisted that the network would command “strong double-digit” price increases in the upfront, which will begin in May after the new fall schedules are unveiled. By comparison, advertisers paid reduced rates in 2009 when the recession was in full swing.

And if advertisers refuse to pay the double digit rates that CBS wants, said Moonves, the net will again, like last year, sell only 65 percent of its time upfront, versus the normal 75 percent to 80 percent. The bet will be on another strong scatter market next season as the economy continues to strengthen.

His advice to advertisers during this year’s upfront negotiations: “buy early and often.”

As to local CBS affiliates, when asked if he would yank affiliations of stations who balked at paying the network substantial portions of their retransmission fees from cable companies, Moonves replied bluntly: “Yes.”

Affiliates, he said, “are sharing in the success” of the high ratings and advertiser demand for CBS programming that the network spends roughly $6 billion annually to develop. “I need something back for that,” he said.

Increasingly, local broadcast stations are demanding and receiving so-called retransmission fees from cable operators in return for permission to carry the broadcast signals on their cable systems. In fact, Moonves said CBS-owned TV stations would collect about $250 million annually in such fees by 2012.

Moonves referenced the case of Florida affiliate a few years back who refused to pay the network anything for its affiliation, and in fact insisted that the network pay it. CBS pulled its affiliation and the station dropped from the number one rated station in the market to the fifth ranked position. “We will find some other way into markets,” where affiliates refuse to pay, he threatened.