A new report from Moody’s says reverse compensation demands from the major broadcast networks will put the financial health of local station groups under pressure in the next two years.
“As the four major U.S. networks renew their multi-year contracts with broadcasters, the networks have increased their demands for ‘reverse compensation,’ which will post a risk to broadcasters’ cash flow in the near term,” Carl Salas, Moody’s vice president and senior analyst, said.
The four major networks charge reverse compensation in exchange for a station being permitted to affiliate with the network.
The credit services agency says the only way to offset the pressure will be to negotiate “significant” increases in retrans fees from cable and satellite providers, as well as to expand advertising revenue and digital strategies.