Carriage Deals Growing More Expensive and Complicated
Deals between pay-TV distributors and programmers are becoming increasingly complicated as content owners seek higher prices and distributors try to win broader sets of rights, executives told investors at a Goldman Sachs conference in New York this week. Sometimes TV programmers don’t always have all the rights the pay-TV operators want to license, said CEO Glenn Britt of Time Warner Cable. “The world tends to focus on the money part of these deals, but the reality is the negotiations have gotten very complicated and it’s because we want to move toward the ‘four anys'” of letting viewers watch programming on their device of choice at their place and time of choice, he said.
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Beyond the new rights distributors are seeking, the rise of retransmission consent payments has affected cable carriage negotiations because there are now more programmers competing for fees, said CEO Ken Lowe of Scripps Networks Interactive. “It’s more complicated, there are more deal points that have to be sought and the field has been expanded because of retransmission consent.” In most cases, deals can be reached despite the difficulty of the negotiations, Lowe said. “Holding the consumer hostage in the middle is not a win for either side."
As retrans payments grow, distributors may have to reassess how they pay programmers for the networks they carry, as quality of programming begins to win out over quantity, said News Corp. President Chase Carey. “I think you're going have a shift from the land grab … to where value accrues to those who deliver the greatest value.” Retrans payments to its Fox stations and affiliates should continue to grow because they're greatly undervalued, he said. “We're not trying to declare war or just pick fights. We're trying to be treated fairly."
Distributors will manage the programming cost increases to protect their margins, said Michael Angelakis, Comcast chief financial officer. “This is not a new phenomenon.” One way Comcast has kept costs under control is through its size, he said. But costs will continue to creep up as more subscribers take up digital cable services and distributors gain more VOD and online video rights, he said.
Besides the retrans fees Disney collects directly from distributors, it expects to see payments from ABC’s broadcast affiliates, said CEO Bob Iger. “We've struck some deals already with affiliates to gain access to those fees,” which are pure profit for the network, he said. “You don’t have to put any new salesmen on the ground, open up any new offices or create any new technologies,” he said. “Given the dynamic of the broadcast business and the relationship with affiliates, we feel it’s not only within our right but that we will get more cash from [affiliates'] retransmission consent deals.”