The debate about how much pay-TV affiliate fees will increase...
The debate about how much pay-TV affiliate fees will increase each year seems to be resolved at around the 8 to 9 percent range, Nomura analysts Mike McCormack and Mike Liddell wrote in a note to investors. Based on Nomura’s…
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estimates and the guidance from both pay-TV distributors and programmers this quarter, “the trend is not expected to soften through the investable horizon,” they wrote. But distributors may be able to afford the higher programming rights, they said. “With capital intensity declining, we see strategic value in securing enhanced rights to differentiate video and accentuate the broadband products,” they wrote. “Even if video gross margins are in decline, there is value in selling an incremental broadband subscription, or a higher-speed tier,” which contribute much higher margin with low capital intensity, they said. But that scenario only benefits ISPs, they said. “Similar to the HD channel advantage that DBS providers had in the mid-2000s, bundled providers are advantaged today, and everyone will likely have to pay,” they said.