Disney CEO: We Expect 'Retrans Fees' From Affiliates

Date : 09/21/2010 @ 2:35PM
Source : Dow Jones News
Stock : Lin TV Corp (TVL)
Quote : 14.9  0.0 (0.00%) @ 2:05AM

Disney CEO: We Expect 'Retrans Fees' From Affiliates

Walt Disney (NYSE:DIS)
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Robert Iger, chief executive of Walt Disney Co. (DIS), said Tuesday that he expects his company to receive payments from affiliate stations of Disney's national broadcast network, ABC, as a result of the increase in carriage fees they expect from pay-TV providers, like cable and satellite companies.

The comments, which came at an investor conference here, reflect an emerging conflict between broadcast networks and their local affiliate stations around the country as the industry makes gains in so-called retransmission consent fees--payments from pay-TV operators to broadcast networks in return for carriage of their programming.

In the past, broadcast networks only benefited from pay-TV subscription revenue to the extent that their corporate parents used them to negotiate higher carriage fees for their stable cable networks. Recently, however, as the advertising business has slumped, broadcasters have successfully negotiated for substantial retransmission consent fees, a shift that media executives have hailed as a key shift for the industry.

Now that subscription revenue is flowing into the broadcast business, national networks are demanding a share of the fees paid to local, affiliate TV stations that use their popular programming to drive audience ratings.

"We've struck deals already with some affiliates, and we're in discussions with others about that opportunity," said Iger.

Vincent Sadusky, chief executive with LIN TV Corp. (TVL), and Perry Sook, chief executive with Nexstar Broadcasting Group Inc. (NXST), both said early at the same conference that they already compensated national networks for their programming and were reluctant to share in new revenue streams from retransmission consent. Both companies own a portfolio of local broadcast stations.

Sook said he believes stations can find other ways to work with national networks to extract more value for both sides from pay-TV providers.

Meanwhile, Iger said Disney's film business is not suffering "cannibalization" in its DVD sales business as a result of its decision to make film titles available for rent through low-cost Redbox kiosks--a service owned by Coinstar Inc. (CSTR). Disney has made its films available to Redbox without a 30-day delay demanded by other major film studios seeking to protect their more profitable DVD retail business.

Iger said Disney's DVD retail business doesn't face the same threat that other studios do from the low-cost rental business because consumers are more likely to want to own the company's films. For instance, he said, Disney's movies for young children are often watched many times in the home, making it more economical for a family to own the DVD as opposed to renting it.

Iger also said he feels the collective value of the company's media brands are underappreciated in the investment community, and he said he has no regrets about the company's willingness to embrace digital distribution channels, like Apple Inc.'s (AAPL) iTunes service as well as online video sites like ABC.com and Hulu.com.

Critics have noted that Apple Chief Executive Steve Jobs is Disney's largest shareholder, arguing that his influence has led Disney to embrace services that are threatening the long-term health of the traditional businesses that make up the lion's share of revenue for major media conglomerates. Iger said new media offers new revenue opportunities for media that can help the industry grow, and he said Disney's early willingness to embrace digital channels has bolstered its competitive edge in the market.

"We see digital media as a glass half full--not half empty," said Iger.

-By Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com


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