Moody’s Sees Retrans Bringing Stability to TV Station Business

Outlook calls for 5% earnings growth

With advertising revenue harder to track, Moody’s Investors Service is forecasting that the broadcast TV station business will be stable based on retransmission consent payments, which have become a bigger part of station revenue.

In a report Tuesday, Moody’s said that the growth of earnings before interest, taxes, depreciation and amortization has become the key metric for determining health of station groups and Moody’s projects growth of close to 5% for the sector.

Moody’s said advertising growth is no longer the best metric for gauging station health. Different station groups calculate core advertising growth differently, with some including digital revenue. And events like the Olympics and elections make year-to-year comparability difficult.

“Softness in core advertising revenue masks the influence and strength retransmission fees are providing and the contribution to EBITDA growth,” said Moody’s, which pegs retrans at about 30% to 40% of total revenue for the station business.

“Going forward, [retrans revenue] growth will moderate, but remain above 10%, and the mix will approach 40% of total revenue,” Moody’s said. “We expect new distribution agreements with virtual MVPD's will support this strength. These new entrants are already executing distribution deals with broadcast affiliates at rates that are usually equal to or better the rated earned with traditional MVPDs.”