Broadcasters: 20% of Revenue from Digital

Gray Television’s Robert Prather, LIN TV’s Vince Sadusky, Nexstar Broadcasting Group’s Perry Sook Speak at Deutsche Bank Media Conference
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New York -- A trio of broadcast CEOs laid out ambitious digital strategies at the Deutsche Bank Media Conference here Tuesday, with retransmission-consent fees the focus of the game plan.

Gray Television’s Robert Prather, LIN TV’s Vince Sadusky and Nexstar Broadcasting Group’s Perry Sook said collecting from cable, satellite and telco providers for the right to air their stations’ signals wasn’t a question of if, but how much.

Moderator Drew Marcus of Deutsche said retransmission-consent fees represented 2% of broadcast revenue last year, but that figure would jump to 10% in 2011. And with those fees going straight to the bottom line, retrans is expected to represent 25% of stations’ profits in 2011, he added.

Sook said Nexstar has about one-dozen-and-one-half distribution contracts up for renewal, and it would continue to be active in collecting carriage fees.

Prather publicly cited Sook for being an early retrans champion. “We all owe Perry Sook a debt of gratitude,” he said. “He stood up for these things that I didn’t want to [stand up for] and a lot of people didn’t want to.”

LIN, meanwhile, has been in a high-profile spat over retrans with Charter Communications, which may result in 11 LIN stations going dark for Charter customers June 30 if an agreement is not reached. Differing from a statement last week that said LIN expected Charter to discontinue their carriage, Sadusky was “very confident” that the two parties could negotiate a deal before the contract is up at the end of the month.

Sadusky forecast that 20% of LIN’s revenue would come from digital, including retrans, in 2010. Sook predicted 20% for 2011. “In a few years, it’s eminently achievable,” he said, while Prather felt that 20% was a bit too ambitious for Gray.

The CEOs offered other digital insights. Sook mentioned the Nexstar station sites as “community portals” not adorned with station branding -- such as WROC Rochester, N.Y., and its RochesterHomepage.net -- as crucial in growing Nexstar’s Web revenue from $100,000 in 2006 to $5 million last year and more than $10 million in 2008.

“We can’t out-Google Google and we can’t out-YouTube YouTube,” he said, “but we can out-hyper-local all of them.”

The broadcast bosses were also bullish on political revenue.

Prather called for $60 million in election money to be spent this year, around 15% of Gray’s revenue and a boost from the $43 million Gray saw in political money in 2006. He said Sens. John McCain (R-Ariz.) and Barack Obama (D-Ill.) started spending in the battleground states in which Gray has stations last week. “We think it’s going to start pouring in,” he added.

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