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Analyst: Retrans Revenues Growing Faster Than Expected

Revenue from retransmission is growing faster than expected,
according to a new report.

Todd Juenger, senior analyst at Bernstein Research, notes
that CBS has signaled that retrans revenues will approach $1 billion in 2016.
The company has previously said retrans will reach that level in 2017.

To get $1 billion in revenue in retrains, CBS would be
getting about $1.22 a month per sub from operators and 61 cents a month per sub
in reverse compensation payments from affiliates.

Juenger says that retrans growth for Fox and ABC are moving
in line with CBS, while NBC's is growing more slowly.

Longer term, Juenger says he expects retrans to reach $2 per
month per sub by 2025, reflecting an annual growth rate of 7% between 2016 and

Faster growth in retrans would put huge cost pressures on
distributors and encourage companies like Aereo, which are looking to provide
broadcast signals while avoiding retrans payments.

"Whether Aereo specifically works or not, its more
important significance, we believe, is that entrepreneurs will continue
storming the castle and someday may succeed in capturing that free signal in a
way that consumers can easily integrate with their cable/satellite channels and
DVR," Juenger says. "At the same time, we believe there is some reasonable
price the MVPDs will pay in order to maintain the convenience and elegance of
today's fully bundled video service (including the broadcast networks)."

At $2 a sub per month, the growth in retrans payments would
a $10 a share to CBS stock, $3 a share to News Corp. and $5 a share to Walt
Disney Co.

Juenger says Bernstein favors U.S. media companies that are
poised to benefit the most from increases in affiliate fees and international
growth (both in TV and Theatrical).  "As
a result of our work valuing the long-term value of retrans at CBS and News
Corp., we are increasing our target prices by $3 and $2, respectively," he
says.  "These adjustments are primarily
driven by out years, but in the case of CBS, we modified our EPS estimates
slightly, increasing 2012 by $0.03 and reducing 2013 by $0.01."