Broadcast Stocks Rise as Gray TV Joins ‘Retrans Will Grow’ Chorus

Gray Television
(Image credit: Gray Television)

Maybe the sky isn’t falling on broadcast. 

Gray Television on Tuesday became the latest large station owner to stand up and tell Wall Street that business is good because the outlook for distribution revenues —including retransmission-consent fees — are expected to grow at a healthy rate.

Nexstar Media Group made a similar presentation last week and a few days later E.W. Scripps said it expects 15% growth in distribution revenue and a 40% jump in net distribution dollars.

Wall Street seems to be listening. Gray stock was up 3% Tuesday morning. 

Other broadcasters were showing gains Tuesday (October 17): E.W. Scripps was up 5.25%, Nexstar Media Group was up 2%, Sinclair was up nearly 2% and Tegna edged up 0.34%.

Over the last five days, station-group stocks have been on the upswing, with Scripps up 17%, Gray up 0%, Sinclair up 8%, Nexstar up 5% and Tegna up 4%.

Despite the gains, the broadcast stocks remained near their 52-week lows.

Broadcast has been suffering from the perception that the TV world is turning to streaming, leaving local stations in the dust. Advertising has been weak and it appeared that it would be difficult for stations to wring increases in retransmission fees from pay TV providers whose subscriber bases are eroding due to cord-cutting.

Two big retrans disputes added to the gloom, with Nexstar stations blacked out on DirecTV and The Walt Disney Co. going dark on Charter, which declared its business would be just fine without Disney’s cable networks, broadcast networks and stations.

When the dust settled and Charter and Disney made a deal, Nexstar declared stations a winner. 

Gray’s new presentation also maintains  the Charter-Disney agreement is positive for stations.

On the first page of its presentation, Gray declares “we believe that broadcast retrans remains significantly undervalued” and “we believe that the current environment favors continued growth for retrans revenues.”

Gray also argued that “the network/affiliate model aligns participants’ interests in curbing MVPD sub churn and in growing retrans for affiliates.”

The Disney/Charter deal, which allows Charter to no longer carry several less-watched Disney cable channels, will shift viewing and carriage fees in the stations’ direction, Gray said.

And with the regional sports network business imploding, sports teams and leagues are moving high-rated games from cable to broadcast, which will lead to higher retrans fees. 

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Gray said that if half of RSN feels were reallocated to broadcast stations, retrans revenues would rise by $3 billion, or 23%.

In its conclusion, Gray said that “broadcasters continue to deliver Premium Content that is the most watched and valued by consumers. Gray in particular provides the most valued content across its well-diversified footprint of 113 large, midsize and small markets.”

The broadcaster reiterated that networks and affiliates are aligned in preserving and growing retrans revenues, and that broadcasters and distributors are aligned in slowing subscriber churn.

“The MVPDs’ $40 billion annual spending on linear programming fees will continue to be reallocated to premium content providers, and especially to broadcasters, particularly as the number of cable nets and RSNs continues to decline,” Gray said.

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.