The what-to-watch decision got a little simpler for Verizon Fios TV subscribers in 11 East Coast markets after Nexstar yanked 14 channels at midnight Friday in yet another retransmission-fee spat.
The outage includes 13 local stations serving such markets as New York, Washington, D.C., Richmond, Va., Harrisburg, Penn., and Providence, R.I., as well as Nexstar’s NewsNation news channel.
“We have offered to extend our agreement with Nexstar, but they have refused an extension,” Verizon said in an announcement on its site. “We will continue working with Nexstar to restore their programming to you as soon as possible.”
Nexstar, meanwhile, blamed Verizon for not taking the same deal as other MVPDs.
“Nexstar has been negotiating tirelessly and in good faith in an attempt to reach a mutually agreeable multi-year contract with Verizon FiOS, offering the same fair market rates it offered to other large distribution partners with whom it completed successful negotiations earlier this year,” it said in a press release.
In a research note, S&P Global Market Intelligence analyst Justin Nielson estimated that those 14 stations yielded $377.6 million in gross retrans revenue, for an average $4.19 per subscriber per month in the second quarter.
“In the second quarter, the average year-over-year retrans per sub rate increase among the 11 publicly traded U.S. TV station groups was 17.0% on a station/network basis, with Nexstar TV station retrans rates growing 15.6% on average,” Nielson wrote.
He also warned that Nexstar could suffer if this drags on.
“On the advertising side, a potential retrans disruption for Nexstar only a few weeks away from the 2022 midterm election day on Nov. 8 could adversely impact the big push of political ad buys,” Nielson wrote. “In addition, its broadcast network affiliation partners might be forced into make-goods or lower ad rates during major sporting events and primetime programming from the loss in audience reach.”
Two other analysts said Verizon would see fewer consequences, at least in the short term.
“Most pay-TV subscribers have become used to these types of blackout situations and have learned to wait them out,” emailed Tammy Parker, principal analyst for global telecom consumer services at GlobalData. “I don’t think Fios subscribers will start jumping ship unless this dispute extends more than a few weeks.”
Brett Sappington, a vice president with Interpret, suggested that Verizon had priced in the risks of added subscriber churn.
“Importantly, Verizon made a decision to risk potential cancellations by not accepting Nexstar’s terms,” he wrote in an email. “That fact suggests Verizon’s belief that the loss of revenue due to cancellations is equal to or less than the increased content cost from Nexstar.”
That provider has already seen its TV-subscriber base steadily dwindling. In its second quarter earnings report, Verizon reported losing another 86,000 Fios TV subscriptions, bringing the total down to 3.4 million after years of decline.
In noting that frustrated Nexstar viewers can pick up those local channels with an over-the-air antenna, Verizon’s announcement offers an unintentional vote of confidence in Nexstar’s strategy of boosting OTA viewership via NextGen TV (aka ATSC 3.0) broadcasts.
In January, that Irving, Tex., firm told investors that it expected NextGen’s additional revenue streams—including targeted ads, data services and sports betting—would yield as much as $15 billion in revenue by 2030 for broadcasters, more than the $13 billion they collect in retrans fees today.