“We did try, but it’s over now,” Aereo investor Barry Diller told CNBC following this morning’s Supreme Court ruling that Aereo violates TV station copyrights when it streams their over-the-air signals without their permission. That has given a jolt to broadcast stocks: Sinclair Broadcasting leads the pack with shares up more than 15% But CBS is up 5.4% with E.W. Scripps +6.5% and Gannett +4.7%. The decision relieves a big concern for Wall Street: that Aereo or a service like it might endanger broadcasters’ ability to demand rising retransmission consent fees from pay TV providers.
Station owners are expected to collect $7.1B in retransmission payments in 2018, up from $3.3B last year. CBS chief Les Moonves has predicted that his company will collect at least $2B in retransmission revenues in 2020. And the revenues could account for nearly 20% of cash flow growth this year at the major broadcast network owners — CBS, Fox, Disney, and Comcast — MoffettNathanson Research estimates.
CBS had the most at stake among Big Media companies because it has few cable channels or other businesses to offset any threat to its broadcast network and stations. The court ruling “validates CBS’ investment in expensive and high-quality programming,” Guggenheim Securities’ Michael Morris says. Janney Capital Markets’ Tony Wible says the decision “effectively increases broadcaster’s negotiating leverage over [cable and satellite companies] in retrans discussions, which is critical given the weaker ad market and rising cost of content.”