LOS ANGELES (TheStreet) -- As Americans watch less traditional TV and advertising revenues decline, retransmission fees -- the money that pay-TV providers pay to carry a channel -- have become a silver lining for networks like CBS (CBS) .
But CBS, which has enjoyed increases of retransmission and other similar fees for two consecutive quarters, has had to play tough with pay-TV providers to secure that revenue. CBS channels even went dark for a time on Dish Network (DISH) in December and Time Warner Cable (TWC) in 2013 when the two sides were unable to agree on the fees.
CBS is likely to have another challenging negotiation later this year if AT&T (T) wins approval for its $48 billion acquisition of DirecTV (DTV). A larger AT&T could press CBS to alter its current retransmission contract to either lower the total cost, or cut back on the number of CBS networks it's required to carry.
AT&T's current agreement with CBS for its U-Verse pay-TV service expires on June 30, and its reasonable to expect that the Dallas-based broadband provider will seek to reduce its programming costs. And at the heart of the renegotiation will be the retransmission fees, which are expected to exceed $9 billion per year by 2020, according to SNL Kagan, an industry research group.
The push by pay-TV operators to cut retransmission fees comes as more viewership moves online and consumers are demanding alternatives to the traditional 150-plus channel bundle. Dish Network, for example, is offering Sling TV, an Internet-based service of 22 channels including Disney's (DIS) ESPN for $20 a month. Similarly, Verizon's (VZ) Custom TV offers a variety of small packages starting at $55 per month.