For Nexstar Digital And Raifman, Size Matters

Nexstar made a huge play for scale with its acquisitions of LIN Media and Media General. Now it’s sharpening the knives in its digital arsenal.

Nexstar Digital, the wholly-owned unit it formed in late 2016, just reported revenue of $46.7 million in the first quarter, and Nexstar CEO Perry Sook told analysts that he expects it to be a “major growth engine.”

“Our intention, as stated previously, is to double the revenue of Nexstar Digital over the next five years by making smart investments in people and companies that are accretive and that complement our core competencies,” he said.

Sook’s latest investment in digital people is Gregory Raifman, who most recently led The Rubicon Project, where he oversaw a successful IPO in 2014. He took over as president of Nexstar Digital on April 1.

Raifman has a remit to consolidate Nexstar Digital’s multiple technology assets into a single platform team, grow business at its digital agency services HYFN and LIN Digital and to go shopping for potential new acquisitions that can further strengthen the company’s portfolio (Raifman’s responsibilities don’t extend to Nexstar stations’ websites nor their sales teams).

Raifman has tapped Anthony “Tony” Katsur as its new SVP of platforms to lead the consolidation effort. Michael Kestenbaum was also named to the newly created post of SVP of strategy and corporate development, where he’ll help to lead organic and M&A-driven growth.

On the tech stack side, Raifman told me the rollup “is well underway right now.” This includes the companies Lakana, a content management system platform; Kixer, a recommendation engine; and the programmatic platforms Yashi and Mass².

It’s likely that some or all of those individual brand identities will disappear in the effort. “You’re going to see fewer and fewer brand names out there, and we’re going to be combining them under the Nexstar Digital brand name,” he says. “That will allow us to go to market a lot more effectively than a lot of smaller brands and solutions.”

However many brands it ends up with, Nexstar will still be facing a tough CMS market marked by consolidations among providers and the attractive DIY options offered by players like WordPress. And there’s also no shortage of programmatic options for media companies, which have flocked to the space in recent years.

Meanwhile, he says, the LIN Digital and HYFN digital media agencies will benefit from more investment to spur revenue growth. But there, too, Nexstar faces myriad competition. Not only is it squaring off against other broadcasters that have launched digital agencies, but many local newspapers have also flocked into the space, eager to offset their painful print losses with more diversified digital revenue sources.

Despite being in a very crowded elevator, Raifman is bullish about the potential of digital agency services. “The size of the markets are still well into the billions,” he says. “The addressable market for digital ad spend in social is about $5 billion-plus, aside from what goes to Facebook, Snapchat and others.”

One of the more interesting things to watch in the coming months — especially for fellow broadcasters and the myriad tech companies courting a potential buyer — will be where and how Nexstar Digital goes shopping. On that front, Raifman offered some insights about his shopping list criteria.

“It’s still very early days,” he says of the M&A hunt, but “we look at the industry as a wide and compelling marketplace right now.”

There is one area we can likely rule out: making an investment stake in another digital media company like a BuzzFeed or Vice.

“We are still designing the investment strategy, but we’re not likely to be in the market to make investments that aren’t complete acquisitions or controlling positions because we are ultimately an operating company and not a venture company,” Raifman says.

Instead, Nexstar Digital’s priority is to build a tech stack it can deploy to leverage its capabilities. There, it’s potentially interested in local and social platforms that enhance its consumer reach and current ad tech strengths.

Raifman says the disruption currently roiling the industry may actually be an advantage for Nexstar.

“I just came from a company where in 2012, our primary product was 90%-plus of its revenues, and three years later it had dropped to 5%,” he says of his time at Rubicon. An acquaintance with that kind of disruption prepares one for it to come again, and not all broadcasters may be as nimble.

Nexstar is looking for an opportunity “to leverage that kind of change in ways that maybe our competitors aren’t thinking about or aren’t focusing on,” Raifman says, noting that’s where Nexstar’s post-Media General heft comes into play. “To keep up with this level of technology change, you actually need size and scale in some ways more than innovation.”

Raifman has his eyes open to all of the consumer volatility broadcast is facing, including OTT. He says he’s watching trends there closely.

“The change and the disruption that’s coming from OTT and VOD can’t be ignored,” he says. “Cord cutting, OTT and VOD are growing and potentially threatening linear TV’s dominance in content and distribution.”

Nexstar is sizing up its opportunities in that space, he says, facing the reality that “more and more of the U.S. population is heading in this direction.”

Consumer engagement generally is at a crossroads, he says. People want content delivered on their own terms — not a media company’s — at the same time as they leave behind a desktop-centric world to one that’s overwhelmingly mobile and social.

Against this backdrop, Raifman sees a rising frustration stemming from the deluge of disparate technologies and tech providers, along with a flood of monetization platforms proffering solutions to the business challenges that have been wrought.

“This is where I see the exciting opportunity for Nexstar Digital to lead — not on the edges but at the core of the market’s needs,” he says.

As linear television gets integrated with more and more technologies, he sees an opportunity “to meld the very best of our unique capabilities into one stronger, focused and innovative team combining the insights we can offer and the access we have built to hundreds of millions of consumers.

“The data, content and technology we are capable of bringing to the market — with a highly localized focus — is exactly what customers are asking for.”

Maybe so. Meanwhile, Nexstar’s competitors should be sure that it’s bringing its size and scale to bear on digital, starting with rallying its companies under one flag.

Michael Depp is TVNewsCheck’s special projects editor. His column on the nexus of old and new media will appear regularly. He can be reached at [email protected].