Following the declaration by Scripps CEO Adam Symson that his company is talking to leagues and teams to fill the gap from the “implosion” of the RSN model, analysts predictably wanted to know if Nexstar Media Group Chairman-CEO Perry Sook is contemplating a similar path for The CW — which has a national footprint like Scripps’ Ion — and an even larger portfolio of TV stations.
At the Nexstar call with analysts following Tuesday’s earnings release, Wells Fargo analyst Steven Cahall asked Sook about the opportunity and whether it’s too early to gauge the market.
“I can tell you that the number of inbound inquiries as well as discussions that are going on with team owners — the activity is frenetic. There are lots of discussions. I think our Clippers deal with Steve Balmer and the Clippers — putting a group of games broadcast exclusively (on KTLA Los Angeles) — to expose that to the part of the market that is not inside the pay TV universe — kind of broke the seal. And I think that other team owners have taken notice of that. There are a lot of conversations going on. I would expect you’ll see us do more deals as time goes on. I think, to a certain extent, the people want to see how the RSN plays out and what that means to them,” Sook said.
“We have a receptive audience, certainly among NBA owners and NHL owners that see the value of broadcast TV in exposing and distributing their product to a much larger audience than is available in the pay TV universe,” Sook noted.
“Broadcast matters,” Sook had stated earlier in the call. “Today, broadcast television remains the only place where content creators, sports organizations, team owners and, most importantly, advertisers, can access local audiences at scale. We have developed these audiences over decades by consistently providing top-rated local news, sports and entertainment content. We provide reach that no other media can, especially for sports content,” he said.
President-COO Tom Carter provided additional detail on the fourth quarter and full year 2022 financials Nexstar issued.
“Core television advertising decreased 3.3% year-over-year. Excluding the impact of The CW, core advertising was down approximately 8.7%, primarily driven by double-digit rates of decline in national spot advertising, which accounts for approximately 30% of our core television ad revenues, and political inventory displacement,” Carter said.
“Nexstar’s local TV advertising revenue, which represents approximately 70% of our total core TV ad revenues, excluding The CW, continues to meaningfully outperform national, declining just 2% year-over-year, despite the significant inventory allocations toward political during the quarter,” he said.
“So far in Q1 of 2023 we’re seeing similar results to what we saw in the fourth quarter with this revenue category,” the COO said of current trends.
“Excluding the CW, our top performing categories in the [fourth] quarter were automotive, home repair and manufacturing, entertainment, paid programming, and air conditioning and heating. We’re extremely pleased to see auto, our largest advertising category in terms of dollars spent, maintain its growth trajectory for the second consecutive quarter, increasing 23.5% over Q4 of ’21,” he said.
Carter also praised Nexstar’s local sales initiatives for adding $37 million in new business during the quarter. “The categories primarily responsible for the core advertising revenue decline were gaming/sports betting, insurance, direct response, medical/health care and radio/TV/cable/newspapers.”
“We’re not back to 2019,” Sook said in Q&A when asked if the auto ad recovery still has room to run. We are seeing some sustained, healthy increases off of that lower base. I think we have another couple of years of these kinds of increased before we begin to approach 2019 levels.”
“It is certainly a tailwind in core advertising revenue. Auto is up double-digits and we see that continuing throughout the year,” he added.
Analyst Craig Huber of Huber Research asked Sook for his “big picture” view of where the U.S. economy is heading.
“Obviously we spend a lot of time with local business owners and local advertisers. They see the customer at the checkout counter and cash register, and they know that consumers are spending — and have factored in 7% mortgages, $3 and $4 gasoline into their daily lives — and are making choices — maybe moving some of that spending. You’re seeing higher net worth customers showing up at Walmart to buy their basic items, but the consumer is still spending and local spending for us is hanging in there. Just fine in the first quarter. The weakness we see is in national, where national advertisers — who obviously aren’t as close to the end-user and customer — have paused or reduced spending due to a potential weakness in consumers going forward,” the CEO said.
Sook was asked how much core advertising is expected to be down in the current first quarter.
“It is a single-digit amount. We expect local advertising will achieve our budgeted numbers, which show a slight increase in Q1. National will be down a low double-digit amount.” In total, Sook is looking for a low single-digit decline in core this quarter.
Along with other major affiliate groups, Nexstar’s local stations were removed from Fubo TV earlier this month after rejecting carriage renewal terms negotiated by CBS owner Paramount Global.
“We firmly believe that we should control our own destiny with regard to the Virtual MVPDs instead of allowing networks to negotiate on our behalf,” said Carter, who called the terms negotiated by Paramount Global with Fubo for local CBS affiliates “below market.” He noted, however, that the outcome with Fubo TV may not be indicative of what may happen elsewhere as other vMVPD contracts come up for renewal.
Sook added that Nexstar “will go dark if we have to” to be properly compensated by the vMVPDs for its local stations. “Excluding revenue from NewsNation, which Nexstar negotiates separately, less than 10% of our gross distribution revenues are derived from virtual MVPDs,” Carter noted.
16 May 2024
23 May 2024
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