Nexstar CFO Tom Carter is optimistic that a more deregulated era is dawning and the company will be acquiring more stations, though he won’t pin down a growth target. He’s also bullish on ATSC 3.0, and sees the repack as a kickstarter to get it in place.
Nexstar Sees More Acquisitions Ahead
Nexstar CFO Tom Carter is “somewhere between hopeful and confident” about a new era of more favorable regulation under the new administration, but he’s keeping an acquisition target close to the vest.
“There is no number in mind,” Carter told an audience at the NAB Show in Las Vegas today. “Our diligence will answer that question.”
Nexstar is interested only in accretive transactions, he said, though he conceded Tribune’s assets might be attractive by its criteria.
Tribune could potentially give Nexstar access to markets where it’s not currently represented, allowing it to overlay its sales and digital practices, along with “being able to spread our distribution agreements over a wider footprint,” he said.
Carter was more reticent about Nexstar’s growth into larger markets.
“We hunt where the ducks are,” he said. “The ducks historically for us have been in small and medium-size markets.”
Nexstar’s modus operandi is to bring large-market fundamentals into those smaller markets, he says, though diligence and the numbers may ultimately direct the broadcaster into larger DMAs.
On the other hand, Carter was unabashedly optimistic about ATSC 3.0 and sees an opportunity there entwined with the repack.
“We can use the repacking as a kickstarter to get the equipment in place,” he said, noting that Nexstar will begin its own 3.0 work during that process, which he sees as fully becoming a reality over the next three to five years at a cost of $50 million-$60 million to the company. He hopes to see some of that recouped from the government.
Now that the spectrum auction is over, Carter also wants all broadcasters to lock arms and move forward on 3.0. To that end, he called for his peers to get on board with a consortium Nexstar has formed with Sinclair. Through that consortium, the companies will ante up 2 MHz of spectrum in each of their markets to promote innovation.
And as retransmission “gets a little toppy in six to nine years,” he sees 3.0 coming along to fill the breach. “It’s the potential for a revenue line item that doesn’t exist today,” he said, noting that ought to motivate other broadcasters as well.
Not that retransmission revenue is something Nexstar plans to give over easily. “I can promise you that we’ll be paying the least of anybody because scale matters,” Carter said. “Size does matter … and that’s going to help us in making it a fairer fight. It’s all about the pain threshold.”
Carter also spoke to Nexstar’s integration of Media General as a successful but ongoing process of streamlining. Prior to the merger, for instance, Media General had an organizational chart with 63 entities. Within 60 days, Nexstar had eliminated 57 of them, making for a quarter-million dollars less in filing fees.
Nexstar is also paring back on duplicative positions and operations and is well on its way to executing on its guidance, Carter said. “It’s a lot of blocking and tackling.”
The company is bullish on local advertising compared with national, as Carter says it sees local as “stickier” and has historically performed better for Nexstar. But he was also optimistic that programmatic could help national advertising by automating the process and potentially recapturing some of the national decline.
“We’re just too damned hard to do business with,” Carter said of the numerous calls national ad buyers must make, not to mention the scores of invoices they receive.
And on the advertising front, Nexstar was happy with its 2016 political results, though Carter says the last election was an anomaly that won’t repeat itself in the local elections of 2018. The company is looking forward to that next cycle.
“We think we’re well positioned and it’s going to be as contentious as ever,” Carter said.
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