Nexstar Media Group (NXST) - President & COO Michael Biard, CFO Lee Ann Gliha

Up next, we have Nexstar. Nexstar Media Group is headquartered in Irving, Texas. It's the largest local broadcast television group in the United States. Following the acquisition of Tribune in 2019, the company owns or partners with over 200 broadcast stations in 160 markets, reaching approximately 70% of all US TV households. Nexstar also owns NewsNation, a national cable network, and has a 75% majority stake in the CW broadcast network. The company has about 30 million shares trading around 165 for a 5 billion equity market cap, 6.2 billion of net debt for about 11.3 billion total enterprise value. Today we have the company's president and chief operating officer, Michael Baird, and chief financial officer, Lee Gliha, with us here virtually. Thank you both so much for joining us.

Thank you. Happy to be here.

So, I'll start off with some of the topics we covered last year to see where we are. We discussed the Charter Disney standoff and your broader thoughts around implications for broadcast. Over the course of the last year, we've seen companies with broadcast assets outperform those. And we've seen large media companies like Comcast and Disney who have explored ways to create value by spinning off traditional cable network assets, retaining their broadcast assets, things like that. Seems like would indicate a positive trajectory for broadcast. So, as we sit here in 2025, how is your thinking around broadcast's role in the ecosystem changed at all? And with streaming fragmentation continuing, is broadcast scale and reach even more valuable?

Sure, I'll take that one. I think when you look back on the fall of 23 because you referenced the Charter Disney kerfuffle, we looked at that and took a few things away, not just from the fact that there was a conflict but more from the resolution of that conflict. Briefly, a few of the highlights that we saw: first, the value or the fight wasn't over valuable programming. You didn't see Charter anywhere in their materials — and if you recall, they came out with a very thoughtful deck, I didn't necessarily agree with everything in it but it was very thoughtful and there were a lot of great points in there — and nowhere in there did you see them really taking issue with the value of the premium programming inside the Disney portfolio. They didn't attack ESPN or ABC for instance. And in the end, that premium stuff got paid. Second, one of the things you did see Charter going after was the value of the long-tail cable networks, or really the lack of value thereof. The sort of stuff that nearly every objective observer looks at today and says, these things really aren't providing value into the cable bundle. And if you recall, when the deal got done and the Disney networks were relaunched on Charter, there were a few that didn't come back. These were largely derivative networks that were derived from their leading brands and they were left out when the deal was struck. The third, and this was really a critical piece for us, was the DTC services were brought back into the bundle for the first time, allowing Charter to bundle DTC with their linear video that they sell to their subscribers. And that was an important milestone from our perspective because it essentially marked the end of an era where programmers could act as if they could benefit from the bundled linear video business that was essentially paying for all the DTC services while simultaneously undermining it with what they were doing with their DTC services. We thought then and we still do today that those takeaways were all positive signals for broadcast. Nothing is more premium or more valuable to the bundle than broadcast, even versus ESPN. We think the calling of those long-tail cable networks was really a good thing for us as well, taking cost out of the system where there's no value coming back in. Good for consumers and frankly good for us if it frees up dollars to be reallocated to services like ours that we think are really delivering the value to the bundle. And third, the idea that the DTC services come back in is a good thing from our perspective as well, eliminating the temptation for programmers to take programming away from broadcast and put it on a DTC service. And frankly, it provides the opposite incentive. If you think of DTC services and linear now being brought back together, if I'm a programmer at a major network, I want to put my big programming on the broadest reach. I don't have a temptation to separate it to try and get paid twice anymore. So I'm going to put it where I can get the most advertising benefit. All of those things at the time we thought were good. Nothing in the interim has changed our mind on that, and as you referenced at the beginning of the question, what we've seen since has only strengthened our point of view on that. Developments at Comcast by shedding their cable networks, refocusing on broadcast as the centerpiece of their video strategy. You heard from the Skydance folks when they announced their Paramount acquisition that CBS was really critical to their vision of the future of that business. And finally, if you think about what Fox has announced with respect to their DTC product, they've been very expressive about saying they're not going to chase original programming for that product, they expect to deliver it as part of their bundled video that they provide to the pay TV business. And I'm not sure if they've said this, but we can say that the full-time feeds of their affiliated stations are included inside that product.

Great. That's a really helpful overview. And we've talked a lot about the potential for deregulation in the broadcast space under FCC Chairman Brendan Carr. What's your take on his early policy direction and what do you see as the largest benefits to the broadcast ecosystem if some of these changes go through?

Well, candidly, it's been a breath of fresh air to have an FCC chair that understands the value that broadcast, and in particular the local station, provides to the community. And we're grateful that he understands that the regulatory scheme around broadcast is really an abject anachronism that needs to go away. Chairman Carr has been refreshingly practical and modern in recognizing that there's something seriously broken with a system that says a company like Nexstar and fellow broadcasters can't grow because we're capped, while big tech and big media with whom we compete both for advertising and viewers can continue to grow without constraint of any kind of similar regulatory scheme. So the chairman has brought an urgency to the situation that is frankly long overdue, and we're grateful for it.

Great. So, Nexstar has been right up against the cap for some time now, and you're the largest broadcaster in the US as I mentioned in my intro. Share your thoughts around M&A opportunities and areas of interest for Nexstar in particular from where we sit today and timing, in light of the potential deregulation that you see coming. How do you see Nexstar participating in further industry consolidation from here and what are your biggest focus areas?

In terms of timing for that first piece on the regulatory side to get into place, what are you anticipating now in light of some of the developments we've heard this week and the potential confirmation of the next Republican commissioner? What are you thinking about in terms of timing?

Look, I think our expectations are that once the FCC gets into a position where there's a Republican majority, we would start to see some action, Brendan Carr acting on his agenda at that point.

That's helpful. And then in terms of the three buckets of synergy from consolidation that you mentioned, what do you see as the most impactful from where we sit today? I think you mentioned retrans synergies, corporate overhead, and there's one more.

That's helpful. And so continuing with retransmission and kind of the scale opportunities. As the largest local broadcaster, you obviously have pricing power to raise your rates, but that's been offset by subscriber declines. Can you share your outlook for retransmission from where we sit today and where we are in terms of the payment cycle relative to where it may go?

Sure, I'll jump in. I don't agree that we have pricing power. I think that's a term of art in some circles that we don't necessarily agree with. We certainly have enough scale to be taken seriously, and I think the heart of your question is really one about scale. The media business, particularly on the distribution side, has always been a scaled business. But notwithstanding our ranking as the largest broadcaster, as I mentioned before, we're in a world where we're competing with big tech all the time, so more scale is always better, especially if you consider who our competition is. And as Lee mentioned, as we think about M&A, scale not only provides negotiating leverage but operating leverage as well, which is critically important to us. But with respect to your specific question on retrans, I guess the answer is we'll continue to pursue a share of the wholesale fees that better reflects the share of the value that we deliver. If you just think about it from a ratings perspective, compare share of wallet — what percentage of fees do we pull out of the system versus share of viewership, what do we deliver back in? There's still a disparity there, and we think that disparity is on the order of about 40%. So there's 40% upside to our retrans if we got those two things to level out. That's been the marker that we've been pursuing for some time. We think there's still upside there, and we'll continue to pursue that going forward.

That's helpful. And then just closing the loop on potential regulatory relief. There's a few other areas that have been floated. Anything impactful or meaningful, likely not quite as meaningful as changes to the cap, but in terms of ATSC changes or potential reverse retrans payments, that sort of thing.

Sure, let me break those down separately. The notion that reverse retrans payments — what affiliated stations pay to their networks — that that's going to be capped or regulated came from one commissioner, in fact one who will retire as of tomorrow or resign as of tomorrow, in an op-ed. So I guess we haven't seen a lot of traction around that idea, and we don't spend a lot of time thinking about that as being very operative. On the ATSC front, yes, that is important. The idea — and this is a proposed rulemaking that the NAB has proffered — that there'd be a mandatory cutoff date converting from 1.0 the current technology to 3.0, making everything that we do over the air a lot more efficient. We think that has a lot of legs actually, should be adopted. And coupled with that, a pretty quick end to the idea that we have to simulcast what we put out on our primary signal on 1.0 on 3.0 as well. That's just duplicative, it's inefficient, and it's taking up spectrum that we could be using for other purposes.

That's helpful. So moving on to sports, Nexstar's diversified its mix of sports programming, including the big four affiliate sports, CW sports, and local sports. Talk a bit about the benefit of broadcast model to sports and how you think Nexstar's strategy around sports develops from here.

Yeah, I'll start with the headline that we think fundamentally broadcast television remains the most important medium for engaging live sports audiences. I think you could just look in the last year and see, notwithstanding all of the rumors of the demise of broadcast TV, it just keeps chugging along and actually setting new records. You look at the Super Bowl what it did this year, Kentucky Derby, just a couple of weeks ago the Indy 500 set a new record for the last 19 years or something like that. The Final Four, the Masters, the NFL draft — all of these things centered on broadcast. Some of them with a little bit of streaming augment, but you don't see any stories like that written about events that are exclusively on cable. The new records that continue to be set are centered on the cornerstone of their distribution being broadcast. So we like where we are in that regard. If you think about our portfolio and break it down into three different buckets: one is we get programming from our big four affiliated networks on our affiliated stations. We don't really have anything to do with the acquisition of that programming; we look at how it's distributed to us, how much of it is exclusive and so forth through the network, and that of course factors into what is a complex and pretty multifaceted relationship with the networks. The other two buckets — what we have on the CW and what we acquire on a local basis for our stations — of course we control those directly, and we look at the cost benefit. We're pretty judicious about what we do in each of those markets. But the common thread I would point to in each of those is that the platform we offer our partner, whether it's a league or a team or a conference, one of the benefits we offer them is the unparalleled reach of broadcast. There really is no other platform that can match that. And frankly, we recognize that that's an asset and we use that as consideration in the negotiations that we have with them. I think every league or conference out there thinking about broadcast as a distribution platform increasingly recognizes the preeminent place that they hold. The history of alternative platforms, whether that's cable or streaming as an alternative, is now long enough to where every rights holder can sort of look back and see, okay, that was a good deal or that wasn't a good deal. In the case of MLS going exclusively to Apple, I'm not sure that's turned out to be a great deal for them. I think others looking at streaming and thinking about a big check available there, but is that really going to help me grow my brand, grow my product, grow my fan base, which is the lifeblood to all of them? When you compare that hit list of successes that I mentioned on the broadcast side against what's happened on the other side where events have gone exclusively to streaming, we see a drop off on the order of typically around 20%. Whether that's NFL on Netflix or NASCAR on Prime or Thursday Night Football, typically you're not seeing anywhere close to the year-on-year comparison; you're seeing a pretty significant drop off.

So you went ahead and answered my next question just about the role of broadcast in sports distribution with some of the streaming players coming in. So I think we can start to move on a little bit to the CW and you mentioned the CW and some of the programming changes you've made there. Can you touch on the importance of the CW to Nexstar and the opportunity that you see there?

Sure. I'll start with the importance of our 54 CW affiliated stations, because that really is a meaningful business for us. If you think about the reason we're in the CW business, it was because we were the largest CW affiliate when that business came to market three years ago. So while the CW as a network may not be the most material contributor to the finances of the company, the stations are increasingly important to us, and certainly the CW as an asset is a strategically valuable asset. It gives us the ability to control our own destiny on a vertically integrated network all the way down. By comparison with the big four networks, on the CW we can control every platform we go to. We have a seat at the table with every distributor for carriage of our stations, whether that's a virtual MVPD or traditional one. And having control of the programming allows us to program it in such a way that it benefits broadcast, which is the business that CW's always been in, but its partners were in different businesses and that drove different strategic decisions for them. So by being able to transform the programming away from niche comic book and other superhero programming and into programming that resonates with the broadcast viewer, starting with sports, we obviously have an opportunity to grow our distribution, grow our advertising, and really make it a business that is positioned in a much different way.

That makes a lot of sense. And then can you also just touch on NewsNation and the longer term opportunity that you see there?

Sure. The common thread with NewsNation and CW is that those are businesses that we were kind of adjacent to and then we've transformed them in a way to make them a better complement to our core business. In the case of CW, we were an affiliate as I just described and then took over the network and transformed it completely. In the case of NewsNation, that came to us as WGN America through the Tribune acquisition in 2019. We looked at that and thought that the world didn't need another general entertainment network focused on original scripted programming trying to compete with big tech and streamers and other big media. In that regard, what we thought it could benefit from was a fact-based, nonpartisan cable news network. That's in the wheelhouse of what we do as a company. We employ the largest number of journalists across the country, over 5,000 journalists. We do news better than anybody else at scale. And we thought that a cable news network with the characteristics I just described would resonate with viewers, and we have the ability to actually execute on that in a way that nobody else does given the fact that we have local news in hundreds of markets around the country. So it's a business that is still growing. If you look quarter on quarter, month on month, certainly at the beginning of this year, we see growing ratings. If you look at the fact that we've only been 24/7 news for about a year, it's still very much in a growth cycle. Notwithstanding that, we had the last Republican debate last year on NewsNation. We're increasingly going head-to-head with the established brands that have been around for 30 to 40 years. So we feel good about the trajectory there, and certainly are proud of the product that we're putting out every day.

That's helpful. And just want to make sure that we touch on core advertising trends and then also political. Can you just tell us what you're seeing in terms of your portfolio and the advertising expectations from where we sit today? Any categories that you see as the largest opportunities or risks moving forward, and then from there we can talk a little bit about political and how you're positioned to benefit in the upcoming cycles.

That's helpful. And then on the political side, as we move into the back half of this year and then into 2026, how are you thinking about political versus the last midterms as well as 2024?

Yeah, I'll jump in there. I think you start with the nature of our footprint. Our footprint is so extensive, we typically have a presence in like 80 to 90% of the contested markets. That gives us a level of stability and expectation that year on year we're going to garner typically about the same share of the spend in our footprint — think of it about low teens. So as the overall spend in television continues to grow, and we saw it grow in the 20 to 24 cycle, the presidential cycle, our percentage of that pie was consistent. So we expect similar trends will continue into next year both in terms of the midterms and then into 28 as well.

Great. Any audience questions? There's one in the back here.

Hello. Yeah, thank you. How much of a risk factor do you see for you guys those standalone streaming services like Paramount, Peacock, and now Fox just announced Fox One, where they're basically just giving the broadcast feed for a lot of these in a lot of markets. Is that a factor for you? Is it a concern? And forgive my ignorance if I don't understand the model there in terms of if you guys receive any retrans from those subscribers.

Yeah, I'll take that one. Each of them is a little bit different in terms of how they're structured, both in terms of the business model with us and the role that our affiliated stations with each of those networks plays inside that product. Let's start with Fox because that's the one I know best given my history. Fox will come out with a product that will include Fox Broadcast, but Fox Broadcast is only expressed in each market today through their local stations, whether that's an O&O station or an affiliated station. So when you buy the product and open it up and watch Fox, what you're going to see in each of your markets is the feed from those local stations, assuming they've gotten a deal done with each of their stations. And I can tell you that we expect to have a deal done with them in that regard. So you will see when you're watching Fox broadcast, NFL on Sunday for instance, if you're in a Nexstar market, you'll see our station. If you're in a Gray market, you'll see theirs assuming they get their deal done. And if you're in an O&O market, you'll see that. So there is an economic relationship between us. Yes, we will get paid for each of those subscribers. We have a similar relationship with Peacock. Peacock has a little bit of complexity because they have two different tiers of product. One level does not include the local stations including their O&Os. The other does include the O&Os and includes ours as well. Same with Paramount. So the economic relationship as it relates to the DTC products is one facet, as I mentioned before, of really a complex relationship that we have with our networks. There are a lot of moving pieces in terms of the puts and takes in that relationship. Ultimately, at the end of the day, I'll come back to the importance of broadcast because I think your question is do we see those as a threat. The way I think of it is those products are centered on their broadcast networks first and foremost. If they move away from broadcast, well, we know what those models look like. If they want to do deals directly with the distributors and make the content bypass broadcast, well, we know what that model looks like. It's called a cable network. And if they want to go directly to consumers exclusively, we know what that looks like. They can go compete with Netflix. So they are doing an augmented version of both of those. But to be a broadcast network and reach the entire country, and again that reach is really the secret sauce to the rights that they're able to acquire and the viewership that they're able to garner, that requires having affiliates in every market. And that's where the role that we provide and our scale, coming back to that question, is really a critical asset of the company in all of those discussions.

Great. Thanks. I think we're about at time. So we appreciate you joining us again this year and we look forward to having you again next year.

All right. Thank you.