The top executive at Nexstar Media Group has criticized the streaming television business, just a few weeks after the company’s CW Network launched its first free, ad-supported streaming channel.
On a phone call with investors on Thursday, Nexstar CEO Perry Sook affirmed the company has few aspirations to deliver its broadcast and cable stations directly to consumers through an à la carte online offering, unless that product somehow resembles the traditional cable or satellite bundle.
Local broadcast affiliates owned by Nexstar are distributed through a number of cable-like streaming services, including YouTube TV, Hulu with Live TV, Fubo and DirecTV Stream, along with some network-owned services like Paramount Plus with Showtime and Comcast’s Peacock. The platforms are able to distribute Nexstar-owned ABC, CBS, Fox and NBC affiliates because of carriage agreements negotiated between the broadcast networks and the platforms.
Nexstar participates through an industry consortium called the Coalition for Local News, which is seeking to change that arrangement. The group is aiming to change certain federal regulations so streaming platforms would be forced to negotiate carriage of local broadcast stations with the broadcast owners themselves. Currently, only cable and satellite TV companies are forced to do this.
Existing cable and satellite regulations have paid off well for Nexstar: The broadcaster earned net income of $167 million off revenue of $1.284 billion during the first three months (Q1) of 2024. It was Nexstar’s highest net revenue in the company’s 27-year history.
The bulk of the company’s revenue came from those lucrative cable and satellite carriage fees, with Nexstar reporting $761 million earned from pay TV companies and their subscribers during Q1. The figure was 4.5 percent higher than what Nexstar earned in Q1 2023. By comparison, Nexstar’s advertising revenue was $512 million during Q1, down 1 percent when compared to the prior year.
The higher affiliate fee revenue suggests some programmers like DirecTV and Hawaiian Telcom acquiesced to the broadcaster’s demands for higher retransmission fees following two turbulent programming-related blackouts in 2023. Nexstar reached a new distribution contract with DirecTV around the start of the National Football League’s (NFL) regular season (DirecTV raised its subscription fees a short time later), and ended its dispute with Hawaiian Telcom after the cable operator filed a complaint with the FCC (which led to a $720,000 fine against Nexstar earlier this year — Nexstar is appealing the fine).
Nexstar has a lot of financial incentives to keep its broadcast channels off streaming platforms that don’t resemble cable-like services, given that retransmission consent fees charged to pay TV providers are now the biggest part of its business. On Thursday, Sook downplayed the importance of direct-to-consumer streaming services, saying recent news that some entertainment giants were working together on new bundled experiences were proof that the cable model was the better one.
“The announcement that you saw last night is further evidence of a rebundling of the assets in the industry,” Sook affirmed on the conference call. “As I’ve said, we’ve gone around the world to go around the corner.”
Cable and satellite platforms offer a better aggregate experience with more content choices, Sook proffered, “which, for viewers of a certain age, being able to change channels is something we still like to do.”
Sook didn’t shy away from the fact that cable and satellite prices have gone up — which are largely the result of broadcasters like Nexstar demanding more money for the same portfolio of channels — but he said streaming services are, also, raising the prices, and suggested the costs could soon be comparative to cable and satellite.
“I think the consumer now looks at the cost of an à la carte broadband package and all the streaming or other pay services they want to add on, it can quickly eclipse the cost of the traditional bundle,” Sook affirmed. “And you don’t have, again, seamless navigation and some of the other things you make. You probably don’t have the number of content choices that you do in a traditional bundle.”
Sook said Nexstar will continue to “support the bundle and support our distribution partners as best we can,” but said Nexstar’s plans don’t involve direct streaming anytime soon.
“The main reason we’re not in streaming is because we just don’t think it’s a good business,” Sook proclaimed. “It’s not a business that we want to get into to lose money. And so we think there are any number of ways that we can reach the consumer.”
But Nexstar is in the streaming business. Two years ago, when Nexstar acquired a majority stake in the CW Network from Paramount Global and Warner Bros Discovery, it also bought the CW Network app, which offers free streaming access to shows aired on the broadcast network.
Nexstar didn’t shut down the CW Network app. Instead, it continued to develop the service. A short time after closing on the CW Network deal, Nexstar announced it would distribute certain live sports — mainly, LIV Golf — through the CW Network website and app, so viewers who live in areas without a local CW Network affiliate could watch that programming.
Over the past few months, the CW Network has quietly developed its own free, ad-supported streaming television (FAST) platform, inking agreements with the E. W. Scripps Company, FilmRise and Lionsgate to distribute their FAST channels via the CW Network website and app. Last month, the CW Network took things a step further by launching its first original content stream dedicated to re-runs of the CW show “Penn & Teller: Fool Us.”
The CW Network continues to be an unprofitable venture for Nexstar, though its losses are narrowing: On Thursday, Nexstar said the CW Network lost just $50 million during the first three months of 2024, which was better than the $89 million the CW Network lost during Q1 2023.
Executives at Nexstar said the CW Network is anticipated to lose $100 million during the year, but it is also projected to be profitable in 2024 as more live sports programming rolls out.
No one on the conference call said whether the CW Network’s FAST platform will also help the network achieve profitability — and, based on Sook’s remarks, top executives at Nexstar apparently forgot it even existed. But when it happens, it’s unlikely anyone will know about it: On Thursday, Nexstar’s Chief Financial Officer Lee Ann Gliha said the company will stop disclosing the CW Network’s financials as separate line items on its external financial reports in the near future.
“The quarter-over-quarter comparison is good,” Gliha remarked. “I would just say, anecdotally, it’s still driven by the national advertising market, which is not in a positive place, despite the green shoots.”
Not mentioned in the article, but Nexstar also has a free streaming channel called The Hill TV, so… https://t.co/oOg6QV446R
— TheDesk.net (@TheDeskDotNet) May 10, 2024
Sook said Nexstar’s investments in more live sports programming for the CW Network was being replicated by other industry peers, and stood as proof that the company was on the right track.
“I think you’re seeing other networks that are maybe either taking their cue or attempting to mimic what we have already done,” Sook said. “Live news and live sports is what drives eyeballs, drives distribution, drives value creation. So I think we’ve been very active in that. And 500 hours of sports and multiyear agreements, we feel pretty good about the CW’s place in that ecosystem.”
