CW Acquisition Has Already Paid For Itself, Nexstar CEO Perry Sook Says

Nexstar CEO Perry Sook said the company’s acquisition of the CW has already paid for itself in terms of adding muscle to the company’s distribution negotiations.

The exec made the comment at the start of Nexstar’s fourth-quarter earnings call with Wall Street analysts. Earlier, Nexstar reported a 45% surge in advertising revenue during the election-fueled quarter. Total revenue of $1.486 billion climbed 19% from the year-earlier period, but came in just shy of analysts’ consensus forecast for $1.5 billion. Adjusted EBITDA of $598.2 million rose 20%.

“It was all part of the thinking,” Sook said of the decision to take over the CW. The network “was undervalued for any number of reasons,” including the “company priorities and agendas” of its prior owners. Given that Nexstar operates the largest portfolio of local TV stations in the country, “when we are negotiating with the Big 4 station groups, there is leverage inherent in that model.” As it continues to put its stamp on programming on the CW, mainly via more non-scripted fare, news and sports, “we’re hoping to create more value in the hopes of extracting more value,” the CEO said.

Nexstar last year acquired 75% of the CW, with prior 50-50 partners Warner Bros Discovery and Paramount Global retaining 12.5% stakes. The broadcast giant’s plan for the network is to make it profitable by 2025 by altering its programming mix. One new piece of programming is a slate of 14 Saudi-backed LIV golf tournaments.

The CW deal involved no upfront cash or stock considerations for Nexstar. Instead, the company took on the broadcast network’s debt, which had piled up during the many years when it was used as a glorified marketing platform for pricey scripted series.

Sook said having the CW in the company’s lineup of network and station holdings means that conversations with distribution partners have yielded material benefits equivalent to the company’s assumption of debt in the deal. He didn’t offer specific figures. Nexstar had $6.95 billion of outstanding debt at the end of 2022, down from $7.41 billion at the end of 2021.

Asked about programming on the CW, which is being overseen by former PopTV chief Brad Schwartz and CW CEO Dennis Miller, Sook said plans call for “a higher quality of unscripted,” in addition to some scripted fare. The aim is to build a slate that is “a little more noisy and will get attention and get eyeballs.” Sports beyond LIV are also in the crosshairs of Nexstar, Sook said. Without offering specifics, he said the company is evaluating “sports opportunities that could bleed into primetime.” LIV tournaments air on Saturdays and Sundays.

CFO LeeAnn Gliha said more complete financial results for the CW will be broken out separately in future reports. The CW took in $62.5 million in revenue during the fourth quarter. The acquisition of the CW, which closed last September 30, generated $30 million in one-time expenses during the quarter Gliha said.

Sook noted that Nexstar’s stock was one of just four posting gains in 2022, a brutal year in the media and tech sectors. He credited the company’s focus on “tried and true” broadcast assets. The CW’s streaming app came aboard with the application, but it is free, ad-supported and widely distributed, giving the company and different strategic hand than media rivals focused on managing subscriber acquisition and churn.

“Our strong financial results are a referendum on the power of the broadcast model and its ability to deliver audiences at scale and strong levels of free cash flow,” Sook said in the company’s earnings release.