Nexstar Media Group Inc., the largest TV station operator in the US, is optimistic it can expand through M&A following Republican gains in the election.
Speaking during a Nov. 7 earnings conference call, Chairman and CEO Perry Sook signaled interest in adding to Nexstar's station count through industry deregulation.
"As we move into the period of government to be led by the Republicans in the White House and the Senate, and likely the House [of Representatives], we will continue to work to push forward industry deregulation," Sook said. "It's evident that the antiquated ownership cap applied to broadcasters does not reflect the reality of today's competitive media environment. We believe that there is value to be created for our shareholders through further consolidation."
The national cap, set in 2004 by Congress, prohibits a single broadcast station group from owning TV stations that together reach more than 39% of US TV households, though a so-called ultra-high frequency discount provides that ultra-high frequency stations are attributed with only 50% of TV households they reach in their designated market areas.
Sook said Nexstar's top legislative priority, and that of industry trade association, the National Association of Broadcasters, is the deregulation of ownership at the national and local levels.
"When you sit back and look at it, our industry's real competition comes from Big Tech companies who have unfunded access to every screen in America from phones and desktops to the TV in the living room, yet our ability to compete with those behemoths is timed by regulations that were last updated in 2004," Sook said.
Beyond the national cap, the US Federal Communications Commission rules prohibit a merger between any two of the big four broadcast television networks. Moreover, the FCC has rules governing station duopolies, where a single entity owns up to two TV stations in a single designated market area.
Sook provided a history lesson of sorts, noting that when he took Nexstar public in 2003 at roughly a 12x EBITDA multiple, it was due in part to the prospect of deregulation coming from the 108th Congress, which took office in January 2004.
"My point is that progress on deregulation has been a catalyst for multiple expansions in the past. So, we plan to move with a sense of urgency on this, as well as push for the formal adoption of ATSC 3.0 as our industry's transmission standard," Sook said. "That is our trade association's No. 2 priority with this new administration."
Sook also advocated for the preservation of local journalism, stating the industry needs strong companies that compete on a level playing field for viewers and advertisers on every screen in the US, not just some of them. He said that while "Big Tech has unfettered access," broadcast is kept to a 39% ownership cap.
"We're not allowed to reach every television home in America with our local station footprint. To preserve that last mile, we think the Republic has a vested interest in maintaining a free and independent press," he said, adding that the company sees "broadcast journalism remaining or becoming that last bastion of a free and independent press at the local level."
Sook also noted that in his conversations with members of Congress over the past year, none of them "want a future where their news is delivered by a chatbot office server," he said.
Nexstar currently employs 5,550 journalists in the US.
Nexstar reported third-quarter political advertising revenue of $154 million, a $135 million increase from the year-ago quarter, and a 16% rise over the comparable 2020 presidential election cycle.
As of Election Day, Nexstar booked political advertising revenue of $491 million year to date, a record presidential election year tally, up from $479 million it booked through Election Day in 2020.
"Once again, local television received by far the largest amount of political spending, and it remains the medium of choice for candidates and interest groups to reach local voters at scale," Sook said.
Driven by the political advance, third-quarter advertising revenue rose 22.2% year over year to $622 million, while distribution revenue grew 20.2% to $719 million.
All told, Nexstar's third-quarter revenue increased 21.2% to $1.37 billion from $1.13 billion in the prior-year period.
Net income attributable to Nexstar Media Group totaled $187 million, or $5.27 per share, compared to $25 million, or 70 cents per share, in the reporting period a year ago.