Nexstar CEO Perry Sook said Tuesday that Fox made a “smart investment” in paying $3.3 billion for the TV rights to the NFL’s Thursday Night Football for the next five seasons.
“It builds value for the network and the affiliates,” he said on an earning call following release of the company’s 4Q results this morning. “It’s good programming that will be consistent not only for 11 weeks, but for five years.”
Sook said he did not believe that Fox would make Nexstar and other Fox affiliate pay more in reverse comp to pay for the rights.
“Fox is no slouch in attempting to extract value from their affiliates so I think they have already taken that bite from the apple.”
All in all, it’s a “net positive” for Nexstar.
On the call, Sook and CFO Tom Carter gave more insight into the health of the company by providing pro forma same-station results. All the growth numbers in the earnings report were grossly inflated by the addition of the Media General stations in 2017.
They also discussed the outlook for retrans growth, the impact of the FCC’s decision to loosen station ownership restrictions and the potential for the new broadcast standard, ATSC 3.0.
According to Carter, on a same-station basis, core ad revenue grew 3.4% in 4Q, contributing to overall revenue growth — excluding political — of 9.1%.
The principal driver for the overall growth was retrans, which grew a little more than 20%.
Sook noted that six of nine ad categories were up 4% to 10% in the quarter: retail, attorneys, medical, insurance, cable and banking.
But the No. 1 category — auto — was a drag, falling 2%.
Sook said the group expected core advertising to be “flat to slightly up” in 1Q 2018, even though Nexstar’s 34 NBC affiliates are expected to post double-digit core growth because of the Olympics.
“If 20% of your portfolio is up double digits and the average of the rest is basically flat, you’re looking at slightly up in core for the quarter.”
Auto has not rebounded in 1Q, he said. In fact, he said, it is “a little softer” than it was in last year’s fourth quarter. “Local auto may have stayed away from the Olympics a little more than they have in years past.”
Sook said that retrans surpassed local advertising as the company’s top revenue stream and that by the end of this decade it could surpass total advertising revenue. In 2017, total advertising accounted for $1.3 billion, while retrans chipped in nearly $1 billion.
Despite all the talk of cord cutting at the MVPDs, Sook said he has he has seen “virtually no diminution” in 4Q of MVPD subscriptions. Since retrans is calculated on a per-sub bases, loss of subs would depress retrans revenue.
“Virtually no” doesn’t mean none, according to Carter. He said that subscriber “churn” caused retrans revenue to slip from $257 million in 3Q to $253 million in 4Q.
But “rest assured,” he said, retrans will be up in 1Q and will continue to rise as Nexstar renews retrans deals for about 10% of its homes this year and more than 80% next year.