What To Look For Next

Another day, another major media merger. The Nexstar Media Group, already the largest owner of broadcast television stations in the U.S., announced yesterday that they will be purchasing Tegna, Inc. for $6.2 billion. There are a few key areas to look for the next set of developments, from regulatory changes to sports rights shifts to a further rethinking of the broadcast network and affiliate relationships.

These aren’t companies that galvanize public attention quite like the owners of the major networks and studios, but there are a lot of interesting moving parts here. Nexstar is a network owner itself, having taken control of The CW from Paramount in 2022. It owns a lesser-known and lightly rated cable news network, NewsNation, whose main claim to fame is a high-profile former CNN anchor Chris Cuomo, as well as a pair of “diginets,” or multicast networks, which deliver a heavy dose of nostalgic TV library content (what we used to call “re-runs”). It also owns The Hill, a well-respected and insider-sourced outlet focused on national politics.

For Tegna, the Nexstar purchase would end a rather tortured corporate journey over the last few years. The legacy media publisher and broadcaster Gannett spun off its stations into what became Tegna in 2015. Five years later a battle for control began, ultimately culminating in 2022 in an attempt to merge Tegna with a private equity firm named Standard General. That deal generated a lot of political heat and was effectively rejected by the Biden Administration Federal Communications Commission, leaving Tegna on its own until the Nexstar announcement.

Nexstar’s justifications for making the deal are a mix of the usual M&A suspects, including gaining scale in TV station coverage areas and revenues, and driving synergies of roughly $300 million – read cost cutting – from the combined companies. The markets have rendered a muted and not surprising reaction to the deal, with a very slight decline in stock price for the acquiring Nexstar and very slight increase for Tegna, both pretty typical. The bigger questions as usual are what comes next for the deal participants and the broader market.

What comes out of the regulatory sausage-making?

If Nexstar purchases Tegna it would likely exceed the existing nationwide cap on the percentage of U.S. households that one TV station ownership group can reach. I’m not going to share the complex and arcane methodology which is used to calculate this cap. Suffice to say we’re dealing with legal distinctions between UHF and VHF stations. Try asking anyone under 50 what those even mean.

This cap, which has been loosened over the years, has historically been seen as critical to control the concentration in the over the air broadcasting and to preserve as best as possible the fidelity to coverage of local news and information. But broadcasting industry has thirsted for decades to lift the cap and has been stymied by the widely held legal interpretation that it such a move requires congressional not merely FCC action. Given a Trump Administration that has regularly dared courts to stop it from enacting controversial and seemingly illegal changes to longstanding rules, I don’t think anyone can rule out the possibility that legal and regulatory restrictions get pushed aside here. And who better to benefit than a Texas-based broadcaster?

But with the Trump Administration, one hand can giveth while the other taketh away. With Nexstar owning a national cable news network and a publication that focuses its coverage on the government, would anyone be surprised if the FCC imposes conditions on a Nexstar-Tegna deal that give the Trump Administration an ongoing oversight of the “fairness” of the Nexstar news publications? This was at the very center of the Skydance-Paramount FCC approval and while there is little of the animosity evident here as we saw between Trump and CBS News, the temptation to further squeeze any opposing viewpoints – hi there Chris Cuomo – may be too great for the Trump Administration to avoid.

Will more sports migrate back to local broadcast stations?

Although the sports media marketplace continues its seemingly endless growth trajectory, the regional sports network (RSN) market has been reeling for some time. Cord-cutting has significantly eaten into multichannel subscribers and sub fees for extremely expensive RSNs. And fewer subs generally means more challenged ratings and ad revenues as well. Sinclair’s foray into this market, ultimately leading to the bankruptcy of Diamond Sports, has only been the most obvious difficulty.

The loss for RSNs has led to some often-spectacular gains for local broadcasters and for teams themselves in just the last two years. The Phoenix Suns moved their games from Bally Sports to Gray TV’s local stations and saw ratings rise 95% and even saw the pregame show ratings up 183%. Early in the last hockey season, Florida Panthers reported an increase of over 150% in their ratings as the games moved from Bally Sports Florida to the local Scripps stations (admittedly winning the Stanley Cup helped). Similar successes came to broadcasts of teams such the Utah Jazz and the Dallas Mavericks. All of this benefits the team owners who crave fan attention, engagement, and attendant revenues.

Given how little other than sports is a dependable ratings-grabber for any broadcasters, it would not surprise me at all to see a deal like this accelerate the competition for more local sports rights to shift to broadcasting.

Will we see more wars between major networks and affiliates?

It’s a distant memory in broadcasting that networks paid significant compensation to local independently owned stations for the “right” to have their programming carried by local stations for networks to sell the national ad spots. Today it’s a world where networks are constantly coming back to their local affiliates to pony up for their share of the massive money national networks spend on sports rights such as the NFL.

But it’s not an easy lift for many broadcasters to make those national payments in a generally declining linear TV marketplace. Back in 2018 in Boston, NBC and its local independent NBC station failed to reach an agreement to renew its affiliation agreement, and NBC’s owner Comcast created its own local affiliate on a different station. If a more powerful Nexstar balks at paying the affiliate fees required from its network partners such as NBC, ABC, CBS, and Fox, might any of those networks simply take matters into their own hands by seeking to partner with local cable operators and bypass their prior affiliates? It’s a vastly unpredictable world ahead for all.