Nexstar Media Group Inc at Citi Global TMT Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jason Bazinet - Citi Investment Research - Analyst : So I'm going to start with a very simple high-level question. The sentiment across media, I would say, right now is generally pretty poor. We got cord cutting, streaming losses for a lot of firms, fears of ad recession. And yet, I look at the performance of your stock and it's done remarkably well. And so it's a high-level question, but can you just start with your philosophy strategically, how you operate the business and what do you think has allowed Nexstar to sort of distance itself from a lot of the, frankly, carnage that's in the broader media landscape?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. That distinction, though -- can I push back on that just a bit? That distinction between cable television and broadcast television seems to be blurring as more of your revenues come from distribution fees, right? And so it seems like that's what you would call a distribution fee, a cable network would call an affiliate fee. So what is the -- I'll give you my hypothesis, that your affiliate fees have been underpriced relative to their true value or that's not true on a lot of the cable net side. Is that the simple distinction?

Question: Jason Bazinet - Citi Investment Research - Analyst : That's going to lead to my first question. If I can figure out technological to make this work. Let's see if I can do this. So question -- yeah. See if everyone is here. Okay. I expect Nexstar's distribution fees to have a three-year revenue CAGR of low single-digit declines, flattish, low single-digit growth,

Question: Jason Bazinet - Citi Investment Research - Analyst : You can. If you have a phone, you can scan the QR code and log in your answer. We don't have a chance to vote. I can't figure out how much long time.

Question: Jason Bazinet - Citi Investment Research - Analyst : Is everyone done voting? Yeah. Okay.

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. 80% low single-digit growth.

Question: Jason Bazinet - Citi Investment Research - Analyst : You'd bet the over. So you're more like in the green bucket. All right. That's great. So let me ask a question about the two networks that you own. The CW, you described it as a small network, and I also want to ask about NewsNation. So CW, I think last year, plus maybe $260 million of EBITDA, and you guys have said, I think, breakeven by early '26 is sort of the glide path. My question is can you talk about how you're going to achieve that? And are there sort of any undulations that the Street should be aware of as you save money by getting rid of sort of the scripted programming and stand up sort of sports rights? I think you have a fair amount of sports rights now that are getting ready to kick in.

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. Anything you'd add, Lee Ann, to that?

Question: Jason Bazinet - Citi Investment Research - Analyst : When you say dollar yield, are you talking about the dollars that were committed in the upfront to The CW is up year over year? Or you're saying when the full year is --?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. Perfect. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 2:00PM, NXST.OQ - Nexstar Media Group Inc at Citi Global TMT Conference

Question: Jason Bazinet - Citi Investment Research - Analyst : So what were -- those were TV stations that you owned that were affiliated with a network other than The CW that's shifting their affiliation to The CW?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. Let's see if I'm technically adept enough to ask the second question. Let me get rid of this one. All right. Okay. I expect The CW, and here, we're just talking the network, to achieve EBITDA breakeven in 4Q '25, 1Q '26, 2Q '26. Nexstar is going to have trouble getting the network to achieve profitability.

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. Here we go.

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. So let's see if I can read this. So --

Question: Jason Bazinet - Citi Investment Research - Analyst : One-third said by one quarter '26. About 15% said 2Q '26. And half of respondents said you're not going to achieve profitability at the network. You'll take the over on that too.

Question: Jason Bazinet - Citi Investment Research - Analyst : All right. What -- can I talk about one of the other networks? NewsNation. This was WGN, right, in the old days?

Question: Jason Bazinet - Citi Investment Research - Analyst : Right. You stood up NewsNation. Can you just start with like what was the thesis? What was the -- is the core thesis just news and sports as sort of the future, that's where most of the --

Question: Jason Bazinet - Citi Investment Research - Analyst : That's great. So you mentioned some of these situations where you've seen Disney enter disputes with distributors where the content has actually been taken down. I think we're in the middle of one of those right now. But what does that speak to? I mean, we've seen takedowns. I mean, we've seen disputes happen and take downs happen. In the old days, they would last one or two days. It feels like we're now in a period where they can last longer, which, I guess, speaks to the contentiousness inside the negotiated room. But what are the implications of these takedowns for your firm, if any?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. So I want to talk about the consumer value proposition. So I think you've suggested in the past broadcasters deliver 45% of the viewership but only collect 25% of the affiliate fees. I'll be honest with you. When I hear that statistic, it seems like a red herring to me. So I'll give you my -- I'll give you this dumb story. I was on an earnings call years ago and Zaslav at the time of Discovery said, here's the percentage of viewership we get and here's the percent of affiliate fees we get. And it was a huge disparity implying the affiliate fees were too low. And so I dutifully went and did a scatter plot of all the media companies, share of viewership, share of affiliate fees. And every company that was earning more in affiliate fees than viewership had sports, and everyone that was earning less in affiliate fees and viewership had no sports. So then I went down this rabbit hole of like, okay, but why is it that a distributor is willing to pay so much for sports? And so I went and looked at all the Nielsen viewership. And you looked at ESPN, and it was like very little of the viewership on average, but there were moments in time when everyone watched ESPN. So then I went back and I regressed. What is the affiliate for you that a cable network gets, measuring its peak engagement relative to its average? And the more peaky it was, the more the affiliate fee was. And I thought about that. I'm like, well, that makes perfect sense because I'm a distributor. What I'm afraid of is if I don't have that content, someone's going to leave. How do I measure my risk? It's the peak viewership. It's not the average viewership. So does that resonate with you that it's more about peakiness of networks viewership as opposed to the average? Or does that seem wrong? I don't know if what I said made sense to the audience.

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. The thesis is all of the people that didn't care about news and sports and get satisfied with some streaming service, more of those have left. And therefore, fewer of them are still remaining in the pay TV ecosystem. It's interesting.

Question: Jason Bazinet - Citi Investment Research - Analyst : Understood. Can we talk about reverse compensation for a bit? Can you just talk a bit about how your negotiations have evolved over time with the networks?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. And what about the other two you didn't talk about, Fox and ABC?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. The audience have any questions for Nexstar? If you do, raise your hand, we'll get you a mic. Okay. Let me -- I want to ask if you'll indulge me for a bit to just educate us on the distinction between MVPDs and virtual MVPDs. So can we just start by maybe you giving us the distinction just to make sure we're all on the same page?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. So I -- you can correct me if I'm wrong. When the '92 Cable Act came out, there was no such thing as a virtual MVPD, like YouTube TV or Hulu TV. And so the language was written just about MVPDs, right? And then as virtual MVPD showed up, there's some sort of distinction that some of the players in the ecosystem are making. Is that sort of I would say follows this letter of the law, but maybe not the spirit of the law? Is that the right way to put it?

Question: Jason Bazinet - Citi Investment Research - Analyst : Is there -- do you think there's a potential for this distinction to be recognized in law? So there's some sort of -- something that puts you back in the driver's seat, if a consumer goes out and wants to buy a virtual MVPD, you're actually negotiating as opposed to YouTubes of the world or the Hulus of the world? Or is that a far-fetch notion?

Question: Jason Bazinet - Citi Investment Research - Analyst : That's interesting. I like that answer. Okay. I'm going to shift unless you have anything to add, Lee Ann? No?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. On political advertising, when you mentioned earlier, you thought we were already in a recession, an ad recession, given the weakness in national. And we're coming out. And I think if I ask most people on the buy side, they would say it hasn't even started yet, like, we might enter one. So my question to you is do you really feel like we're in a national ad recession today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 2:00PM, NXST.OQ - Nexstar Media Group Inc at Citi Global TMT Conference

Question: Jason Bazinet - Citi Investment Research - Analyst : Two years?

Question: Jason Bazinet - Citi Investment Research - Analyst : Can I push back?

Question: Jason Bazinet - Citi Investment Research - Analyst : I could say you could see declines in national advertising because there are secular changes that are going on with national advertisers that are preferring alternative ad mediums to television, but it's not a macroeconomic recession. It's a secular shift.

Question: Jason Bazinet - Citi Investment Research - Analyst : You're talking connected TV now?

Question: Jason Bazinet - Citi Investment Research - Analyst : Okay. I'm going to do a poll question here. So this is a macroeconomic one. In the next 12 months, the likelihood of the real recession is less than 25%, 25% to 50%, 50% to 75%, 75% to 100%?

Question: Jason Bazinet - Citi Investment Research - Analyst : That's why it [accepted]. Okay, here we go. Evenly split, so a third less than 25%. a third, 25% to 50% and a third, 50% to 75%. No one at the 75% to 100%. Go ahead.

Question: Jason Bazinet - Citi Investment Research - Analyst : Makes perfect sense. So I'm going to ask a question on M&A. So you -- I think everyone would agree that it looks at your track record, you've been phenomenally successful with M&A in the past and generated a lot of returns for shareholders. It seems like we're in an environment where more M&A, just in general, is more difficult given the way that the federal regulators are looking at things. My question is do you agree with that, that more M&A is going to be difficult for you either given sort of the rules that exist today or fears about doing something else from the M&A side? And if it is more difficult, what do you think you'll do with your cash flow? You guys generate a ton of cash. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 2:00PM, NXST.OQ - Nexstar Media Group Inc at Citi Global TMT Conference

Question: Jason Bazinet - Citi Investment Research - Analyst : When you say streamline it --

Question: Jason Bazinet - Citi Investment Research - Analyst : That makes perfect sense. Perry, Lee Ann, thank you so much. This was great.

Question: Jason Bazinet - Citi Investment Research - Analyst : Yeah. Yeah, absolutely.