You can count Nexstar as a fan of the distribution agreement struck between Disney and Charter, which ended a two week-blackout of stations like ESPN, select local ABC stations and other Disney-owned cable channels.
The deal, which was announced last month, shook a few of the pay-TV norms up, including bundling Disney+ for some customers of Spectrum, the cable and internet service owned by Charter. The agreement also eliminated some lower-performing channels from the lineup, including Disney Junior, Net Geo Wild and FXM, suggesting other cable channels may end up on the chopping block.
All of this is a potential boon to a company like Nexstar, which is the nation’s largest owner of local broadcast stations. The company argued in an investor presentation released on Monday that the deal showed the value of broadcast content from networks, and that the reduction of lower performing cable channels means potentially more money to pay for the distribution of big networks like ABC, CBS and NBC.
“Reduced content spend from eliminating underperforming cable networks can be reallocated to premium content like broadcast TV,” the company said in its presentation.
The last point suggests Nexstar is positioning itself for future negotiations as it attempts to wring out the most value from its stations through new distribution deals with pay-TV providers. It’s no stranger to contract disputes, having just reached a new agreement with DIRECTV last month that ended a blackout that spanned three months.
Nexstar goes on to note that while broadcast stations have the most watched TV content, it is paid proportionately less than top-tier cable channels like ESPN. It added that Nexstar content shown on its affiliate stations generate 45% of the viewership, with the remaining 55% coming from network content like primetime ABC or FOX shows.
The company also argued that if it were paid retransmission fees equivalent to the ratings of its local stations, revenue would rise as much as 76%, or $11 billion, based on its percentage of the share of audience.
Those numbers sound impressive, and are useful to throw around at an investor presentation when you’re trying to drum up excitement. But Nexstar would face significant challenges getting that kind of upside given the over increased cost to carry all channels, whether they’re local stations or cable networks like the ones owned by Disney or Warner Bros. Discovery.
But it’s important to note how Nexstar sees itself. The company will offer more specific financial details and discuss its performance during the company’s second-quarter earnings report, slated for November 8.