Dean Buscher/THE CW
By Cynthia Littleton, Jennifer Maas
Source: variety.com, February 2022

For months, TV industry insiders have been wondering why private equity giants like Apollo Global Management and Blackstone have been kicking the tires on local TV station groups.

Television stations — the medium’s oldest form of distribution — hardly seem like a sexy acquisition target these days. By definition, local stations are regionally focused hubs at a time when Big Media is consumed with competing in the global streaming wars; they serve up linear live programming at a time when the on-demand revolution is upending the industry.

TV stations also deviate from streaming in another important way: Most of them churn out a healthy amount of profit and free cash flow. On Feb. 22, Tegna, one of the last large publicly held station groups, announced a $5.4 billion deal with Apollo and media-focused hedge fund Standard General to take the company private.

The deal for Tegna’s 64 stations comes to fruition as the nation’s largest station group, Nexstar, is taking steps to bolster its national reach by wrangling a deal to acquire The CW Network from WarnerMedia and Paramount (formerly ViacomCBS).

This activity is driving speculation about Nexstar making next-generation programming plans for its nearly 200 stations in 116 markets around the country — ranging from the nation’s largest market (New York City’s WPIX-TV) to market No. 196 (San Angelo, Texas’ KLST) — out of the 210 total in the U.S.

The reason TV stations are hot these days? Simply put, they’re still good businesses.

“Local TV still has large audiences,” says James Goss, managing director of Barrington Research and a veteran broadcast analyst. “Even with so much programming chasing [audiences], there’s only so many hours in the day. The strength of local stations that produce local news, weather and sports is that this is the kind of thing that is very personal to people. Even if they have Netflix and Amazon and Hulu, viewers still want their local stations.”

Goss points to the biennial burst of political advertising that flows almost entirely to local broadcast stations — rather than cable networks or digital outlets — as a draw for investors. Network-affiliated stations in predictable battleground stations such as Pennsylvania, Ohio, Florida and Wisconsin can count on a growing windfall every time the statehouse, the governor’s mansion or Senate seats are up for grabs.

The other wild card for broadcasters is the potential of the cutting-edge new broadcasting standard known as ATSC 3.0 that is slowly being rolled out across the country. The system is designed to allow broadcasters more flexibility to use their spectrum bandwidth to support new channels or new data services that can be personalized to the individual user.

“There are going to be increasing capabilities for the spectrum that can be a potentially large revenue generator at some point as well,” Goss says.

With network TV’s May upfront presentations fast approaching, factions within The CW Network, Paramount and WarnerMedia are pushing to have Nexstar hammer out an acquisition agreement sooner rather than later. And with Discovery’s acquisition of WarnerMedia from AT&T expected to close in mid-April, some players are putting even more pressure on Nexstar to get its transaction done before WarnerMedia is subsumed in the merger.

From a negotiations standpoint, the sides see the time as right for a deal that would benefit The CW’s studio owners and Nexstar. If an agreement can be reached before Discovery takes control of WarnerMedia, the plan would be for Paramount and WarnerMedia to retain minority stakes in The CW — born in 2006 out of a mashup of The WB Network and UPN — and continue to produce content for the network.

Per multiple insiders, there is no formal timeline set by Paramount and WarnerMedia to close the deal, but execs at both Nexstar and The CW Network would also like to see a planned transaction for Nexstar’s majority stake in The CW to be announced before the broadcast network makes its upfront presentation to advertisers this spring. That in-person event is scheduled to take place May 19 at the New York City Center Theater in midtown Manhattan.

Paramount and Nexstar recently struck multiyear renewals for existing CBS Television Network affiliations in 39 markets across the country. Following three affiliation agreements renewed early in 2021, these pacts complete all such renewals between Paramount and Nexstar. The move further solidifies Nexstar’s strong relationship with Paramount, and maintains its status as core affiliate group for “Riverdale” and “Walker” home The CW in major markets such as New York, Los Angeles, Dallas, Houston and Washington, D.C.

Nexstar’s flurry of activity around The CW has longtime company observers like Goss convinced that the station group has bigger ambitions to grow in local as well as national networks.

Says Goss: “It’s been trying to create some additional networks because of the strength of the large national platform that it owns.”