Nexstar Stays Ahead of The Game

Sook’s stations show knack for innovative revenue sources

By Michael Malone -- Broadcasting & Cable, 6/21/2010 12:01:00 AM

Nexstar Broadcasting Group was hatched 14 years ago this month, and founder Perry Sook has built the company into a maverick broadcast outfit. Many cite Nexstar for leading the way in terms of retransmission consent revenue, with Sook's hardball negotiating getting pay-TV providers to cough up significant cash. Citing "virtual duopolies"-bottom-line-boosting service agreements with a rival station in a given market-as a core strategy, Sook has grown Nexstar into a 34-station group that provides services for another 25 stations.

Chairman/President/CEO Sook spoke to B&C Deputy Editor Michael Malone about what's next for Nexstar from his Irving, Texas, headquarters. An edited transcript follows.

A typical Nexstar station will generally be the No. 1 or No. 2 station in the market in terms of revenue and local news rank. In an ideal circumstance, it would operate or derive financial benefit from a second station in the marketplace, and both stations would drive a robust community portal on the e-media side.

How does Nexstar look in terms of the political advertising ahead?
Because of our geography, we do very well in the even-number years; our political revenue for Q1 of 2010 was 50% greater than in Q1 of 2008. That will [also] be true for the second quarter of 2010. If history is any guide, we are on track for a record political year by a not-insignificant margin.

Nexstar's KUTV Salt Lake City recently stopped doing news for KJZZ. What would it take for you to eliminate news in one of your markets?
Local news is the primary focus of our identity as a company and as an industry. So, it would be the last move we would want to ever have to make as a cost-cutting necessity. Having said that, in medium-sized markets, if you're not No. 1 or No. 2 in news, you're probably not making money with your local news product.

Do you see Nexstar making an acquisition soon?
Given that we're just six months out of the drought year of 2009, while we are on track to have a record year, we're going to be very cautious in deploying our capital. We are paying down debt and strengthening our balance sheet, and think that is a good long-term course to take. We are always on the lookout for opportunities to create digital virtual duopolies and acquisitions that make sense, but we're going to be cautious stewards of our capital.

Are you concerned that the FCC will take a closer look at virtual duopolies?
The FCC has reviewed every one of our virtual duopolies at their creation, and we are very comfortable with the current rules and our ability to work within them. What needs to happen is some meaningful deregulation that would benefit the smaller markets. We don't begrudge NBC and Comcast merging, but why we can't fully merge two UHF stations in Rockford, Ill., or Erie, Pa., is beyond me in this day and age.

Are you pacified by what you're hearing from Washington in terms of broadcasters' spectrum?
I think Congress should mandate that the FCC conduct a full inventory of all spectrum, not just broadcast spectrum. There seems to be increasing momentum that this should, and will be, the first step in developing any kind of national spectrum policy or any kind of action plan as it relates to spectrum. I think that the looming broadband "crisis" is promulgated by statistics put forth by the wireless and broadband industry, and I think those projections need to be held up for inspection. At that point you can look at the wireless and broadband devices-are they as efficient as they could be in terms of their operation and use of spectrum? Once you have taken those three steps, I think you can begin to develop a coherent strategy for managing spectrum.

Having said that, the Internet was never meant to be a one-to-many video distribution device. It was set up primarily as a one-to-one medium, and I think the fact that AT&T has begun to ration its spectrum usage vis-a-vis tiered pricing will be an impetus to the development of chip-enabled mobile devices to which broadcasters can deliver video on a one-to-many basis. So, I'm optimistic that this entire process will put more credibility and credence in the concept of rich video delivery via broadcast to devices, rather than via broadband or wireless.

Do you have retrans negotiations going on?
We have 16 agreements that expire this year. In 2011, I have approximately 150 agreements that expire, which were the three-year deals we did in 2008. Retrans, fortunately or unfortunately, has become a treadmill that I seem not to be able to get off. But it's a transformational revenue stream for the business, so I'm happy to spend as much time as is necessary on it.

What prompted you to first work in television?
My initial dream in this business was to be a play by play announcer for the Pittsburgh Pirates when Bob Prince retired. I was first on radio when I was 12 years old, when the radio station that I walked by on my way to junior high school invited me in to read Little League scores from the night before on the air. I was hooked from that point forward.

It's the only business I've ever been in-hopefully I can get it right one of these days!

What are you watching on TV?
I primarily watch sports. I'm also a huge fan of The Big Bang Theory and CSI Miami. CSI Miami in high definition-it's great eye candy on Monday night when you get home from work.

Since retrans is such a large revenue stream for station groups, do you hear from your fellow broadcasters, saying thanks for leading the way in terms of pushing for it?
I hear from a lot of our fellow broadcasters who've been very complimentary of our efforts in pioneering this revenue stream. The accolades and compliments are very nice, but I have yet to receive my first royalty check from broadcasters. I will let you know when that shows up in the in-box.

But the kind words are worth more than royalties, aren't they?
[Laughs] I haven't been able to spend them yet, let's put it that way.

E-mail comments to mmalone@nbmedia.com and follow him on Twitter: @StationBiz