Why This Matters: Nexstar founder Perry Sook has won the Golden Mike Award for his role building the company into an industry leader.
Nexstar media group founder, chairman, president and CEO Perry Sook started his company in 1996 with a single station in Scranton, Pennsylvania, and a belief that the television station business, out of favor in the late ’90s, was ready for a resurgence. Over the past 23 years, Sook has dedicated himself to proving that theory right and later this year, after its $6.4 billion purchase of Tribune Media is closed, Nexstar will be the largest station group in the country, with more than 200 stations in more than 100 markets and covering 39% of U.S. television households.
Sook has been a guiding force in the industry through Nexstar and his participation on many industry boards — he is chairman of the CBS Affiliates Board, the Television Bureau of Advertising (TVB) board of directors and The Ohio University Foundation Board.
On March 6, he was awarded the Broadcasters Foundation of America’s Golden Mike Award for his contributions to the industry and to philanthropy. The Broadcasters Foundation helps men and women in broadcasting who have lost their livelihood through a catastrophic event, debilitating disease or other unforeseen tragedy. The Golden Mike is the group’s highest honor, and foundation chairman Dan Mason said in a statement that the growth of Nexstar under Sook has benefited the entire TV industry. “As a member of our board, he has championed our mission of helping broadcasters in acute need and spread the word about the assistance we can provide,” Mason said. “He is admired among his colleagues, and it is a privilege to honor him.”
Sook spoke recently with B&C. An edited transcript follows.
B&C: You started Nexstar in 1996 with one station, during a time when television stations weren’t considered to be a particularly attractive asset. What was your thinking behind this?
Perry Sook: I believe, and still do today, in the essential mission of local broadcast television, which is to create local content to inform viewers and to help local businesses sell their wares. We exist as a local service business and I’ve always believed in that mission. Technology may, over time, change how we do it, but our essential mission is serving our local communities by facilitating business-to-consumer communication, and by providing local contextual, interesting, engaging, content, which is primarily local news. That mission hasn’t changed and that’s what attracted me to the business. Starting the company when local television was out of favor and building it for the last 23 years opportunistically has allowed us to create a company, when we close on Tribune, that will have almost 15,000 employees and almost $4 billion in revenue and will be the largest owner of commercial television stations in the United States.
B&C: Was the goal always to be a large station group, or did it just work out that way?
PS: The goal was never to be the biggest. Our goal was to try to be one of the best and one of the most valuable, create opportunities for our employees and create value for our shareholders. We continued to acquire opportunities that made sense for us, and really just woke up one day and realized that when we close on Tribune, we’ll be the largest television broadcast group in the country. That was never the goal. I would say finding good acquisition opportunities, integrating them, performing, all were the goal, and where we are today and where we will be soon is the byproduct of that strategy.
B&C: The Golden Mike is a pretty prestigious honor. Past recipients include Graham Media Group president and CEO Emily Barr, former Hearst TV president and CEO David Barrett, former New York City Mayor Michael Bloomberg and NAB president and CEO Gordon Smith. How does it feel to be a part of that group?
PS: I am very humbled for my name to even be mentioned with many, if not all, of those who have received this award before. The thing that is special for me is that I have received a number of awards for achievement in our industry; this award has particular ties to philanthropy and helping those less fortunate, and that is something very important to myself and my family. The combination of those elements is what makes this award very special to me.
B&C: What do you see as being the most exciting thing happening in broadcasting right now?
PS: We’re spending a lot of time working on the transition to ATSC 3.0. We think that is going to be the next value driver and will open up opportunities for those of us that operate in the local side of our industry. We think there is an opportunity to provide enhanced services to advertisers and consumers, as well as data transmission, working with autonomous cars. We are in point-to-multipoint wireless communications and we think that there are going to be opportunities to do things that we aren’t even thinking of today with ATSC 3.0.
The other area that we’re spending a lot of time on at the senior roles in our company is the TIP [TV Interface Practices] initiative, which is an attempt to make broadcast television less expensive to do business with from a process perspective. In other words, if you have one employee that can make three clicks and buy ads on YouTube or Facebook, but you have an entire department to place media, reconcile invoices across 40 or 50 stations, we need to get it to the point where we can be more profitable for the agencies to do business with us. We think those two elements taken together could really drive value.
B&C: What’s the scariest trend?
PS: The audiences are more fragmented today than they were five years ago, and five years ago they were more fragmented than they were 20 years ago. That is just a fact of life. With so much video out there, our challenge is to make sure we are contextual, relevant and interesting. I don’t see the world [or] any business being less competitive five years from now than it is today.
Our job is to continue to be relevant, to continue to work with a sense of urgency and, if we do a good job, the money will come. I’ve had that philosophy from the very beginning. You don’t set out to make a lot of money, you set out to do a good job and then the money and rewards will come from that. That’s the philosophy we attempt to influence here at Nexstar. Our No. 1 mantra is, ‘Make good long-term decisions.’
B&C: How do you see broadcast fitting in with the streaming video, on-demand trend in distribution?
PS: I think we are the foundational element. Just like when cable started, the very first channels that went on cable were the broadcast channels. HBO, ESPN, none of those channels were even created yet. They were created when cable became more successful. But with the diminution of print media, local newspapers in our communities, many of our medium and smaller markets don’t have a local news or talk radio station. The only place they can get content on a seven-day-a-week basis — everything from sports scores to local weather to what’s going on at the city council government — we’re the last bastion of local journalism.
Not only is there a national interest in preserving the local element of journalism for our democracy, but it’s also that people realize that there are aggregators of content, but there are fewer and fewer local producers of content. I think we need to recognize that and take that job very seriously, and for that reason we will always be relevant if we don’t abdicate our responsibility.
B&C: With the Tribune deal, you’re going to get cable network WGN America and a stake in the Food Network. Is cable an area you would like to expand in?
PS: It’s hard to say. We’re going to be learning those businesses as we go. I spent a day last week in New York with the management team from WGN America. Those people have developed an impressive turnaround in the last couple of years with WGN America and I think it certainly has a place in the basic-cable bundle, and our job is to make it more relevant over time. The Food Network stake and WGN America will contribute something on the order of a low-teens percentage of our bottom line. It’s important, but it’s not the primary focus of the company. Having said that, we will be right up against the national ownership cap with the Tribune acquisition and we may be able to grow by adding stations in markets that we’re already in, but in terms of increasing our national reach, until or unless the rules change, we’ll be concentrating our excess free cash flow for acquisitions primarily in the digital business as we continue to try and build that. I believe that the cable network is more challenged that in the local broadcast in terms of where it sits in the ecosystem. Perhaps if you’re big enough, you can punch above your weight on both sides. We’ll look at that opportunity as it comes forward, but it certainly isn’t going to be the primary focus of the company.
B&C: We were talking about scale a little while ago, and with the Tribune deal, you will obviously have a lot of it. How is more scale helping you?
PS: It increases our profile as a place to work. The best and the brightest want to come to a company they feel is going to survive long term and perhaps not be sold. It helps our per-widget cost. When you buy 10,000 of anything, it’s going to be cheaper than if you’re buying one of them. We have been able to expand our Washington, D.C., bureau. We doubled the size of people there when Nexstar acquired Media General. We will grow it yet again when we acquire Tribune. We’ll be a company with national scale but a local focus.
We’re a holding company of local stations that serve local communities, and if our scale allows us to provide them with additional resources like a D.C. bureau, like a state capital bureau that no smaller entity could afford to provide, that also may give us a competitive advantage in those marketplaces from a content and ultimately a revenue perspective. That’s the reason for scale, to allow us to do things that smaller companies we may compete with can’t do or may be financially prohibitive for them to do. That’s the virtuous circle.
I do believe that it is in the national interest that broadcasters be allowed to reach 100% of the U.S. population, and not just 39% or 78% or some number in between depending on how you view the cap and the UHF discount. YouTube TV, Facebook, Amazon Prime can reach 100% of the United States population and I would say they are scarcely regulated, if at all. Our content is regulated for obscene and indecent content, we have to disclose who buys our political ads and there is an element of providing fair and balanced coverage for a local community, otherwise you’ve alienated half the audience on which you need to make your living. I think it is in the national interest that broadcasters be allowed to grow their reach to 100% of the U.S. to compete on an equal footing with those less-regulated or nonregulated entities that have literally sprung up and have grown unabated.
B&C: There has always been a backlash concerning retrans fees, but is there a sense that increases may be close to hitting a wall? Do broadcasters need to find a new revenue stream to make up for that?
PS: Local stations in aggregate comprise somewhere between 30% and 35% of the viewing in an MVPD home and broadcast stations in aggregate earn between 12% and 14% of the distribution revenue from the MVPDs. We’re nowhere near fairly compensated at this point. Perhaps some of the marginally viewed, less significantly viewed cable networks will find it harder and harder to be paid to be part of the bundle as more money shifts over to what people actually watch, which are the broadcast stations. I think there will be continued growth in distribution revenue for the broadcast industry. But again, ATSC 3.0 and spectrum monetization, and hopefully others we haven’t even thought about yet, will be the next value driver, the next leg of the economic stool for local television.
The transition to ATSC 3.0 is hard, but it’s not impossible, and we’re trying to develop a template and a playbook that can be applied market by market to make the transition without any disruption of service to viewers. We’re the only company in both the Pearl [TV] consortium and the Spectrum[Co] consortium — we have a foot in both camps — so I think we have a unique perspective on how we can move forward to accelerate this transition. But the repack itself will take three and a half years, and I think this will take some amount of time beyond that before these markets are transitioned and there’s an installed base of handsets or chipsets to be able to receive ATSC 3.0. We’re on record saying 10 years from now, we think that revenue from spectrum monetization in aggregate could be as much as distribution revenue, retrans revenue, is today. For our company, that’s over $1 billion.
B&C: When you were inducted into the B&C Hall of Fame in 2014, you said broadcasters ‘remain the envy of all other forms of media.’ Do you still believe that?
PS: Absolutely. We can distribute through the pay TV ecosystem or over the air. With ATSC 3.0, we’ll be able to distribute to every device and not just television devices. We produce local content, we’re involved in the local community, we help local businesses sell stuff. I think that is a business that survives long after I’ve retired from this company or left this earth. If we stay true to the mission of what we do and focus on what we do and not how we do it, I think it’s still the envy. There is no one else that has our individual reach, our profile in a local community. We are at our best when we are most local. I would continue to say now and maybe even increasingly in the future, we will continue to be the envy of other sectors of our industry.