Nexstar's Perry Sook won’t be around the company’s Irving, Texas, headquarters much this summer. The station group boss will be hitting the road—but not on a family vacation.
Chairman, president and CEO of the broadcast group he founded 20 years ago this month, Sook and Timothy Busch, Nexstar’s executive VP and co-COO, together will be visiting each and every one of the stations Nexstar will formally acquire from Media General later this year in a $4.6 billion megadeal. When the acquisition is completed, the series of station stops of Sook’s summer itinerary will be part of a station group that has been the ultimate growth story in the local TV business.
“We want to make sure that when we are handed the keys that we know, and have been to, every one of the assets we are acquiring—that we know the people and that we know what we’re buying down to the detail,” Sook says. “We are going to be partners. I don’t want that to happen after the money has already cleared the bank.”
Sook offered the forecast during a lengthy, lunchtime sit-down with Broadcasting & Cable in May, during a visit to New York for the upfronts. On the eve of Nexstar’s 20th anniversary—and at an eatery across the street from CBS’ annual upfront blitz at Carnegie Hall—Sook took stock of the company he’s grown over the last two decades, where it’s heading and where local broadcasting fits among the ever-growing list of competitors.
Making his way to one of the quieter tables at the bustling Redeye Grill on Manhattan’s Seventh Avenue, Sook was the picture of the consummate dealmaker. Loquacious and affable, Sook also spoke frankly, telling his version of the Nexstar story including, most notably, the acquisition of Media General. The deal saga began last August and involved a back-and-forth with fellow suitor Meredith, which finally bowed out of the bidding in January. Shareholders of Nexstar and Media General formally approved the deal on June 8.
Sook calls this a “watershed” moment for Nexstar, which has been on an upward trajectory since it started with a single station, WYOU in Scranton, Pa. two decades ago.
When the Media General deal closes, the combined company, which will be called Nexstar Media Group, will be the No. 2 affiliate group in the country, with 171 full-power TV stations in 100 markets that reach 39% of U.S. households. The merger boosts Nexstar’s TV portfolio by nearly two-thirds, more than doubles its audience reach, and ups annual revenue to $2.3 billion, according to the group.
The trek by Sook and Busch, which launched mid-spring in Harrisburg, Pa., and will continue through August, is taking the pair to 48 markets throughout the country, covering portions of nearly every geographical region except Alaska.
On the itinerary: Birmingham, Ala.; the San Francisco area; Colorado Springs; Indianapolis; Mason City, Iowa; Jackson, Miss.; and Albuquerque, N.M. Also on tap: Wichita, Kan.; Buffalo, N.Y.; Lafayette, La.; and Honolulu.
Station visits like these are rituals of sorts for Sook, who went through the same exercise with each of the 60 non-Media General stations Nexstar has acquired since 2011. And although previous visits didn’t include this many stops—Media General has 71 stations in those 48 markets—Sook’s agenda is largely the same as it has been in the past.
“I think it is important to set the tone from the top, so I am making the investment to do that,” says Sook, who, along with Media General boss Vince Sadusky, has already held a virtual town hall-style meeting with the general managers of stations from both groups.
“I’m a large shareholder in this company, so it’s important for me personally that everything go well,” he says. “But it’s also just the way we do it.”
Once Sook and Busch are on the ground, they plan to spend their time meeting face-to-face with all levels of station staffers, largely keeping things friendly with an open, two-way dialogue. It’s a chance, Sook says, for individuals on both sides of the equation to ask and answer questions, compare how the different entities do business and learn more about what Nexstar’s plans are for the stations once they take them over.
These first-round visits are also an exercise in building trust, keying employees into his philosophy to keeping things honest, even when it comes to saying things they may not want to hear. “There should be no surprises on either side, and we will never mislead you,” he says.
If Nexstar has radical plans in the works, Sook isn’t saying so. He says the foremost goal is building the best possible teams to run stations “regardless of the uniforms they’re wearing at acquisition.” That includes news staff with the insight and expertise to best create the market-tailored programming on which stations brands are built—and make more money than any other daypart.
“The local news product won’t change appreciably,” Sook says. “We don’t believe in a cookie-cutter approach that news in Burlington, Vt., should look the same as the news in Fresno, Calif. Those are local market decisions.”
Yet Sook says neither the stations being assumed by Nexstar, nor the way they do business, are sacrosanct either.
And although Nexstar and Media General share many best practices, some things are bound to change with a merger of this magnitude. Media General employees are surely wondering what it means for them at a time when such consolidations are often equated with layoffs, personnel changes and replacing one newsroom culture with another.
“There may be changes to process, changes in approach and changes in philosophy,” Sook says, “and I think we owe each other that discussion before we close the deal so people can measure whether they want to sign up for that or not.”
“We get the right to do that because we’re the ones putting out $4.6 billion,” he says. “There will be one company in charge. It will be Nexstar.”
Using Scale to Bolster Programming
For all the billions Nexstar is putting into Media General, it isn’t getting any of those glaring, kind of swank, prizes for a broadcaster—the big-name, big-market talent or, say, the studio with a Michigan Avenue or Manhattan backdrop.
Nexstar also keeps a decidedly low profile. The company does not own a corporate jet, nor does Sook plan to buy one anytime soon. On their current journey, he and Busch are flying American.
Additionally, Sook says there was never any urgency to growing the group to the size it’s on the verge of reaching. “That scale is the byproduct of doing good acquisitions, not the other way around,” he says.
The deal, however, does create exactly what Sook has long wanted: the vast network of mid-market stations he has been pursuing since roughly 2003, when Nexstar started its spate of mass acquisitions with its purchase of Quorum Broadcasting.
In achieving that, Nexstar stands as the only group of its size devoted to serving stations in the kind of mid-size markets that, despite the onslaught of digital, still put a premium on local TV news, often elevating on-air talent to celebrity status. Sinclair Broadcasting, in contrast, has affiliates in top 25 markets like Washington, Seattle and Minneapolis-Saint Paul among its 172 stations.
“There is such powerful industrial logic to it. We are literally a company that has scale,” Sook says. Leveraging that scale, Sook says, is key to the new incarnation of Nexstar airing next-level, locally focused programming few broadcasters have the wherewithal to produce.
Stations will still, by and large, be responsible for producing the bulk of their local programming. Nexstar continues to invest in providing that—on-air and online and on mobile—by creating franchises, such as the season’s “Your Election Headquarters” packages, for stations to brand, and bolster offerings, Sook says.
But the group has plans to expand beyond that, with an overarching commitment to making Nexstar properties creators, vs. aggregators, of content, he says.
In states with networks of Nexstar stations—New York, Texas and Tennessee among them—Nexstar plans to establish capital bureaus, which most broadcasters axed years ago, with individual stations sharing the cost of keeping them afloat.
The Washington bureau Nexstar is getting in the Media General deal will also likely be expanded because it will have so many more stations to serve, Sook says. “Now with 100 markets to support it, we can invest more,” Sook says. “It insures its survival.”
Nexstar teams will also be dispatched to major events. This summer, reporters will file stories from both presidential nominating conventions, as well as the Olympic Games taking place in Rio, a long way from the county fairgrounds.
But in every instance, Sook says, the goal is to provide stations with the kind of locally focused stories competitors with fewer assets won’t have—news about, say, the state’s convention delegation or the local Olympian about to become a superstar.
“We are not trying to duplicate what the national [networks] are doing,” Sook says. While improving Nexstar’s tech stack and expanding product offerings—on-air and online—is certainly a goal of the company, Sook says he has no interest in building or buying national platforms as other groups have.
“We do local really well. Other people do national really well,” he says. “So I believe in doing what you do best.”
Keeping the Faith in Local TV
The list of complicating factors for stations keeps growing. They are trying to stay viable amid digital competition, battling for retransmission revenue from pay-TV providers (an effort Sook spearheaded), and orchestrating long-range multiplatform initiatives to hook young viewers.
Yet Sook has a way of boiling down Nexstar’s business model that makes it seem exceedingly simple. “Our job is to provide local information and help small business sell stuff,” he says.
Certainly Nexstar is not immune from the big issues the industry is wrestling with: participating (or not) in the FCC spectrum auction, streaming content, launching OTT channels (and deciding what to put on them) and fending off an ever-growing array of competitors, whether they’re in-market or reaching consumers via cyberspace.
Nor is Nexstar ignoring it. The group has been aggressive, as well as prolific, in growing its digital offerings since it launched community outlets in 2007. The group’s digital portfolio expanded with its acquisition of three media content management systems that have since been consolidated into one, Lakana.
But perhaps being in the local broadcasting business is, in fact, somewhat easier for Sook than others because he is so confident in—and committed to—the medium, to which he has devoted his 30-plus-year career.
He says many of the big challenges to the industry—distribution models and cross-platform audience measurement among them—are more issues for national networks. He says local TV is actually far less vulnerable, largely because it is built on the premise—and responsibility—of providing community news as few others do. That offering, he says, is also particularly valuable to local advertisers who rely on local TV for mass reach.
“The marquee programming on networks is addictive, but the money is in local news,” Sook declares.
And while the larger industry braces for threats including legions of consumers ditching the big screen for tablets and smartphones and cord-cutting en masse, Sook remains sanguine.
Nor does the Nexstar chief fear the emergence of leaner, cheaper pay-television packages, as they aren’t aimed at reducing distribution of local broadcasters.
“We will always be the foundational element of those skinny bundles,” Sook says. “And I don’t fear them, because if you have the skinny bundle you have fewer competing choices for eyeballs and therefore advertising revenue. Local television will do just fine in that environment.”
Currently, 12% of Nexstar’s total viewers access their local stations over-the-air vs. cable or satellite, primarily because they live in rural areas that don’t have pay-TV service, or they can’t afford it, Sook says.
“We were serving OTT before OTT was cool,” Sook says. “It was called rabbit ears.”
All of which feeds Nexstar’s relatively cautious approach to making station content available on digital platforms. If viewers want to watch the day’s news highlights or particular stories on tablets or platforms, they can do so on demand. But anyone who wants to see a local newscast start to finish, still has to turn on a TV.
While consumers can access station content on-demand, Nexstar affiliates are not streaming their newscasts or other programming live, nor will they. “Free has never been a great way to make money,” says Sook. “Five years from now, OTT will still not be much of a thing but it will still dominate our investor meetings. I have yet to see a business plan for OTT that makes sense.” He adds, in something of a koan for the company: “We make our living locally, and we must never lose sight of that.”
Guru of Retrans Revenue
Industry leaders say Sook’s investment, work and belief in local broadcasting has been a boon to the industry. He is considered the leader in broadcasters securing the right to retransmission consent revenue from multichannel pay TV providers. He sits on the boards of the National Association of Broadcasters, Television Bureau of Advertising and the NBC affiliates.
“He still is always about not only moving his group forward but moving the industry forward for everybody,” says TVB president Steve Lanzano. “That always has been the center of who he is.
“He really has a belief in being a broadcaster, and what local broadcasters bring to the community—and how important that is,” he says. “Also, he not only is really smart, and really street smart, he gets stuff done.”
Gordon Smith, the NAB president and CEO, has a similar take, saying that over the last two decades he has been “a true trailblazer in both local and digital media.
“When broadcasting’s history is written, one of the chapters will chronicle the Nexstar team’s entrepreneurial spirit and Perry’s courage in fighting for fair retransmission consent compensation,” Smith says. “NAB salutes this remarkable company for its commitment to free enterprise and its belief in free and local broadcasting.”
Meantime, Sook says Nexstar’s 20th anniversary should not be all about him—nor the company for that matter.
In turn, the company is forgoing a splashy celebration on June 17 in favor of Nexstar’s Founder’s Day of Caring, the company’s way of giving to the communities in which they operate. Under the initiative, Nexstar’s 4,500 employees will use five hours of paid leave to help out whatever charity their stations select.
Sook has set the “ambitious” goal of driving a total of 20,000 hours of community service. Nexstar will match each hour its employees work with a $1 donation.
The undertaking is also in keeping with the role Sook believes local broadcasters should play in the communities that support them. All Nexstar department heads are required to sit on some sort of community group’s board.
“At our heart we are a local service business,” Sook says. “I just believe we can be difference makers.”
MILE MARKERS ALONG NEXSTAR’S 20-YEAR ROAD
The following are selected highlights of the company’s two-decade run.
1996: Nexstar Broadcasting Group formed by chairman, president and CEO Perry Sook. Its initial assets include just one station, WYOU in Scranton, Pa.
1998: Advocates “virtual duopolies,” allowing a station to provide programming and services to an in-market station with a different owner.
2003: Completes initial public offering; begins trading on NASDAQ under the ticker symbol NXST.
2005: Wins fight against MVPDs to get retransmission consent cash back, creating a major revenue stream for broadcasters as well as enabling Nexstar to receive retransmission consent revenue from MVPDs.
2006: Completes acquisition of WTAJ in Johnstown/Altoona/State College, Pa.
2007: Launches hyper-local websites serving communities at a time when broadcasters’ sites were largely station adjuncts.
2008: Despite the collapse of the U.S. economy, Nexstar achieves record revenues of $284.9 million, driven by virtual duopolies and multiplatform distribution.
2009: Completes acquisition of WCWJ in Jacksonville-Brunswick, Fla. Deepens executive bench by adding Thomas Carter as chief financial officer and Elizabeth Ryder as general counsel.
2010: Completes first step in refinancing its capital structure, reduces total debt by approximately $40 million. Establishes mobile functionality for its local community web-portals, including mobile apps and geo-targeted mobile alert system.
2011: Completes acquisitions of stations in Green Bay, Wis.; Marquette, Mich.; and Evansville, Ind.
2012: Announces acquisition of 12 stations in eight markets and Inergize digital platform. Acquires six stations in California and Vermont. S&P raises Nexstar’s corporate credit rating one notch to B+ from B.
2013: In a nod to the growth of digital, appoints Thomas O’Brien to the newly created position of executive VP/digital media and chief revenue officer
2014: Structures agreements to support minority-owned Marshall Broadcasting and Bayou City Broadcasting in becoming FCC licensees. Reports record net revenue of $631 million and adjusted EBITDA of $235 million for fiscal 2014.
2015: Completes acquisition of 15 stations from Communications Corp. of America, Meredith Corp. and Landmark Media Enterprises, as well as local digital programmatic video ad platform Yashi and machine learning mobile ad technology platform Kixer.
2016: Prevails in five-month takeover battle with Meredith, acquiring Media General for $4.6 billion in cash and stock to become the No. 2 station group in the U.S.