Good to go. Hi, everyone. Thank you very much for coming. My name's Nick Zangler. I cover ad tech and media at Stephens. Happy to have Nexstar with us. Lee Ann Gliha, CFO, Mike Biard, COO. Guys, thank you very much for coming. Nexstar, it's the largest broadcaster, operating 200 local stations across 116 markets. Also operates a major broadcast network in The CW, recently acquired, I think that was a year and a half ago or so-
Mm-hmm.
a growing cable news network in NewsNation, which I actually utilize and watch pretty frequently.
Very good.
Thank you.
Yeah. But maybe just as an introduction, you know, would you mind discussing the reach, the scale of your assets, how you feel about your positioning, the strategy versus your peers, and other broadcasters within the current market environment?
Yeah, great. I'll just kick it off. Thanks for having us here.
Mm-hmm.
We really appreciate it.
Absolutely.
We think our, you know, our scale is a real differentiator for us. It makes us a little bit of a, I think, a unicorn in the broadcast space. We are the largest local broadcaster. We cover 68% of the population of the country, and on a revenue basis, we're actually 40% bigger than the next local broadcaster that's out there. You know, and just to kind of put a little bit of more flavor behind, you know, the scale on the local side, we are the number 1, number 2, or number 3 affiliate of each of the Big Four broadcast networks, and then also of CW and My Network. And so that really provides us a significant amount of scale from that perspective.
We, as Nick said, we are in 116 markets across the country, with 200 local stations, and from a political perspective, which is a great source of revenue for us in the even years, that scale provides us coverage of over 80% of the contested elections. So we really do a good job of being able to generate significant revenue from the political environment in those even years. And then when you compare us to any of the larger network operators, you know, we have a footprint that's actually, from a station perspective, 75% bigger than Fox, which is the largest owner of stations from a network perspective.
So it gives us a little bit of a different angle when we talk to advertisers, because both of our nationwide exposure and our local exposure. On the nationwide side, as you mentioned, we have significant coverage. We acquired the CW Network in September of last year, and that covers 100% of the country. And we also have the NewsNation cable news network, which has comparable coverage to the other cable news networks that are out there. So not only do we have the nationwide reach, you know, we cover the entire country, but we have the largest local presence, so that really creates an interesting dynamic for us and a kind of a very compelling offering when you go talk to advertisers.
In addition, it provides us with some significant, because of the scale, significant negotiating and operating synergies, which really help us drive our revenues from a distribution perspective and also from an advertising perspective, because we have that scale, and also, helping us manage our expenses because we can leverage that across a larger platform. And that really helps us generate our significant amount of Free Cash Flow. You know, over the last 12 months, we generated Attributable Free Cash Flow of just over $1 billion, and we're able to return about 95% of that to shareholders.
Got it. I'm just going to open the questions up-
Sure.
and so I'll let you guys kinda-
Yeah
... dictate who wants to watch 'em in. For everybody in the audience, if you guys wanna step in, go.
Um-
Right up, yeah, go ahead.
Just a broad picture. Number of minutes spent on your network, do you capture that trend?
Number of minutes spent.
By an individual. I'm just thinking, because there are so many screen alternatives that has come out in the last 5, 10 years, how much do... Because it's 24 hours in a day, so if I'm watching it on my phone, I'm not watching on screen, right?
Yes, um-
Are there any numbers?
You know, I don't really have that handy, but we would... You know, you can pull any sort of Nielsen data or whatever that talks about kind of the overall pie and how much goes to broadcast versus cable versus streaming.
[inaudible]Yeah, that I know about the... I'm interested in the trend. Sorry.
Yeah, okay.
Okay.
Honestly, I was hoping just to talk about sports the whole time. There's so many exciting things going on here. But I'll walk through the whole overview of the company, but I am gonna get into a bunch of sports-related questions. But before I do that, Mike, you're almost three months into the role as COO. Can you talk about your background hailing from Fox, and how that background helps with the strategic direction that Nexstar is pursuing going forward?
Sure. Sure. First of all, thanks for having us.
Of course.
Happy to be here. So yeah, as you mentioned, I joined Nexstar just under 3 months ago from Fox, where I spent 23 years. And it was Fox and its predecessor companies. When I started, it was News Corp, and Fox was a subsidiary or actually a tracking stock, and then ultimately split off, and then there was a massive transaction with Disney that closed in 2019, which fundamentally did change the company. And during that time, my role evolved. I was involved with distribution pretty much the whole time, but then expanded my role in 2019 to take on an operational role, which included everything from corporate real estate to running the Fox Studio lot, which is like running a small city.
Everything from, you know, food and beverage to, you know, health and safety, you name it. It's an interesting business actually, running production services. We had 18 sound stages, and following the Disney transaction, we had an interesting relationship with them. They were both a tenant of our office space, and so we had to establish that relationship, which I led, and then they had almost exclusive use of our back lot for production of their scripted content. So very, very interesting business. In the course of that, you know, Fox was a very flat organization at the top.
And so I, you know, worked very closely with the heads of the networks and particularly on the sports side, and senior management on all of our, you know, significant either acquisitions or renewals, including the most recent NFL deal. So I was on a, you know, relatively small... not relatively, actually very small deal team that did that renewal a couple years ago. So, you know, in the room on really all of those things, including, you know, the acquisition of Tubi, which you know, for the first time, really expanded Fox into a digital platform.
So yeah, wide variety of experiences and, you know, the thing that attracted me to Nexstar and really, you know, directly relevant was, you know, obviously my network experience. You know, at Fox, I was there when we both launched networks, acquired networks, you know, transitioned networks, all of the things that Nexstar is busy doing right now. You know, particularly with respect to news networks. You know, I was there during the, you know, obviously, you know, significant rise in growth of Fox News, but also the launch of Fox Business. And you know, was involved in all of the distribution there. On the sports side, you know, launching cable networks, acquiring networks, transitioning networks from, you know, one genre to another.
I was heavily involved when we acquired a channel that was called Speedvision, and we converted that to Speed Channel and ultimately converted that to FS1. And so lots of learnings along the way that I know will be directly relevant to exactly what's going on here. If you look at NewsNation, you know, we're, you know, just over three years away from when we converted what used to be WGN America into a news channel. And, you know, we didn't mention, and you were describing the network, almost three years to the day of that conversion, really launch of a news channel, we announced that NewsNation will be the home of the next presidential debate, right? The Republican presidential debate. So we're, we're thrilled about that.
One of those sort of, you know, kind of flags in the mountain, if you will, that, you know, the network has really arrived and is in a different spot. And it will give us, you know, really a launchpad, that we're excited to use and to grow from. On The CW side, as Lee Ann mentioned, you know, we've owned that for just over a year, right? Going back to September of last year. And really just starting to put our fingerprints on it, right? And our imprint on it. You mentioned sports. We put live golf on there.
Mm-hmm.
Really the first time CW's had any sports ever. Starting in January, relatively small bet. We made a slightly larger bet with the acquisition of ACC Football and Basketball. We're, you know, in our first season of football. We're excited for basketball to arrive next month. We announced the acquisition of NASCAR Xfinity Series. We'll be the exclusive home of that, beginning year after next, and next year we'll have the arrival of WWE NXT series. Again, the exclusive home of that. So significant changes to that network under our ownership, and we're excited about it, and certainly all the experience I had at Fox will bring to bear on the development of all of those businesses.
Well, that's what I'm most excited about, the sports content and all that's coming to Nexstar via either local or broadcast. I mean, I've tuned into some of those ACC network games on The CW, but obviously, within this sector, I think it's the most exciting thing that's happening for broadcast, and it's happening for all you guys. Nexstar, Gray, Scripps, you're all gaining incremental access. It's either from the move from local content, from RSNs back into the RSN model, or you've got. I mean, even the NBA is talking about, you know, potentially looking for a broadcast partner. Like, the sports dynamic is changing. They want broader access, and I think they're, you know, looking to the networks or the broadcasters to potentially provide that.
So can you just talk a little bit, starting high level, about the benefit that the broadcast model, in general, brings to sports and what it kinda looks like now versus, you know, potentially what it could look like going forward?
Yeah, I think in a word, what broadcast brings that no other platform can bring is reach, right? It brings a level of reach that is really unrivaled. When you look at, you know, streaming products, and, you know, the growth of those has really started to flatten out. They're, you know, sort of middle of the road. You've got, you know, fully distributed cable networks, ESPN being sort of the lead in the sports world. They do a little bit better on reach, and then you have broadcast, right? Which is really head and shoulders above any of those other products and continues to sort of, you know, offer a scale and an accessibility that no other platform can offer.
And so if you're, you know, a major sports league or any sports league, for that matter, you, you thrive based on growing your fan base, right? You, you don't thrive in a closet. But-
Right
... you thrive by being widely available, and you know, sort of being available generation to generation so that, you know, families can sit and, you know, pass on that sort of tribal nature of sports fandom. And that's how they grow. And so, you know, you look at the, you know, the sort of lead horse and 800-pound gorilla in the sports landscape, and that's NFL, obviously. And NFL, more than any other product out there, has been quite vocal and expressive about embracing broadcast television. Every single NFL game is available on broadcast television, and I'll repeat that because people sometimes don't realize that's the case. They talk about, you know, the package that they have for Amazon Prime on Thursday Night Football.
Well, each of those games is actually available on broadcast in the market of each of the teams playing. So if you have the LA Rams playing the New York Giants on Thursday night on Amazon Prime, that game is also available on broadcast in LA and New York. And in fact, the viewership in those markets, if you look over this season, and we track this, not surprisingly, you'll see about two-thirds of the viewers in the markets where the game is available on Prime and broadcast, choose broadcast. Two-thirds, and that's without all of the marketing that goes into Amazon Prime, right?
If you're watching Sunday Football, whether it's, you know, CBS or Fox or Sunday Night Football on NBC, or Monday Night Football on ESPN, you're promoted to Amazon Prime for that Thursday night game, and yet, in the markets where it's available on broadcast, two-thirds of the viewers vote with their eyeballs to go to broadcast.
Mm-hmm.
Right? There's lots of reasons behind that, but it does demonstrate the sort of enduring strength of the reach of that platform, right? And the fact that it is a better viewing experience for most people. I think, you know, hands down, people would tell you that, "If I could choose to watch on broadcast and change the channel at timeout or halftime or whatever, versus being stuck in an app where not so easy to change a channel-
True.
... it's a much better experience.
Mm-hmm.
And all the more so if you're looking at that in a window when there's multiple games on.
Right.
Right? And, you know, on Thursday night you may be a football fan, but there's probably an NBA game on or a hockey game on, and you wanna check what's going on there. If you're stuck in an app, that's not so easy to do. So the user experience that sort of confines you in that, I, I don't think is one that most sports fans find particularly fulfilling.
Mm-hmm.
So back to your question about the platform and sort of this... I think it's being written about as though it's a renaissance in broadcast, and we don't think that's true. We don't think broadcast ever went away. We think there's just a little bit of a refocus on it, and that's primarily because you've had two things happen. You've seen sort of the promise of these direct-to-consumer apps start to kind of fade as their growth has flattened out and the churn rates continue to be, you know, fairly unsustainable. And then secondarily, you mentioned the RSNs, right? You've seen cable networks led by the regional sports networks, and I know that business well, because, of course, Fox was the biggest owner and operator of those-
Mm
... and I was a big part of growing those, those businesses for the years that I was there, and I was there when we sold them to Disney, through Disney, really, to Sinclair. You've seen that business fade away for two reasons. Number one, they just haven't been able to get the distribution, right? And number two is sort of the price value has gotten out of whack. So as a result, you have leagues and teams now sort of pivoting back to look for that reach-
Mm-hmm
... right? And that distribution. Of course, broadcast is right there waiting for them with open arms.
Right.
So, we at Nexstar sit in a particularly unique place in that ecosystem. So Lee Ann mentioned our position as an affiliate of the Big Four networks, right? Number 1 affiliate of Fox, the number 2 affiliate of CBS and NBC, and number 3 for ABC. As a result, we end up distributing NFL, right?
Mm.
The other sports that each of those Big Four has, whether it's, you know, NASCAR on Fox and NBC, or Major League Baseball or NBA, we are the face of each of those networks in the markets where we own the affiliate.
Right
... covering a big swath of the country. So, we play on our own stations that are Big Four affiliates with that marquee programming. We then have The CW. We talked about the sports that we've acquired for that. We control that network both in terms of the national level, where we deal with third-party affiliated stations, but also our own stations, and where we do quite well. And then we have dealing with increasingly local teams that are starting to think about what life is like after the RSNs.
Mm-hmm.
That's where those conversations, I would say, are really kind of in the, you know, early stages.
Right.
Diamond Sports Group, Bally's, is the trade name on them, still going through their bankruptcy process. How that shakes out, I think will be... It'll be lumpy, it'll be uneven, depending on the market, the league and the team that you're talking about. But, we feel really, really good about how we're positioned-
Right
... for that going forward.
If you think about that dynamic, I mean, what's been announced thus far on the local side, you've got Scripps talking about gaining two exclusives for some hockey teams.
Yeah.
Warm weather hockey teams that are gonna benefit their advertising revenues by $24 million on a base of $600 million, right? So, like, two hockey teams, two sports relationships, is that meaningful for Scripps, and, obviously, Gray is formulating some, unique relationship with the, with the Phoenix Suns. You guys, thus far, I would say, have been more focused on what you're bringing to the national stage versus with the CW, right? But you do have the, the local content exclusive with, with the Clippers. So can you just kind of frame up where you see more of the opportunity going forward? Is it gonna be more steered toward, what I call, with the, the national market, with, with the CW, or do you see more of an opportunity on the local side?
And then, just given your footprint, I would imagine that you are in a more advantageous position than any other broadcaster to attract these local teams. Maybe you can just dissect that a little bit when you think about the opportunity.
Yeah, I think, again, that the teams that have been available for the local deals is really a function of kind of where they stand vis-a-vis their RSN rights deals, right? And so, you mentioned Gray's deals for the warm weather hockey teams, that's Phoenix and Las Vegas. In the case of Phoenix, the Coyotes became available because that contract ended with Diamond Sports Group, with Bally's. In the case of the Golden Knights in Vegas, they weren't doing business with Bally's.
Their deal became available, and so that was a bit of a kinda early indicator, if you will, of kinda, I think, where the teams that are still tied to RSNs, where that will go as those RSNs start to either, you know, close or transition away from particular markets. It remains to be seen exactly what happens there across the board, whether that's a sort of market-by-market basis, or does that entire group, you know, fold shop? I'm not sure I know exactly, and they're still trying to get a bankruptcy plan that's approved by the debtors and the court. So we'll see where that goes.
But to your question about how we're positioned, we're certainly positioned better than anyone else just by virtue of our raw scale and the number of markets that we reach. We've been active in discussions, certainly taking a lot of incoming calls from teams and leagues who are interested in exploiting our reach, and we'll continue to have those. You mentioned the Clippers deal. That's actually one that's different than sort of the fallout from an RSN. We did that side by side with the RSN, did 15 games in Los Angeles for the Clippers. And interestingly, back to my story about reach and performance, you can see that those games on KTLA in Los Angeles do, you know, 2x the rating that those same games do on the RSN.
Notwithstanding the fact that we only have 15, all the marketing, you would think that, you know, viewers would not think first of KTLA to go watch a Clippers games, given, given the fact that we only have 15, and yet we do 2x the rating.
Mm-hmm.
Right? Back to all my—our, our thesis about where people tend to go to see sports in particular. So back to your question, we—I don't think that... I'll reframe your question. I don't think it's an either/or. We don't think of CW and our interest in national sports and what we've done there is an alternative to acquisition of local rights. We think it'll be in tandem, and we will continue to be, you know, I would say, opportunistic in those markets. We'll be, you know, disciplined and judicious as we talk to teams. I think, you know, certainly when you look at the landscape, not all teams are sort of situated equally even within leagues.
But particularly, if you compare like MLB teams and the percentage of revenue that they've been accustomed to getting from their local and regional rights versus an NBA and NHL team, and particularly NBA, 'cause they're on the verge of redoing their national deal. And so I think they have probably slightly less concern around the revenues that they need to acquire from the local market, compared to maybe MLB, right? Who doesn't have a renewed national deal coming. So the fact that NBA is coming up on a national deal, I think that will be very interesting how that shakes out. But certainly, the teams are feeling much more interested in pursuing local broadcast deals than I think historically we've seen.
Great.
Yeah. Anything to add to that?
No, that's perfect.
All right, so we'll continue to look for more sports deals as the time goes on. But
We, can we-
Oh, go ahead, Gavin.
Can we force him to make a guess on the RSNs? I know the tone of your voice and your verbiage suggests you're like, "Who the hell knows?" But you're about as educated a person just given your background. What do you think happens? Look,
[inaudible]Are we gonna see a bunch of billionaires come in and do vanity buys, like Time Magazine or Washington Post, say-
On the RSNs?
Yeah, what, what's gonna happen?
You'll see some of that, I think. In other words, the vanity buys have already happened around the teams. And the question is, do they sort of pivot into owning their own distribution platforms? I think there will be some of that, but I think mostly that will be... You can look at, you look at what's happening in Washington, right? Around the Leonsis group, right? Where they're gonna launch a direct-to-consumer product and try and pick up, I think subscale, but they'll pick up, you know, some viewers and fans outside of pay TV.
But I think what you will see is that paired up with broadcast to get the reach, and I think the most sort of progressive thinker on that is a billionaire with a vanity buy in the Suns, right? And you can see the deal that they did with local broadcast paired up with a D2C app. That D2C app, I think, you know, allows them to sort of reach into the corners and maybe experiment with some different programming. But the sort of cornerstone or bedrock of it all, as it relates to, you know, really making sure that the product is widely available, back to growing that fan base, first sustaining it and then growing it, really, that bedrock is broadcast, right? And if you listen to the executives at the Suns talk about it, that's exactly the way they see that.
So I think you will see more of that, going forward. Whether, you know, some subset of the RSNs survive, I think is the question. There's no question that it won't emerge looking like it does right now. I think for sure that that's not in the cards. I think the only question in my head is whether, you know, some number of those RSNs, and they really are operated as individual businesses. They lose scale as they start to, you know, sort of really operate individually, which I think creates even more pressure on a challenged business. But I do think there is a business model for two or three of them, that cover broad swaths of the country.
I'm thinking now in the Southeast and Florida in particular, where there are economies of scale and really strong teams there. Long-term rights deals that they could probably rationalize, but I think that's the exception to the general rule.
Ann, can you maybe talk a little bit about when you first did the CW deal? Obviously, you thought about, "Okay, we'll lose money when we get back to breakeven," I think. So a lot of these initiatives, is this- If I think about 2024 cash flows, does this sort of mean that we're gonna kind of maybe trough even lower, but then with, like, a bigger rebound, a bigger prize at the end? Or do- Is it... Do you think the same, or, or was a lot of these contemplated when you guys did the deal? I'm just trying to think about specifically, should we be thinking about 2024 cash flows lower, but maybe greater payoff, or this is kind of what we expected?
Yeah, I mean, look, I... I would say if you just look at the last 12 months of losses, those are very heavy losses because the content that was being put in place was very expensive content-
Right.
and it had very low viewership. I think, you know, our strategy is sort of twofold. One is to reduce overall content costs, and that competes a little bit with the fact that we are actually expanding the amount of content that we provide. And then also to put on content that's gonna generate better viewership, and that we're gonna be able to monetize in a couple of different ways, one of which is being advertising and one of which is distribution. I think a lot of these deals, you know, we didn't, obviously didn't see them coming as quickly as they came, but, you know, I think our outlook is still to, you know, achieve profitability in the next couple of years.
But, you know, we'll have to see how that kind of all plays out vis-à-vis, you know, we've got some headwinds right now, especially with the national advertising market doing what it's doing.
But initially, when I... I mean, I guess when you initially positioned CW-
Mm-hmm.
I mean, I really thought of it as, like, costs take out or just-
Yeah, it's still cost take out.
It seems like there's a lot of... I don't want to say let's call that defensive. It sounds like there's a lot of offensive-
Yes.
- environment, you know?
Yeah, I think we're really excited about it, right? I mean, I think at the time... I think, you know, when we bought it, we said, "Look, this is a defensive play and an offensive play." It's a defensive play 'cause we didn't want the network to be shut down because we had a lot of revenues that were tied to The CW affiliation. But on the offensive side of things, you know, putting more sports content, live sports content on the network, that, you know, as Mike just said, broadcast and sports are-
Right
like a marriage made in heaven. That's what's gonna create long-term franchise value for the network, and it's gonna create more value than probably just putting on, you know, whatever entertainment content that, you know, we've got. So I think it's a combination of things, and I think we're working through, you know, kind of how all this plays out in terms of what our vision was then and what it is now. But I think if you, you know, you talk to Perry, you know, having sports on there was always part of the strategy, just came a little faster than maybe we thought it would.
I think the timing was really terrific for us, right? Because the narrative around broadcast changed right as we were getting our arms around the business.
Right.
Right? And I, I'm not sure I was there when they did the acquisition, but I can't imagine that anyone saw, you know, as soon as 12 months in advance, you were gonna have really every rights holder out there coming to The CW looking for, you know, reach. The reach that only broadcast can provide. I mean, we published an investor deck recently, and if you look in there, one of the things, one of the points we make very clearly is the performance of broadcast programming, right? Relative to really everything else. And if you look at each of the Big Four networks, and they're far and away are the, you know, draw more viewership than anything else. Each of those Big Four does 4x versus what ESPN does, right?
A large part of that, I just sort of repeat that because people don't realize 4x the viewership that ESPN does. Part of that is because you just have this beachfront property, this very rare, scarce resource of a broadcast network, and we've just put the fifth one, you know, really on the map vis-a-vis sports for the first time. And that, you know, is essentially, you know, hanging a "Open for business" sign to all of the sports rights holders. And they've been coming at a pace that I think was probably faster than anyone expected a year ago. And we've been opportunistic in that regard.
So, we're super excited about the ability to, you know, really exploit that and do so in a way where, you know, each of those big four, despite the performance that they have, they only have so many hours, right? And they're gonna make their bets where they think they can make them. And we've made ours and, you know, candidly, ours are more money ball. We've said we're not buying NFL, we're not gonna be the lead, you know, acquisition of NBA, for instance. But what we have acquired, we think will be terrific and will really, you know, start to increase circulation with a different kind of audience that never had come to the CW before.
Then just one other follow-up question, because you talked about cash flow guidance next year. Just related to the ex-CW. Just kind of I know you guys sort of talked about this, but I just want to double-check the bridge between the old guidance and the guidance versus just [inaudible]Anchor and Chris versus Emily.
Yeah. Yeah, we, our new guidance that we put in on in the third quarter call was, you know, a little bit lower than what our original guidance was, and that was really kind of due to, you know, I would say, half due to distribution, of which a good chunk is related to the fact that we were dark on DirecTV for a period of time. And then also the other piece of it being just, higher attrition than what we anticipated at the beginning of the year. And then the other half is really due to advertising and interest. So on the advertising side, you know, the market has been, you know, pretty, pretty negative in terms of the, you know, what the expectation was for the beginning of the year, and then sort of that compounds into 2024.
That was really the reason for the adjustment in the guidance.
And then just one last question, just capital allocation, when I think about leverage and leverage charges-
Mm-hmm.
in a higher interest rate environment.
Yeah.
Does that sort of rejigger kind of where you'd like to be on the leverage profile? It's gotten more expensive, cost of capital has gotten more expensive.
Yeah, I mean, cost of capital is more expensive, but when I look at, you know, if I think about, you know, my highest cost of debt is really, ironically, my Term Loan B right now, and if I look at that on an after-tax basis, I'm still, like, in the sixes in terms of what the cost of that is. And so when I think about my capital and where I-- my excess free cash flow, where do I put it? Do I do it into debt in the sixes, or do I do it into my stock in the twenties? I gotta go to the stock because I don't think I'm over-leveraged, right?
I mean, our leverage from an LTM basis ticks up on in a non-political year, and obviously, this year we had the incremental impact of the DirecTV situation. But it'll come back down next year when we have, you know, great political revenues and the benefit of all these distribution contracts flow through. So, you know, I think we feel good with the quantum of debt that we're at right now, and then being able to use our excess cash flow to return to shareholders in the form of dividend and stock repurchase. And then, look, at the end of the day, you know, Nexstar made its living and created a lot of value for shareholders from M&A.
So to the extent we can find something that makes sense, we'll, you know, kind of lean into that if that's gonna be more accretive for our, for our shareholders than just those straight buybacks. I mean, I guess the other point, and I'll just, and I... Nick's gonna laugh at me, but I'll just take the opportunity to just sort of add. You know, on an LTM basis, you know, we generated just over $1 billion of attributable free cash flow, and we returned 95% of that to shareholders in dividends and share purchases. So that's actually a cash 20% return.
Yeah.
I mean, and yet we trade on an EBITDA multiple basis that's at the low end of the peer group. It's to me, there's an opportunity there to think about, you know, maybe valuing Nexstar in a different way. And then on top of that, you know, since we started our share repurchase program in 2019, we've reduced our share count by 25%. And that's been about 10% a year for the last couple of years. So, you know, there's real sort of value levers just that are, you know, corporate finance, that can be a case for, you know, why this stock would be a good one to buy.
Ann wanted me to lead with that question. I was like, "I can't, I can't, that can't be the first question out of the gate.
It could.
So, what is the market getting wrong?
You know, I think that the, you know, the market gets caught up in sort of the... There's a lot of media-
Mm-hmm.
and there's a lot of news about, you know, streaming and how the viewership is changing. And, you know, at the end of the day, we believe that there is a true, and Mike touched on this, virtuous cycle as it relates to the broadcast model. We just spent, you know, just spent a bunch of time talking about the benefit of sports, and, you know, he didn't touch on news. You know, news is incredibly important. People spend a lot of time on news. You know, we talked about, you know, when we put that investor deck out, we looked at, you know, let's look at all of the national networks and how much time people are spending watching those national networks.
But I also said, "Look, let's look at our own stations, and if we take our entire portfolio of stations, how much of the viewership of our content is related to network content or our own content?" Because we know the value of the network content. You can see that in those national numbers. It's about 45% of the viewership is from our own content, so that's not a small number. That's people leaning in. They're watching news. They're watching the syndicated content. They're watching our local lifestyle shows. You know, they're spending a significant amount of time with our own, with our own content.
So, you know, we think that there's a real, you know, virtual cycle as it comes to broadcast, that's based on sports and news, and people leaning in and watching that content that's gonna create reasons for them to continue to subscribe to the pay TV ecosystem, which will then, you know, help us with our revenues over time. And so we feel like, you know, there's a lot of noise out there, and it's hard for people to kind of see through to that, but that's what we think is really kind of driving what the disconnect is. Because I think if you look at the fundamentals of our company and the free cash flow generation, it's undeniable.
So, the market doesn't get what you explained in the second part?
Yes. That's my belief.
How about you, what do you think?
Well, I think getting to these next few questions, I think, the distribution revenues is a hot topic as well-
Mm-hmm
... in the face of declining subscriber count from MVPD. So I wanted to touch on that as well, because this is a dynamic that, you know, you continue to outrun here, but obviously, your paid distribution fees from the various MVPDs, the Comcasts of the world, Charters of the world, they are shedding subscribers at an accelerating pace, right? Comcast was down 13% year-over-year from a subscriber count basis, yet at the same time, you guys are growing distribution fees, right? And you exhibited that into this next quarter's guide. I know the DirecTV impasse affected last quarter, but we're modeling 13%, I think, next quarter for distribution fees. And obviously, that just showcases that the math is simple. It's subscribers times subscriber fee per subscriber.
On a net basis, you continue to grow that. So you're able to continue to extract higher fees per user. Can you talk about how you've been able to do that, and the leverage you have to extract that value? And then I've got a few distribution questions that kind of follow up on that, but maybe that's just a good way to start.
Sure. I think just to clarify, that 13% or a number in that range, you're really talking about the traditional MVPDs, right? As opposed to overall pay TV, where we get paid, right? So we're not selling just to traditionals at that 13%. We're selling into all of pay TV, which includes the virtual MVPDs, such as YouTube TV, Hulu Live, and so forth. That number's much lower, right? Down into the, you know, single digits, for sure. So that's really our base as we think about it, right? And we don't really think of our business being tied to just, pardon me, just Charter, DirecTV. We think of it as all pay TV. Anybody where, you know, where our stations are where networks are carried.
So that's the first thing. And, you know, the good news is the virtuals continue to grow, and I think, you know, the headline around YouTube TV, particularly, with Sunday Ticket bolted onto that product. The leading news there is they've had a really good fourth quarter, third and fourth quarter, but really fourth quarter, tied to that. So we'll see that. That will bear out in the numbers as we get them. But back to your core question, really about leverage, and I think, you know, Lee Ann touched on this at the beginning. You know, our scale puts us in a different position versus really any other player out there, particularly as it relates to the local stations.
We just have, we're just playing a different game. And both the content that we have and the scale of that content allows us to go to a distributor and really be in a position of, you know, kinda having must-have programming. If they're gonna be in the, you know, pay TV business, they really need to carry our stations, and that's the reality. So the ability to continue to sort of outpace subscriber erosion, I think reflects a couple of things. A, it reflects that scale. B, it reflects the value that we bring, and we talked about, you know, the Big Four networks and how much viewership they represent. And our position vis-a-vis those Big Four networks on our stations means that, you know, we represent an over...
You know, just a huge percentage of the viewership on any pay TV platform. And we detailed some of this in the deck that we published. We think that the fees that we're generating, notwithstanding the growth in those fees year-on-year, is still trailing the viewership that we bring to the table. And so, you know, as you look at a changing landscape, you know, and we talked about this in our deck as well, particularly post the Charter-Disney sort of dust-up and the resolution there, which represented really a couple of new kinda features as you think about pay TV. We think we benefit from that. And let me elaborate on that if you don't mind. All right. I think that the first is-
You're answering my next few questions.
Well, I think that you know, it. We got hit in the, as I may have said earlier, we got hit in the blast radius of someone else's fight.
Right.
And we really felt the need to sort of say in a very public way, "Listen, to the extent that you think this is negative for us, you've misread what that fight was about, and you've misread the implications of the resolution of that fight." The fight was not around the sort of proverbial, you know, content versus distribution, where distribution wins, and we as content lose. That's not what it was about. It was. We think it was about really two things.
It was around, you know, D2C products that the traditional, you know, frankly, Big Four networks and others had created that were undermining traditional pay TV, and Charter said, "Enough of that." And it was about bloated cable portfolios with sort of long-tail, what we call derivative cable networks, that really, aside from not adding value to the pay TV, were really just a tax on the premium content inside those bundles. So said differently, if you look at the resolution of Charter-Disney, inside that Disney portfolio, they had, you know, premium content led by the ABC O&O stations and the ESPN and other sports networks in there. Then they had other networks, namely FXX, FXM, Nat Geo Wild, Nat Geo Mundo , Freeform, and others, that Charter said, "We're not paying for those anymore." In fact, they're not carrying them anymore.
Mm-hmm.
So when the deal got done and the Disney networks went back up, they didn't all go back up. The networks I just named did not get relaunched and will never get relaunched by Charter. And, and so back to: Well, what are the implications for us? I think the implications for us are a couple things. Number one, the premium content, the kind of content that we deliver on our stations, got paid. All right?
And the second is the D2C products got bundled in with the traditional video package, both the existing D2C products in the case of Disney+ and ESPN+, but most importantly, and this was really what the fight was about, the forthcoming ESPN direct-to-consumer product, which Disney's been very vocal about saying, "It's not if, but when they launch that product." And Charter basically drew a line in the sand and said, "We're not gonna, you know, pay for you to produce that product only so you can compete with us," and Disney yielded on that front, and it will be packaged in. We think that's a game changer.
Right.
Right? Back to your core question on the erosion of subscribers, we think bringing that content, which had started to leak out, and there was these crazy, you know, sort of perverted incentives to put content, take it out of the traditional bundle that was paying, and, and continues to pay for the creation of these D2C products, take it out of that bundle and put it on D2C as they tried it to, to chase scale. That incentive is over.
Mm.
Now, if those D2C products are gonna be bundled with the traditional video, there's no reason to pull content out of that and put it in there. In fact, the incentive is to put it on the biggest, widest platform, i.e., broadcast, to generate the most advertising dollars.
Right.
Right? So-
So you basically, to summarize, you see two key benefits. One, if we continue to see continued bundling of D2C into the cable offerings, what you could potentially see is a stoppage of the bleeding on the MVPD subscriber attrition that you're seeing there. That's benefit number one to you, and number two, you're seeing them curate that offering and make more room to pay the people that actually matter by dropping some of those local stations, and then you point to the amount of viewership that you attract within that bundle, and that's where you can go after them with, obviously, higher distribution fees. Which, you know, leads me to my next question, like, in the investor deck, you talk about the fees that you get right now versus, you know, what you could potentially extract if your fees matched your viewership.
Mm-hmm.
Right? And that's—I mean, they're, they're big numbers, right? I think 35%-75%, depending on how you look at it. I guess my question is, why don't you feel that... It obviously presents a more long-term tailwind for you to continue to extract higher distribution fees, but if right now you're giving away a product that is, is—and you're not being compensated for it, you know, given the viewership it attracts, why can't you be more aggressive right now?
Yeah.
just basically command the value-
Yeah
... that you currently offer-
Yeah, no, it's a com-
in the ecosystem.
It's a completely fair question. I think that the reality is, when you get into these distribution deals, and so much of it is leverage, and both sides are fighting basically to move, you know, margin from one side to the other. The almost single biggest sort of metric in those deals that's negotiated over is the rate of change, right? Rate of change on the fees that are paid. And notwithstanding the fact that, you know, by every objective piece of data, we are trailing where we should be, you can't just wave a wand and get there. It's too disruptive, right?
And not only that, we need those dynamics that you talked about at the beginning, particularly as the bloated portfolio gets sort of distilled down to the stuff that matters. That's gonna take a little bit of time to work through, and so, you know, we think, we, I like to think of it as, you know, our share of wallet will shift.
Mm-hmm
... right, to track our share of eyeballs, of viewership, but that can't happen overnight. You know, these companies that we deal with, you know, they're running a business. They're looking for margin as well. As we take increasing share, it's gotta come from somebody else, and it either comes from them or it comes from a third party that they're dealing with.
Right.
Right? Or they continue to raise prices. That needs to go through in sort of a, you know, a little bit of a timeframe.
But what-
But we feel good about that.
What's positive about what you just saw is that the tea leaves are there now.
For sure.
They're curating the offering.
No question.
Yeah, right.
Yeah, no, we feel really good about the dynamics. And if you, you know, if you listen to Chris Winfrey, you know, CEO of Charter, he's pretty absolute about saying that they're not doing a deal in the future unless it looks like the Disney deal that they did on two features. Number one, the inclusion of D2C products inside the pay TV bundle, and two, not paying for content that doesn't matter anymore.