Okay, we're gonna get started. We are pleased to have back to the conference, Perry Sook, Founder, Chairman, and CEO of Nexstar Media Group, along with Lee Ann Gliha, Exec VP and CFO. Guys, thanks so much for being here.
Thank you.
Thanks for having us.
So maybe I'll start with high level. So the future of the pay TV business has been top of mind for investors. You've been very clear in your view regarding the continued importance of broadcast in the television ecosystem. I thought maybe you could speak a bit more to your viewpoint. What would your pitch be to investors skeptical around the future of your core broadcast business?
Yeah, maybe I'll start with that. I think, first of all, the important thing to know about the broadcast television business is that from a content perspective, we have the most watched content that is available, that's out there. We did an analysis last year that looked at all television networks, and the broadcast networks were the most watched content by a significant factor. In fact, each of the broadcast networks generated 4 x the viewership of ESPN, which is pretty powerful. And on top of that, we've got great local content. You know, we also looked at our overall viewership, and we said, "Well, how much of that content is related to network content versus our own content?" Turned out about 45% of our viewership is from our own content.
So again, very, very powerful content that people like to engage with. So that's point number one, I think. Point number two is demographics. When you think about the firewalls that exist within our business, demographics is one of them. There was a study that was done a couple of years ago that said about 73% of the population that's age 45 and up, which is more than half of the adult population, has a pay TV subscription, and those people are less likely to churn off. They're more likely to have a habit of having a pay TV service, and in fact, they'll have every other service as well because they've got the wealth to do it. And so that's, you know, the first firewall in terms of thinking about what the longevity of our business is, is that demographic firewall.
I think the second firewall, when you think about it, is our, is our access to sports content. When you think about what is driving the viewership of the broadcast networks, a good portion of it is the NFL content and the sports content. And if you are a sports fan, you're gonna continue to subscribe to pay television to have access to all of that content. So that's the second piece of the firewall. I think the third piece of the firewall is really when you look at the overall ecosystem and what is making money from a, from a media company perspective, the only thing that's out there that's making money is the linear ecosystem.
So ultimately, if you're a company and you're looking to kind of grow and make money, which I think most public companies are, you're gonna have to lean back into that linear ecosystem in order to continue to make money, which is gonna mean that there's gonna be continued investment in that side of the business that's gonna perpetuate the growth of our business over time. And then I would say, you know, the last couple things are more just about our company. You know, we are the largest company in the local broadcast space. We have a, you know, moderately to lowly leveraged balance sheet, and we generate a significant amount of free cash flow.
And if you just take the average of the analyst consensus estimates for the average of, you know, 2023 and 2024, or sorry, 2024 and 2025 for free cash flow, it's over $1 billion of free cash flow, which means that if you just look at our stock price, we could generate our entire market cap in less than 5 years. And we are using that free cash flow to buy back stock, which is incrementally accretive. So I think those are the things that I would, you know, kind of point to in terms of, you know, the elevator pitch of why it- why our business has legs and, and kinda make sense to invest in.
Great. That was a great start. Maybe just staying on the ecosystem for a second. If we look at some of the recent trends in DTC, we're seeing a bit of reversal for the past few years, right? There's price increases, more ads, some retrenchment around content spend, marketing. I guess with that backdrop, would you expect to see at some point an easing in some of the subscriber attrition that we've observed recently?
I think we're about to begin the great rebundling in some way, shape, or form. You see the new entrants beginning to raise prices because of the amount of money they're losing, and they realize that they can't sustain a business with those kinds of losses. And I think you're seeing people now look at the traditional bundle and saying, "You know, I get the video content," particularly if certain MVPDs are going to incorporate the streaming options as part of their bundled offering to the consumer. And we're relatively indifferent. As long as we're paid to be there, we're part of that bundle, and broadcast stations, by franchise agreements, are in the basic tier of every piece of the distribution of a traditional MVPD.
So, you know, one of the things you get from a bundle is seamless navigation, and if you try to change channels during Thursday Night Football, you've got three clicks to back out of an app and three more clicks to get back into whatever else you want to watch on another app. And, you know, I just changed channels. I went back and forth between the Knicks game and the golf yesterday, and it was literally, I had a button for last, so it was just one button back and forth the entire afternoon, which is how I spent my day.
But I do think that, you know, as Lee Ann said, there is kind of a firewall of the high percentage of people over the age of 45 that have a pay TV subscription. And even those under that age now are saying, "Okay, my broadband on an à la carte basis is gonna cost more than if it's in a bundle. You know, if I, you know, I all of a sudden buy all of these à la carte services, I now own more than the cost of the bundle, arguably with less video choices, may not have every streamer I want." But it may be a matter of time, and I think that, you know, Tom Rogers was on CNBC last week, and he was talking about streaming service and saying: Okay, Netflix is number one.
You probably would have to put Amazon because of the strength of Prime, maybe as two, maybe Disney, three. If people are gonna pay for three or four, that means everybody else is trying to crowd into the last car on the train, right? So I think by definition, there's gonna have to be a bundling of those services into a service if it wants to have anywhere near the scale to compete. So, we didn't chase streaming because we're already available as a service, free over the air, so we had ubiquitous reach without that. We also are allergic to losing money, so that's the other reason we didn't chase streaming. But we do think that you will see sub declines in the traditional pay TV universe begin to moderate over time.
Yeah. And to your point, we've seen not one but two bundles now get announced in the last two weeks on the, on the streaming side.
Exactly.
Yeah. Maybe just going back to consumer choice, pay TV, right? What type of rationalization or changes do you think need to happen on your side of the ledger, on the pay TV side, to make that more attractive for consumers?
Well, I think what you're gonna see is the streaming side have to continue to raise their prices, because if I look at what's being offered to the consumer, retail is at a price below what I'm selling it to the distributors on a wholesale basis. That, you know, prices will—I think, ultimately, will have to equalize and, you know, everything old is new again, right? And so Michael Wolff wrote a book called Television Is the New Television. If you read it, it just talks about the powerful gravitational pull of the existing ecosystem for content creation and distribution. And as I say a lot, you know, our basic business is a local service business, right?
We provide local content to consumers that is relevant and increasingly the unique way for them to receive local news and information, not available through radio or newspapers to any depth. And then the other thing we do is we help local businesses sell stuff. Well, that's a good business to be in, that local service business, and that is, at the core, the lion's share of the revenue and profits of what we do. And while technology might change the way we distribute our signal, it's basically just changes in distribution. It's not gonna change our base service mission, which is, you know, the relationship we have with 43,000 SMBs and 70% of the country, and the 310 hours a year of local content that we produce, and that's really the core of what we do.
You know, if there's a moat around our business, it's that it's very, very expensive to try and replicate that.
Maybe bring the focus back to Nexstar. So when we look historically, debt finance station acquisitions have been a hallmark of your strategy to drive returns and scale. How important is M&A to your future growth? You know, what opportunities do you see, you know, just kind of given some of the regulatory limits out there?
Well, M&A has been a big part of our story, you know, for the first 27 years of our almost 28-year existence, and has driven value. I think we have a very well put together and well-used playbook as to how to integrate and realize synergies. And there will be M&A in our future. It's just in this current regulatory environment, you know, Lee Ann and I are of the mind, well, why spend time and money on something that we think has almost no chance of getting done through the regulatory agency? So I think when that changes, you know, we'll lean in more. Now, listen, we're in conversations on a couple of one-off station opportunities that will create duopolies, perhaps new CW affiliates that have an immediate financial benefit to us.
And we'll still do those, as we have in the past, you know, San Diego and other one-off duopoly creation. But I think in terms of scale, M&A, you know, cost of capital is a factor, economic outlook is a factor, but more than anything, it's the chances of getting through either the DOJ, the FTC, or the FCC. And all of those are real tough puts right now for any industry, not just ours.
Adjacencies, anything there, right? You did purchase The Hill a re there other things that are adjacent to news or the content you're getting into on sports that would be interest?
Well, I think that's an important point. Most all of our content acquisitions, historically and on a going-forward basis, will be content related or content adjacent to what we're doing now. We're not particularly good at buying ad tech companies and making them better, and so you, you've seen us, you know, our foundation is local news. We've added national news with our cable network. We've added political news with The Hill. With the CW, that was distribution and a programming source, not only for our stations, but, you know, we see an opportunity to run that business more like a business than it has been before. But through that, we've now added 500 hours of local sports to the CW.
If you look at what drives the needle, what moves the needle is local news, local sports, you know, live news, live sports, live events. So I think we're into that as a portfolio in a fairly significant way.
Got it. You know, scale is something that, you know, you've highlighted that it differentiates you versus some of your local broadcasting peers. Maybe you could talk a little bit about, the benefit of size as it relates to your distribution, advertising, your network relationships.
Is that me?
Yeah.
Okay, I would say that, you know, it's important to be important, right, to every vendor you do business with, and I would count the big four networks into that, right?
Yeah.
We're a number 2 or number 1 or number 2 distribution platform domestically for, you know, the big four networks. And so, you know, I think it's important, I think, you know, you can, you know, the nuclear option really stings when you talk about, you know divorce, and, you know, we're not talking about divorce, but if the threat of that is there, and it's a viable alternative, then it becomes a credible threat in the negotiations. So, other companies of smaller scale probably don't have that same impact or could be easily replaced. We can't be easily replaced. So that gives us, I think, more leverage in the negotiations to make sure that we get fair deals.
But I would say, you know, on the other side of that, bringing all of our advertising sales under one umbrella, as we go to market now, as one Nexstar, has gotten us further up the food chain in the agency holding companies of having the conversations of, "Geez, you really like college sports? Well, we have it on The CW, but then we also have it via other networks locally in the 30 states in the country where you do your business." So it's local activation at scale with a network overlay, and that's a pretty unique concept because no one else can do it to the scale that we do. I think those are two of the most important reasons why our scale differentiates ourselves from the peer, our peer group.
It's a good segue to political. I imagine your scale gives you a pretty wide reach over not just the presidential race, but Senate, governor races. Expectations for political this year, and then I'm curious, how do your kind of national assets play into that, at all?
Well, to the extent that we can produce political content, you know, we hosted the fourth Republican presidential debate last year, aired it on both NewsNation and The CW. The political dollars that flow would only be national dollars, you know, a presidential race, a ballot initiative that was in multiple states, someone trying to influence Supreme Court justices ahead of a big decision. They would use our The Hill or NewsNation to potentially do that. But as Tom Monaghan said, "You know, all politics is local." And so it is. You know, if you look at our station footprint, we operate in 40 states. We're in all the battleground states that potentially will come up in the presidential race, but that's less than 30% of our total revenue.
The other statewide races, the Senate race in Ohio, in Pennsylvania, in Montana, the ballot props in California and Nevada, will really drive our political revenue this year. We're in almost 90% of all contested House and Senate races and gubernatorial races. So, you know, we have historically, as a company, taken a low- to mid-teens percentage of all political advertising spent on television, and we see no disruption of that trend, all of which points to what we've said will be a record year.
You mentioned the debates. I find it interesting that one of the two debates is scheduled for June. You know, traditionally, a quieter period for political spend. Does having a debate in June maybe stimulate some presidential spending that you wouldn't normally have seen? If everyone's trying to put ads around that content.
I think it's very interesting. The first debate occurs before either of the political conventions-
Right, exactly.
I'm wondering if there's a read-through there, right?
Yeah.
Historically, a lot of money has been raised leading up to and based on the results of the debate. You know, I don't know how many, you know, fundraising emails you get on your phone every day or text messages, but I would expect that to multiply as we get closer to the debate. And then, again, based on the outcome, the message will be recalibrated, and it'll be back again. So I don't know if that will pull forward any spending to speak of, but I do know that historically, 80% of the money that we've taken in for an entire year has come, you know, in the back half of the year, and with the concentrated portion of that, Labor Day forward to Election Day, so those six or seven weeks, depending on the calendar.
And so that's really where the rubber meets the road. First quarter political is interesting, but as I like to say, not really meaningful in the scheme of things.
I think there was a period of time when investors had concerns around social media, taking a certain amount of share in political. That never really panned out. Maybe the social media firms decided that wasn't a place they wanted to be. Now, the concern seems to have shifted to CTV, right? There's a lot of CTV in inventory out there that could be targeted locally. What's the potential kind of impact that you see to that in terms of market share?
Well, social media might be effective in as a fundraising mechanism. It's not really a get out the vote mechanism. And CTV may be interesting, and they will probably take some money out of the entire pie this year. But if your goal is to get out the vote on Election Day, no other medium comes close to reaching the populace the way that broadcast television does. And if you look at the people who do vote, who are predominantly 50+, I mean, that lines up almost perfectly with the demographic of what linear television delivers. So, there might be, you know, some activity around the edges, but, you know, I don't think it will affect our mid-teen share of what we expect to be a record political spend this year.
Got it. I want to circle back to sports. So live events or sorry, live games continue to generate great audiences on broadcast TV. The leagues do appear keen, though, on adding more streaming partners. We saw that last week with Netflix and the NFL. That could be coming with Amazon and the NBA. How do you think league strategies are evolving? What's the long-term impact to Nexstar and broadcast?
We've met with the commissioner of every major sports league around, and I think what they all get is what the NFL has known all along, is there is no replacement for the reach of broadcast television. And so I've met with Adam Silver, we've met with MLB. You know, we've obviously met with the folks at NASCAR, and the trade is taking less money for expanded reach of broadcast, realizing that the RSN model was not sustainable. That's why they went bankrupt. We can't pay what they want, what they paid, because we don't want to go bankrupt.
But I think when you look at our Clippers deal, for example, you know, Steve Ballmer, who's, you know, not the easiest guy to negotiate with, realized the value of local broadcast and expanding to the, you know, almost half the market that doesn't take a paid TV service in the Southland. But not only for the games and exposing those, I call it the welcome mat package, right? You get 15 games or whatever, out of an 82-game schedule, but you might interest someone in buying a ticket. You might interest someone in buying merchandise. But then, you know, we have the players come on on a regular basis and talk about their, you know, their favorite playlist.
Maybe they do the weather, maybe they go to a, you know, on our morning show, maybe they go out to a charitable event that we're hosting. Maybe we go to one that the team is hosting. And I think he realized the value in exposing his players to the community as other than just athletes on the court. And so it's worked very well. We've just done our second renewal with them, and, you know, I think you'll see us do that opportunistically, locally. And again, nationally, I think that, you know, that, that while, you know, the special events of two games on Christmas Day or a Thursday night package or whatever are interesting around the edges, the amounts paid for those games.
I f I look at Christmas Day, you know, each NFL game may generate $10-$12 million in advertising. It's been rumored they paid, you know, more than $75 million apiece, plus you have to do the production, plus the marketing and promotion. And so it's obvious that it's not a money-making venture. It might be done for other things. But I, you know, I think that the important thing is that the commissioner of the NFL has said that during his tenure, you know, the NFL will always be on broadcast, the Super Bowl will always be on broadcast. So I think you'll see these opportunities to make some outsized money around the edges, but the teams, owners, and the league commissioner know that the power in broadcast.
That's why the games are universally available, with very few exceptions, over the air and not on cable.
Got it. Maybe staying on the sports topic, you've added a number of rights deals, Xfinity, NXT, ACC Football, most recently Pac-12. Maybe you could update us on your sports programming strategy. And then I'm curious, as you sort of reach kind of critical mass, as these all come online, how do you think about developing CW Sports as a brand?
Well, I tell everybody we're playing Moneyball, right? We're like the Oakland A's competing against Artie Moreno's California Angels. You know, he has 4x the payroll, but they play in the same league. So, we're kind of in the same place. You know, we're never going to be the topping bid in an auction. But, you know, we have not done a sports rights deal that doesn't pencil out to make money for us over the term of the agreement. So we won't abandon that discipline at any point in time. But we're up to 500 hours of sports, a lot of Saturday sports. We have room for some more Sunday inventory, and so opportunistically, we'll look at packages, parts of packages, you know, to continue to populate that.
Because, again, we know that live news, live sports, live event television is what moves the needle in terms of distribution revenues, in terms of consumer engagement. And so, you know, opportunistically, if we can add to the portfolio, we will. People have asked, "Are you going to change the CW brand or, you know, create a CW, " You know, I say, "I don't even know what that means, right? What a CW is." But, you know, as far as I'm concerned, people watch programs and not networks. But if we put good content on the air, you know, people seem to gravitate to it. We had five instances in the fourth quarter where our total audience delivery for the CW on a given night was over a million viewers.
4 of those were sports-related nights, and the other 1 was the debate. So, you know, I think we know what moves the needle. We just have to move into that opportunistically. And, and quite frankly, a lot of folks who the bulk of their inventory is on cable, are the ones that are most engaged in conversations with us.
Maybe zooming out a bit on CW, how's your ownership tracked versus your, your original expectation? And where do you see the opportunity for the network and then the, the wider Nexstar portfolio, where you own the stations?
Yeah. No, we feel good about the progress to date. I think just kind of rewinding for half a second. We bought the network in September of 2022, and with the network came the 2022, 2023 broadcast season, which just ended in the third quarter of 2023. And that programming was very expensive, original programming that was a cost of the deal. So during that first year of ownership, we did everything we could to reduce the operating expenses of the company. We did what we could on the programming side. It wasn't, but it wasn't until really the fourth quarter of last year that we got control of the full programming slate.
And so you're now starting to see the benefits of the reduced cost of the programming in the operating financials of the company. In the first quarter, we announced that we had improved the operating cash flow of The CW by about $50 million. We expect to improve the operating cash flow of The CW Network by over $100 million throughout the course of this year. So we feel good that you know, we're starting to be able to have more control of the business and execute our plan on the cost-saving side of things. And now really kind of from here, it's going to be executing, watching the audience grow, watching the distribution revenue grow. We've said many times that within our own portfolio, our CW stations are our most profitable.
And so we know that there's room to kind of continue to grow that, that business with our affiliates and, and throughout the, you know, with our, with our own distributors as well.
I'll just add one postscript to that, and that, the CW that we inherited, acquired, programmed 14 hours a week, which was 2 hours a night, 7 nights a week in prime time for a number, a dollar number. We are programming now 15 hours a week in prime time. We added the third hour on Sunday, + 500 hours of sports in this upcoming season for less, and, and not inconsequential amount less-
Yes.
than what they were spending to program 14 hours. So, you know, everything we saw as the business opportunity has certainly proven to date.
Got it. I want to make sure we cover advertising. So, just looking at some early commentary around this year's Upfront, you know, we've gotten some indication agencies, traditional budgets might not, you know, grow materially. Kind of, how are you positioning your, your national assets in light of those trends? And then maybe just discuss the ad market more broadly. What are you seeing in terms of national, where it's been challenged, and then anything on local?
Well, the upfront hasn't really started yet, so everyone's negotiating in the press. So, surprise, agency budgets are going to be down this coming year.
Negotiating.
If you go back and look at the commentary every year of the last 10-
Of course.
you would hear the same thing.
Yeah.
But, you know, beyond that, you know, again, our ability to go in with this one Nexstar, all of our digital and linear assets under one roof, and make a 4- or 6-legged sales call to say, "Here, here's our array of assets and the opportunities we see for your brand," that's actually getting traction. Now, no money has been laid down yet, so we don't have proof of concept. We just have a lot of lean-forward conversations at this point.
Okay. Got it. Anything on the current national or local market to call out?
Yeah, look, I think we, you know, we talked about it on our first quarter earnings call, that it's, you know, it's still down, but it's down less than it was in the prior quarter. So we're feeling like there's some positive, you know, positive things happening, and then the back half of the year should be a little bit easier comps. I wouldn't say there's anything in particular to call out in terms of categories other than, you know, we're now kind of getting to the point where we're lapping a lot of that sports betting money, which was nice to have for a period of time.
Okay. Earlier this year, you gave guidance for low-teen net distribution growth. I think that's mid-single, when you exclude the impact of the carriage dispute. Maybe talk about what's factored into that guidance. And then, curiously, what gives you confidence in your ability to kind of achieve continued increases with the MVPDs?
Yeah, I mean, you know, we factor in all of the impact of the recent negotiations that we had with our distributors. So if you kind of go back in time, in 2022, we reset a little over 50% of our subs. Last year was a little over 40%, so this year it's going to be a small year. Less than 10% of our subs will be reset. So our guidance for this year really takes into consideration the deals that we did last year, the deals that we're going to do this year. We have one network deal that's coming up this year, that will impact this year, but it includes all of that.
It's based on just what we've been seeing and what we've been able to achieve, both on the distribution side and the reverse comp side. You know, we expect that we will continue to be able to grow our distribution and our net distribution for some period of time because we continue to be under-monetized. You know, we've done all that work you probably saw in our October presentation, where, you know, we're still generating more of the viewership and taking less of the content fees from the distributors than we otherwise should have. So we think that can continue to grow, and we've been successful in moderating the rate of growth of affiliation fees as well. So we expect that to happen.
It probably won't continue for forever, but you know, we expect that to, you know, continue to grow for some period of time.
Got it. You recently got carriage for your CWs Mys and Independents and the virtual MVPDs. Can you speak to the incrementality of that?
Sure. Well, first of all, they wanted the content, right? Nobody carries a network they don't want to carry. And so they wanted the stations, they wanted the local content. They're willing to pay for the local stations, the local content, so that's the primary beneficiary. But it also now allows us to be distributed ubiquitously throughout the local marketplaces. Imagine a station as powerful as WGN in Chicago or KTLA in Los Angeles, not being available on the virtual MVPDs, which made no sense, since those are two of the higher-rated stations in the marketplace, and usually either number one or number two in local news. So now they're at distribution parity, which you know, obviously adds distribution revenue, but it also allows them to monetize advertising at a slightly higher level than they had historically.
I want to cover NewsNation. Does it feel like the network is starting to become more mainstream? Maybe you can update on how it's performing, where you see this asset in maybe two, three years' time.
Sure. We continue to show substantial growth. I think I saw a stat where we're, you know, now up about 240% from, you know, when we launched in, particularly in prime time, because when we launched in prime time. We'll be 24/7 on June the 1st, which is going to be here, you know, in less than two weeks' time. And so again, when we had the debate we know that over 1 million viewers watched it on NewsNation, and so our average nightly audience is not, you know, not anywhere near that number. So we also know that we're distributed now in more pay TV homes than both CNN and MSNBC. So reception is not the issue. It is raising awareness.
Our current awareness score is 35% of the population knows what NewsNation is, according to telephone surveys we do every month. Which means 65% of the country, we have to knock on the door and introduce ourselves, and so that's really the opportunity for us. You know, the hotel I stayed in last week had NewsNation on in the in-room distribution. This hotel does not. And so, you know, that's another area. That's out-of-home viewing. We don't get credit for it, but it's a habit. If you want to watch Chris Cuomo or Dan Abrams every night at 8 or 9 o'clock, you know, we'd like you to be able to continue that habit when you're on the road. Now, you can through the app, obviously, but it's a lot easier when you can just toggle up and down.
You've talked about kind of a more moderated or middle stance for your network relative to the established ones? Could you, you know, argue also in terms of awareness, like, is there a handicap in the sense that those networks are associated with certain political affinity groups, and that gives them more awareness, and by having a more moderated stance, that hurts you in that way, or is that-
We could have made more money quicker if we'd have tacked one direction or the other, but I had to look at this guy in the mirror and said, "That's not really what we're about as a company.
Right.
Our local news is not biased, you know, and we get scores for that. I said, "This is an extension of the brand of our company." And we have begun to use this phrase, the moderate majority in America, that's probably socially liberal and fiscally conservative, and we agree on more than we disagree on. It's just that the discussions have been hijacked by the fringe groups on either side that make us seem more divided as a nation than I believe we are. We also are telling stories about middle America that oftentimes get lost in the other national news outlets, and the more we do of that, the more I think we establish our relevance. Our job, quite frankly, is to make sure that unbiased is not boring, right?
And because it's easy to put people on a stage and have them, you know, shout at each other, right? And, you know, some people can't turn away from that. But, and it's a way to get clicks, and it's a way to get, you know, heat, but, but that's not what we're about. This is a longer build, but the company has the balance sheet. Because of our distribution agreements that were in place at the time of launch, we've been able to cover our expenses and are profitable. People say: "What's success look like?" I say: "Well, CNN, I think, makes $500 million a year, and Fox News probably makes 3x that." So that's what success looks like to us. Anywhere between where we are today and the closer we get to them, that's the more successful we are.
And again, our legacy, if we do this right, you know, might help to change the discourse or the way the discourse is handled in this country, that you can respectfully disagree. So if all of those things happen, those will be happy byproducts of what we expect to be a increasingly profitable venture for us.
Okay. I want to make sure we touch upon ATSC 3.0 or next-gen TV. What are the most near-term kind of applications coming out of that? When could investors expect kind of a material revenue contribution that you would call out?
Two, two different parts to your question. One, I'll start with the second one first. Material contribution to ours and others' financials, I still think is probably 4-5 years away. There's more conversion of ATSC 3.0 that has to happen. We have to get rid of the simulcast requirement of our current, you know, high-definition signal that takes up bandwidth to fully be able to realize our potential. And so we did a signal test with a manufacturer, an automobile manufacturer last week out on the West Coast. It was like the old drive to the market and, you know, "Can you hear me now?" On the cellular, right? And you know, they were very impressed with the signal quality, the fact that the signal held.
Their interest is, you know, twofold, threefold, actually. In-car entertainment, so serving video to the headrest behind the front seat, for the entertainment of those behind. Second is navigation and being able to do enhanced navigation and real-time updates. The third is data delivery, which would be those updates that come from, you know, your car manufacturer, say, your system needs to be upgraded. 85% of those fail because they're delivered via satellite, and the car's in the garage or parked under a tree. Well, ours is terrestrially driven, and we, if we can, you know, decrease the number of cars that have to come into the dealership for that free-to-the-consumer service, there's huge financial benefit to the OEMs for that.
Got it. All right. You ended with exactly one second left. Perfect.
That was crazy.
Yes. .
We're TV. We know how to back time.
I know. And thank you.
Thank you for having us.
Appreciate it. Great.