Nexstar’s Sook Says He’s Unconcerned on Spectrum Auction in 2011
Nexstar Broadcasting Chairman Perry Sook expects no movement, and certainly nothing “deleterious,” to broadcasters happening in the context of incentive spectrum auctions in 2011, he told investors during the company’s Q4 earnings teleconference Thursday. “In this budget climate, there would be a faction of Congress wholly uninterested in sharing any auction proceeds with broadcasters.” Indications from leaders on the Commerce committees are that Congress wants to move ahead with a spectrum inventory before taking up auction proposals, he said.
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Sook doesn’t expect any harm to broadcasters as a result of an FCC rulemaking on retransmission consent, he said. “The only thing the FCC can do is find either the broadcaster or MVPD operator is not operating in good faith,” he said. “That really is their only standing. Anything else would exceed their delegated authority, so I don’t see anything happening in that proceeding either,” he said. “The FCC chairman has said it is beyond their delegated authority to mandate arbitration” he said of Julius Genachowski.
That bodes well for Nexstar, as Sook said he expects the company could double the amount of retrans fees it collects from pay-TV operators in the next six or so years. It collected $7.6 million in retrans revenue in Q4, a 20 percent increase from the year-ago quarter. The company has several contracts coming up for renewal at the end of 2011, he said. “Some years are heavier than most, and this year happens to be one of them.” Nexstar doesn’t expect to suffer too much financially from having to pay increased reverse network compensation fees, Sook said. “Stations provide eyeballs to the network. The network provides programming to the stations,” he said. “My experience over the last 15 years is that people have ultimately been able to work that out."
Nexstar has already factored in higher payments to the networks in its cost projections, Sook said. “The fact that the networks would like for us to pay more is not really new or newsworthy,” he said. “I think they are correct that they will see more payments from us as affiliates over time.” At the same time, Nexstar expects its costs for syndicated programming to drop, he said.
The table may finally be set for more consolidation among TV station groups, Sook said. He acknowledged that the climate for financing deals has improved, and that some long-time private equity investors may be ready to shed their stakes in broadcast operations. Sook has long called for consolidation among mid-sized station groups, to reduce corporate overhead costs and increase broadcasters’ leverage with pay-TV operators. “The strategic conversations have increased” from where they were 18 months ago “and I think you will see that continue,” Sook said. He said that the industry is “coming closer to that intersection” of “where we are today and the art of the possible” in terms of reaching deals. Nexstar’s Q4 sales gained 32 percent from a year earlier to $108.4 million on higher political ad sales. Profit ballooned to $14.2 million from $967,000 on higher sales.