Entertainment

Nexstar’s next battle to make the numbers work – The Hollywood Reporter

In the end, Nexstar was paid $54 million to take The CW away from Paramount and Warner Bros. Discovery.

In fact, it’s an oversimplification. In fact, Nexstar, led by CEO Perry Sook, was given its 75% stake in the network freebut after factoring in cash, accounts receivable, and accounts payable (and other liabilities), the local TV giant ended up with a $54 million profit “on bargains,” reflect the seriousness of their previous company owners. above.

The national broadcast network (distant 5) has long been known to be a money pit, but a review of the unaudited financial statements sheds light on the network’s complex financial situation and the challenge how big it will be for Nexstar to turn the tide to reach its goal of being profitable by 2025.

According to one hollywood reporter analysis of financial statements included in Nexstar’s latest quarterly filings with the SEC on November 9, CW had approximately $100 million in revenue per quarter in 2021-22, with an annual operating rate. from $370 million to $405 million. However, it had an annual loss of between $300 million and $400 million. In other words, for every dollar in, $2 out. (The CW has never been profitable since it was founded in 2006.) The CW’s biggest source of expenses is programming, and it has acquired that programming from Warners and Paramount, saving the common owners. .

The network consists only of scripted originals produced by both Warners and CBS Studios, supplemented by a number of unscripted shows and low-cost Canadian series acquired to help perfect its medium. . While the network isn’t designed to be profitable, both studios make money in part from Netflix’s $1 billion output deal in 2010, as well as international sales for titles. as famous as age.

While that model proved extremely effective, the network’s parent companies chose not to renew their Netflix agreement to support their respective streamers, HBO Max and Paramount+, with CW programming instead. watch all of their originals on Netflix. Furthermore, the need for all streamers to retain global programming rights as platforms expand into overseas markets means the end of that lucrative international sale. Without a revenue stream from Netflix and foreign sales, the CW’s business model no longer made sense, and Warners and CBS Studios began exploring sales options, resulting in a sale to Nexstar.

And while other suitors (including at least one private equity firm) roamed, the local TV giant won out, benefiting from being the largest owner of the CW stations. in the country (such as where more effective political ads can be monetized). “Nexstar believes it can buy The CW with $0 buy-in consideration due to The CW’s recurring losses and its position as The CW’s largest affiliate that it believes the number of interested buyers has been diminished. limited,” the company wrote in its 10-q report.

Now comes the hard part, when the local TV giant needs to find a way to prevent the heavy losses that the CW is facing. It has now agreed to make 12 scripted series from its previous owners, mainly for the 2022-23 season. But then new entertainment director Brad Schwartz will chart a new, much less expensive content strategy. “We just need to get neater. Schwartz said CHEAP on November 2, “We just need to get leaner. If we were to follow the script, we had to find a clever way to do it.”

Nexstar’s chief financial officer, Lee Ann Gliha, said at a financial conference that the company intends to take $155 million from the sale of its Chicago property and bring it into the network. “It’s a long way to go to fund the investment we’re going to have in the CW,” the CEO said.

And the company also plans to use The CW to tap into the increasingly crowded ad-supported streaming market. “The acquisition is expected to strengthen Nexstar’s revenue opportunities as the CW’s largest affiliate, diversifying content outside of news, establishing it as a participant in the advertising of the CW. video-on-demand services through the CW App and create value by improving CW ratings, revenue, and profitability,” Nextstar wrote in the filing.

And sooner or later the company will be able to buy 25% of the shares of The CW that WBD and Paramount are holding. According to its filing, Nexstar has a call option in August 2024 to purchase the remaining shares, and the seller has a June 2026 option to force Nexstar to purchase the remaining equity.

Lesley Goldberg contributed to this report.

A version of this story first appeared in the November 21 issue of The Hollywood Reporter. Click here to sign up.




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