Nexstar Sticks to 2025 Profitability Target for The CW

Nexstar Sticks to 2025 Profitability Target for The CW

Nexstar Media Group reiterated its guidance of making The CW profitable by 2025, which it said will require a “low nine-figure” investment over that time period. 

The TV station group officially took over The CW on Oct. 1. Existing CW programming is in place for the 2022-23 broadcast season, Nexstar management told investors Tuesday. After that, the company said it will move to more of a mix of scripted and unscripted content and shows that “appeal to a broader audience.” 

“Over the course of the next year, we’re really working to develop our slate, which will then come online in the 2023-24 broadcast season. We will have some carryover commitment for the CBS and WBD programming in that year, but it’s minimal at that point,” said Lee Ann Gliha, Nexstar’s executive vice president and chief financial officer.

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Given the timeline, the majority of losses related to Nexstar’s nine-figure investment will be weighted toward the fourth quarter of 2022 and each quarter of 2023, management said. 

Nexstar acquired a 75 percent stake in The CW from Warner Bros. Discovery’s Warner Bros. TV and Paramount Global’s CBS Studios. Following the acquisition, Paramount and Warner Bros. Discovery each retain a 12.5 percent stake in The CW.

Asked whether more of the two studios’ programming will appear on the network after this season, Nexstar CEO Perry Sook said there’s a possibility.

“Warner and Paramount are not precluded from selling us programming. It’s just going to have to be a financial deal that we like, and there may be a couple of shows that distinguish themselves this year that we want to roll over into next year,” Sook said. 

Nexstar has already implemented several changes at The CW, including parting ways with its CEO, Mark Pedowitz; Rick Haskins, its head of streaming; and CFO Mitch Nedick. Dennis Miller, a Nexstar board member, has been installed as president of The CW. Brad Schwartz was recently named president of CW’s programming. The personnel changes will lead to “an incremental low eight-figure amount” of restructuring charges in the next quarter, management said Tuesday.

“I can tell you that Dennis Miller hired a very gifted program executive Brad Schwartz, and Brad Schwartz on a much smaller budget than we’ve given them at The CW was able to find and develop a show called Schitt’s Creek, which, you know, we told him, ‘Your job is easy. Just go find a couple more of those and we’ll be in fine shape at The CW.’ But he has a very creative mind, very creative deal-making and a sharp eye for talent,” Sook added. 

Nexstar expects The CW to generate revenue of close to $70 million in the fourth quarter alongside “a comparable negative amount” of adjusted EBITDA. 

The company will exclude the investment in The CW from its free cash flow guidance moving forward, while breaking out The CW’s metrics. The CW will also be designated as an unrestricted subsidiary under Nexstar’s debt agreement, and therefore will not have an impact on its leverage ratios. 

Nexstar reported third-quarter net revenue of $1.27 billion, up 9.7 percent from a year earlier, and net income of $287.5 million. While core television advertising decreased 7.6 percent, year-over-year, due to a weaker ad market and the lack of Olympics programming, political advertising revenue reached $129.3 million, up 84.3 percent from the third quarter of 2018, and $3.1 million less than the third quarter of 2020.

The increase in political advertising was primarily driven by strong midterm election spending in California, Nevada, Missouri, Michigan and Pennsylvania.