Perry Sook: Well, I think the announcement that you saw last night is further evidence of a rebundling of the assets in the industry, and I said we’ve gone around the corner — around the world to go around the corner. And what we’re doing is repeating basic cable, basically, if you will. And the one thing, again, basic cable has that an amalgamation of apps doesn’t have as seamless navigation, which for viewers of a certain age being able to change channels is something we up doing, it’s something we still like to do. So I think you’ll see pricing rationalize. I see there was an announcement of that streamers are raising their prices. And I think the consumer now looks at the cost of an a la carte broadband package and all of the streaming or other pay services they want to add on, it can quickly eclipse the cost of the traditional bundle and you don’t have, again, seamless navigation and some of the other things you make.
You probably don’t have the number of content choices that you do in a traditional bundle. So we’ll continue, obviously, to support the bundle and support our distribution partners as best we can. But the main reason we’re not in streaming is because we just don’t think it’s a good business. And so — it’s not a business that we want to get into to lose money. And so we think there are any number of ways that we can reach the consumer. Everyone wants to stream because they don’t have broadcast assets that are free over the air that can reach 100% of the population. I mean, so they’re trying to expand outside of that traditional pay-TV universe, but we’ve been there for time in memoriam. So the more things change, the more they start to look the same is my personal view.
Craig Huber: I’m sorry, one more quick thing. Lee Ann, your expectation to get the breakeven profitability on a sustained basis for the CW. Is that still late 2025, maybe early 2026?
Lee Ann Gliha: Yes. We haven’t changed anything on our point of view there. .
Operator: Our next question comes from Jason Bazinet with Citi.
Jason Bazinet: I just had two quick questions. Lee Ann, I was struck by your comment about getting down to 2x leverage. I was just looking at my model. And I guess I had you down to sort of high 2s in the political year and — are you really saying 2.0 or just something with the 2 .
Lee Ann Gliha: No. No. I said in the 2s, in the 2s.
Jason Bazinet: In the 2s. Okay. Sorry, I missed that. And my second question, do you mind just sort of to the extent you can just talking about, I think, between last quarter and this quarter, the FCC came out around your CW in New York City, your ownership of that station. Do you mind just sort of summarizing your position in the FCCs and how you anticipate this all sort of playing out?
Lee Ann Gliha: Yes. I mean, look, we put out a response. I think you’re referring to the FCC comment around . We put out a response. We think that the — we feel like it’s really kind of an unvalidated request by the FCC. It’s based on not a lot of things that we think are accurate. And so we have filed a response and we’re going to defend it vigorously, and we will continue to see how that process plays out. It will take some time to get through that process is what we believe.
Operator: Our next question comes from Aaron Watts with Deutsche Bank.
Aaron Watts: Two questions, if I may. The first, perhaps in parallel with Perry with some of your remarks you’ve made already. But with the recent introductions of a couple notable streaming ad-supported offerings that are bringing more targeted video inventory online, do you see that as being a headwind for your business today or in the future? And maybe perhaps contributing to the lack of sustained momentum on the national side? And then secondly, I appreciate this isn’t necessarily a new phenomenon, but perhaps topical with some of the NBA headlines. With sports commanding an even greater share of viewership attracting the largest audiences, and rights holders continuing to seek higher rights fees. How does that dovetail with commentary suggesting growth in network compensation should be moderating for you and other affiliate partners?
Perry Sook: Well, let me start with that, and then I’ll turn it over to Michael. The CW compensation from affiliates is not a significant number. And what we’re trying to do is build value in those affiliation agreements, not only for our value in the network that we can then attempt to further monetize those agreements at a fraction of what each affiliate group might be paying any of the big 4. But success for us is a different bar. But when I look at sports, we — our NASCAR deal goes in excess of 7 years. We did a 4-year deal with ACC basketball. We’ve got a multiyear deal with WWE next. So we’ve made — we have over — when people talk about sports, we, as a company, Nexstar has contracted for over 500 hours of sports that will flow primarily through our CW network and the largest CW affiliate group, which are our stations, which reach the CW in excess of 35% of the country.
So it is obvious to us and I think by our actions and by the vision we’ve laid out for the industry that live news and live sports, and by the way, we’re not the only one saying this, and I think you’re seeing other networks that are maybe either taking their queue or attempting to mimic what we have already done, but live news and live sports is what drives eyeballs, drives distribution, drives value creation. So I think we’ve been very active in that. And 500 hours of sports and multiyear agreements, we feel pretty good about. The CW’s place in that ecosystem. And again, the only thing that has aired on the CW so far is 1 season of ACC and now our second season of Lives. So all of the big event programming is still yet to come. So we think things will get pretty exciting, pretty quickly as we approach and get into the fall.
Michael?
Michael Biard: Yes, I’ll just add to that. I think if your question is really directed at the potential impact on reverse comp as a result of potential NBA deals, I guess I’ll just reiterate what we’ve said in the past on that with respect to exclusivity, right? The value from our perspective vis-a-vis our network partners is exclusivity. I’ve said many times, exclusivity is the coin of the realm in our business, and it remains to be seen. I think what happens with those deals when they’re announced and the value that ultimately is delivered to our affiliated stations. So turning to your question on advertising. I think, listen, it’s early days. I think the reports on the Street are that some of the newer entrants into the ad business and their ad-supported streaming services have healthy aspirations with respect to the CPMs that haven’t necessarily been met by the marketplace.
So I think it remains to be seen how that shakes out. But for our business, I’ll just return to the strength of sports, right, particularly as it relates to the CW. That is where a lot of our investment in the future is turning to sports and our ability to not only drive audience but drive advertising revenue there. I think that you only have to look back as far as the most recent quarter, right? In the first quarter, we saw a consistent and dramatic demonstration of the enduring strength of sports. NFL set new records, football set new records. We saw women’s basketball set new records. So sports continues to demonstrate strength. I think our programming will distinguish itself and our ability to monetize it will be different — materially different than the advertising in the SVOD products, based on our ability to aggregate audiences and live programming.
Operator: Our next question comes from John Kornreich BK Media.
John Kornreich: If you extrapolate out about 3 years, given how you’re trending now and given no change in station rules, you’re going to be down very close to 2x in leverage and 25 million shares. Is there any point going below 2x? Is there any benefit to it at all?
Lee Ann Gliha: I mean, look, I think at that point in time, we would have to kind of reevaluate what our capital strategy would be. We obviously believe that a levered return gives shareholders a better total return. But we would have to see what the market looks like at that point in time. But that would be a very low leverage number, I agree.
John Kornreich: Okay. I mean, the way things are going now, you’re sort of in a slow going private mode, frankly. And Perry, I mean where do you see this company in 3 or 4 years? Where do you see the company in 3 or 4 years?
Perry Sook: Well, I see our basic mission, John, not changing providing content and helping local businesses sell stuff. I mean, that’s our reason to exist. And when you strip away all the noise, it is a very simple business model that we operate on here. Given the discount at which the stock trades compared to its fundamentals, we continue to believe there’s a lot of way for investors to win. And if we’re the principal acquirer of our stock, then obviously, the company will win and investors in the company win. But I’d point back to that article that was talking about the 100 baggers over the last 15 years. And John, you were around during that time. I remember you asking me on the call, isn’t your free cash flow per share higher than your share price in 2008, and it was.
And those that joined the party in 2009 and stayed with it through the end of last year, which is what this article was all about would have seen in excess of a 300% return over that 15-year period on their equity, which is the third largest return of any public stock with a market cap over $500 million. So I think that long investors have been rewarded by this company, with that amount of unused powder, we look at the balance sheet as an asset of the company. And one of the ways we produce that outsized return was through — taking some big swings, Media General and Tribune. So we will continue to look at — we’re being very patient right now given not only the cost of capital but the opportunities that are out there, but we will continue to look at opportunities to grow the company and create additional value for shareholders beyond the embedded 20% return of us buying back our stock.
