Q4 down, but auto up at Nexstar


Automotive led the ad category increases for Nexstar in Q4, with CEO Perry Sook crediting the nearly 10% improvement credited mostly to local dealership advertising. He told analysts that two-thirds of the company’s auto advertising came from local dealers. Auto now accounts for 24% of Nexstar’s core advertising, up from 22% a year ago. But even with auto growing, the lack of political advertising meant that Nexstar’s overall Q4 revenues were down 11.8% on a same station basis to 68.1 million. Reported revenues were 71.6 million, down from 77.2 million, and broadcast cash flow was 28.2 million, down from 33.8 million.

But 2008 is another political year and Sook is predicting big things. Plus, retransmission payments are growing. To start the year off, Nexstar is forecasting that Q1 revenues will be up 2.3-4.7%.

“Based on record and still growing fund raising” by candidates, Sook told analysts that Nexstar expects political revenues in the “low to mid 30 million dollar range,” above the company’s take of approximately 27 million in both 2004 and 2006.

He cited robust spending in Texas, which just completed its primary. And Sook said that since it is still a two-horse race for the Democrats, his stations have already received requests to buy time from the Democratic candidates for Pennsylvania’s April 22nd primary, a state where Nexstar has stations in three markets, as well as for the May 6th primary in Indian, where Nexstar is also in three markets. “We see a gain from the presidential spending surge as well as from the fact that we have several competitive statewide races this year in Arkansas, Missouri, Pennsylvania, Louisiana, Indiana and Texas, as well as about a dozen competitive congressional races across our footprint.” Not only is spending by candidates strong, but Sook said his stations are also starting to see some spending by the independent “527” groups.

Q4 retransmission revenues were 4.6 million for Nexstar, up from 4.1 million a year ago, and they were up 26% for the year to 17.2 million. “More of the same is in store for 2008 and 2009,” Sook told analysts. It may seem like just yesterday that Nexstar was locked in battles with cable MSOs as the first TV group to go to the mat demanding cash for retrans. But, it’s time to renegotiate those contracts. Sook said 47% of the retrans contract dollars are up for renewal by the end of 2008 and 30% in 2009.

Traditional cable, of course, is not the only source of retrans cash. Verizon’s new cable competitor has become a significant force in the Ft. Wayne, IN market for Nexstar. Sook said retrans payments from Verizon now exceed those from either satellite TV company in the Ft. Wayne market. And he noted, happily, that when customers move to the Verizon FiOS service they’re moving from a cable or satellite company that pays Nexstar less per subscriber than Verizon does.

RBR/TVBR observation: The television industry owes Perry for sticking to his guns on retrans and knocking down the door for others to follow. But, in fact, he doesn’t really need your thanks. He has the cash on his books from winning the fight.