While top executives at broadcast TV station groups reported first-quarter revenue declines amid economic uncertainty and the impact of tariffs on the economy, they offered bullish sentiments regarding the prospects for significant deregulation in broadcast ownership rules and M&A activity.
“In my 45-plus years in the industry, I continue to believe that the prospect of meaningful broadcast ownership reform has never been better than it is today,” Perry Sook, chairman and CEO of Nexstar Media Group and chair of the NAB’s Joint Board of Directors, said in kicking off Nexstar’s first-quarter earnings call. “We are fortunate to have a strong FCC chair in Brendan Carr, who keenly understands the need for local broadcast deregulation and the relief that we and the industry need on both the national ownership cap and in-market local ownership rules.”
Carr recently fueled hopes for deregulation in a May 7 interview by calling ownership rules "archaic" and "artificial." That was his strongest public statement to date indicating that he would change those rules.
Once the fifth FCC commissioner is confirmed this summer, giving Carr and the Republicans a majority, Sook said: “We anticipate chairman Carr will begin to take action on his agenda. In addition to our deregulatory agenda to level the playing field and to enable consolidation, we are also seeking to obtain a firm transition date for ATSC 1.0 standards to ATSC 3.0 standards, which will support and advance our rollout of high-speed data transmission and other services to allow us to fully monetize ancillary uses of our spectrum.”
Sook stressed that Nexstar’s “strong financial position and balance sheet” makes it well-prepared to capitalize on deregulation through M&A. “Historically, this strategy has created tremendous shareholder value,” he said.
On Tegna's earnings call, President and CEO Mike Steib said: “73 members of Congress have signed a letter to FCC chairman, Brendan Carr, advocating for deregulation and broadcasting and the Chairman is expected to have a majority soon. We're staying close to all of this and our healthy balance sheet, consistent free cash flow generation and track record of disciplined capital allocation position us well to pursue the best opportunities for value creation.
“Chairman Carr has been clear with his agenda and support for local broadcasters and the important role that local broadcasters play for our communities and the role that local news plays for our democracy,” he added later in response to a question about deregulation. “He is expected to have his majority soon. And as I noted in my prepared remarks, he seems to have bipartisan Congressional support for supporting local and supporting local broadcasters.”
He added that this “will unlock M&A opportunities in the space that can be really accretive for buyers and sellers,” but he cautioned that “until we know the full landscape and until we know the prices, I can't sort of comment more precisely as it pertains to how we think about...about capital, capital allocation.”
“I'm as excited about the M&A opportunity in this space as you all are, and I'm sure it's frustrating not to hear us be able to be more specific in our responses,” he added. “You probably imagine it is for us as well. What I can tell you is we believe that the deregulatory moment is coming and it's coming at just the right time.”
During its Q1 earnings call E.W. Scripps executives also highlighted the M&A opportunities that deregulation might bring.
"Most importantly, what we have accomplished over the last year has set us up well to move successfully through the company's next season," said Adam Symson, president, and CEO at E.W. Scripps. "Not far ahead, we see the prospect of local broadcast industry consolidation that will drive growth by finally allowing us to deepen our presence in our local markets, building upon the strong relationships we already have with viewers and advertisers to create even greater shareholder value with significant efficiency."
"I think it's fair to say that the commission recognizes that local news, local sports, local programming entirely depends on the durability of local television," he added later. "Standing in the way of that durability, we think are the rules that prevent consolidation, both in market and national consolidation that's necessary for us to compete on that level playing field with the national media companies, the networks and that are right now already using their leverage to essentially impair our abilities to serve local communities. So for us, we believe greater scale nationally and greater depth in market are necessary for our assets to perform their best for shareholders and continue in service to the communities where we operate. So I expect we'll do everything in our power to take advantage of this moment. I expect off the bat, given our balance sheet, our greatest opportunities would be both in swaps and in select asset sales."
Symson also highlighted signals from the FCC that they would like to strengthen local broadcasters in terms of their relations with broadcast networks in terms of affiliate fees and retransmission negotiations with vMVPDs.
"We think the commission recognizes that things have gotten to the point where the networks are using their economic leverage to control the airwaves, which is essentially a de facto violation of communications regulations," he said. "So the networks ought to be taking this moment as a call to action to address the issue proactively instead of waiting for it to be regulated."
He also expressed optimism that the FCC would actually move to lift ownership caps and that investors wouldn't once again be disappointed by caps remaining in place.
"I believe that the commission will act in a way that, as I said in my prepared remarks, rebalance the marketplace," he said.
During its Q1 earnings call Gray Media chairman and CEO Hilton Howell Jr. said: “We are energized by the possibility that the government may, at last, allow local broadcasters to compete on a more level playing field with all of our competitors.”
“Market consolidation,” he added later, is “inherently universally positive in terms of saving money, but it also gives us, because we are so focused on the delivery of local news, local content, local sports, you’ve got to give the audiences something to view it all. The consolidation allows us to compete with the really huge tech giants that are actually taking about 80% of the local ad market. And so consolidation is an all in all positive for the entirety of the broadcast business. And we're very excited about it."
