"It’s no secret that The CW is not profitable," Lee Ann Gliha, Nexstar’s chief financial officer, said on a conference call with analysts and investors Monday (August 15).
Nexstar isn’t paying anything to current owners Warner Bros. Discovery and Paramount Global for a 75% stake in The CW, but plans to invest what Gliha described as a low nine-figure amount over three years in the network.
"We view this amount as a proxy for a purchase price–or an investment over time–rather than an ongoing drag on cash flow," Gliha said. "You know us. We are profit and cash-flow focused and expect this asset to achieve profitability."
While the transaction is expected to close later this quarter, Nexstar will begin managing the network immediately, she said. The financial results of The CW will be consolidated with Nexstar's results and the transaction will be immediately accretive for Nexstar "based on the protection it affords for our existing CW-related cash flow, with upside opportunity as we turn the network around."
Nexstar says the deal requires neither FCC nor Justice Department antitrust reviews.
Nexstar chief operating officer Tom Carter said that Nexstar intended to own infrastructure to reduce costs at The CW in areas including corporate overhead, digital infrastructure, ad sales and content and programming acquisition.
"While reducing costs is one part to improving profitability, there is significant opportunity for value creation by focusing on building the broadcast audience and driving new revenue," Carter said.
Under Nexstar's control, the network will have more of a focus on ratings and revenue, as opposed to its current "dual agenda" that led to greenlighting programming capable of crossing over to an SVOD service, Carter said. That led to The CW having an unusually high percentage of its programming spending going towards original scripted shows.
It will also shift its programming focus from targeting 18-to-34-year-olds to aiming at the 58-year-old viewer who is actually watching the network, he said. That disconnect contributed to The CW being the lowest rated of the broadcast networks.
“So over time, we will be taking a different approach to our CW programming strategy,” Carter said.
He said the network will be "increasing the mix of lower cost unscripted shows and high-quality syndicated programming appealing to a broadcast audience, a departure from the prior predominant focus on expensive, original scripted content."
Nexstar has already been pitched by distributors offering "cost-effective" programming, he said.
Warner Bros. Discovery and Paramount Global will be producing original programming primarily for The CW’s 2022-23 broadcast schedule. Nexstar has the option to extend this programing partnership, Carter said.
He said Nexstar will continue to make the CW’s programming available for free on the network’s website and app. ■
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Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.