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How Will the Nexstar-Tribune Merger Change the TV Landscape?

November 4th, 2019   ||    by Susan Kuchinskas

The Nexstar-Tribune merger is complete and, already, this new media behemoth’s clout may be shifting the media landscape. Variety reports that the newly bulked-up Nexstar plans to move from ratings-based ad sales to an impressions-based model. Nexstar Broadcasting teamed with Comscore to offer advertisers with audience measurement across TV, digital, mobile, and streaming-video outlets.

Advertisers will be able to buy across platforms, using the standard currency of CPMs. This will also let sellers aggregate audiences across platforms.

Expansion of Programmatic

One possible effect of the Nexstar-Tribune merger is that it could lead to an expansion of programmatic capabilities. According to Business Wire, in 2017, Nexstar acquired LKQD Technologies, a deal that let advertisers target customers across television and digital video. Then, in 2018, it acquired local programmatic video platform Yashi, per TV Technology.

In 2018, Tribune Media launched a programmatic ad sales operation that let buyers access inventory around the clock, MediaPost reported.

Combining all these capabilities with impressions-based measurement could make Nexstar the leader in programmatic, data-driven advertising services—and cause other broadcast entities to follow.

Merger Mania

The completion of the Nexstar-Tribune merger is just the latest in a wave of mergers in the past few years. Kagan identified 2018 as the biggest year for broadcast television mergers and acquisitions since 2013, totaling more than $8 billion, Fierce Video reported. (That number includes the Nexstar-Tribune merger, announced last year, worth an estimated $3.51 billion on its own.)

Media Radar noted that mergers and acquisitions among media companies to bulk up their content, along with the launch of streaming services, will reshape both streaming and national television. For example, it predicted that Disney, having acquired networks from Fox, will capture the most national television ad dollars in 2019.

Nexstar, with its partner stations, now addresses 63 percent of U.S. households. Will it use this dominance to increase advertising rates?

The Justice Department’s approval of the deal was contingent on Nexstar selling off TV stations in 13 markets, based in part on the fear that too much market dominance would let the company charge cable and satellite operators higher retransmission fees and higher spot prices, according to Broadcasting & Cable.

Higher Retransmission Fees but More Investment

In fact, in an analysts’ conference call reported by Multichannel News, Nexstar CEO Perry Sook noted that the combined companies would reap an extra $75 million in retransmission fees because the company would apply Nexstar’s higher rates to the Tribune stations.

That’s great news for Nexstar, but not-so-good news for TV viewers who pay for cable, since these fees are passed along to cable subscribers. Higher cable subscription fees could turn around and bite local stations if viewers drop their cable subscriptions and quit watching local TV altogether.

On the other hand, Yahoo reported that Nexstar said it would bulk up the local news offerings of one newly acquired station, KRCW-TV. In what it called “ambitious plans” for the Portland-based CW affiliate, it will expand the station’s 10 p.m. newscast to a full hour and will add a 30-minute sports highlights show on Sunday nights.

This investment bolsters the value of KRCW because local news is the best way to build trust and engagement with people in the community. If Nexstar continues this approach, stations and viewers will benefit.

Homogenization Concerns

But concerns remain. One effect of the merger could be homogenization of local stations’ offerings—and this could be a loss for local stations and viewers. Local viewers are very loyal to news anchors, and this kind of community tie is a key to stations’ success.

In a conference call with analysts, Sook said the newly bulked-up company would primarily focus on local television, Cablefax reported, adding, “We’re going to operate both the radio assets and the cable assets aggressively, until or unless somebody makes us an offer we can’t refuse.”

Another concern is that the FCC’s decision on the Nexstar-Tribune merger may pave the way for similar conglomerations and make it harder for public-interest groups to challenge media megamergers, according to Bloomberg Law. For example, the FCC denied watchdog group Common Cause the right to lodge a petition to deny the deal.

Common Cause warned in a petition that “the merger could lead to reporter layoffs and consolidated newsrooms, resulting in less in-depth reporting, locally-originated programming and local news.” Michael Copps, Common Cause special adviser, added, “This will only lead to less informed citizens, negatively impacting our democracy and civic dialogue.”

What Happens Next?

The fight over deregulation continues—and it could even invalidate the Nexstar-Tribune merger, according to Multichannel News. On September 23, the Third US Circuit Court of Appeals vacated the 2017 deregulatory order that expanded the number of media properties one entity could own in a single market. The court said the FCC hadn’t paid enough attention to how this might impact diversity in ownership.

The FCC is appealing the ruling, which could, theoretically, invalidate Nexstar’s big deal. But it’s difficult to see how that deal could be unwound, given the broadcaster has already made agreements to sell stations.

Broadcaster mergers are just one part of the shifting media landscape. Whether they lead to more investment in local programming and more data to drive targeted TV ad campaigns or a homogenization of local offerings is still to be determined. What’s sure is that the television landscape continues to change.

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