As it transitions to new ownership, the CW probably won’t look dramatically different in the short term, but Nexstar Media Group plans to make it a more broad-based and cost-conscious broadcast network.
The company confirmed earlier Monday that it will take a 75% stake in the network, with previous 50-50 owners Paramount Global and Warner Bros Discovery each retaining 12.5%. The transaction will be formally completed in the coming weeks.
Executives put forward some of their original plans in a 15-minute conference call with Wall Street analysts, though the presentation contained only prepared comments and no Q&A period.
After Nexstar CEO Perry Sook launched the call to reaffirm the rationale for the deal, under which the company will take on the CW’s debt but not pay cash or stock upfront, other executives brought more tangible news.
CFO Lee Ann Gliha said the goal is to make the CW profitable by 2025.
“It’s no secret that the CW isn’t profitable,” she said, “but this isn’t typical of fully distributed broadcast or cable networks. According to SNL Kagan’s data, no other broadcast network operates at a constant loss.”
An important step towards profit is a significant reduction in costs. “We expect to invest a low nine-figure amount over this three-year period as we execute on our plan,” Gliha said. “We see this amount as an indication of a purchase price – or an investment made over time – rather than a continued brake on cash flow. You know us. We are focused on profit and cash flow and expect this will be actively profitable.”
Nexstar president and COO Tom Carter said Paramount and WBD will continue to produce scripted originals for the network, but he said the arrangement would be “primarily” for 2022-23. Furthermore, Nexstar will have “the option to extend the partnership”, but nothing is guaranteed on that point.
While the comments don’t go into too much detail, Carter made it clear that the focus will be on retooling the CW, especially its previous cost structure under founding partners CBS and Warner Bros. In many cases, both vendors and network owners, companies saw greater financial benefit in programming shows that could be sold at large margins to subscription streaming stores. The CW ended its long-standing output deal with Netflix in 2019, as both parent companies stepped up their respective investments in new SVOD offerings.
“Our approach will be different from other broadcast network owners,” Carter said. The company would develop its programming “without a dual agenda of greenlighting programming with potential to move to SVOD.”
The CW’s demographic focus will also change over time, Carter said. Historically, shows like Riverdale, All American, Arrow and supernatural have targeted viewers in their teens through their 30s. However, the reality is that the average CW viewer is 58 years old, and Carter said schism explains why the CW is the lowest rated broadcasting network
He predicted “lower unscripted costs,” without elaborating, and said more syndicated shows would likely be added. The CW recently programmed 13 hours over six nights in primetime. With the Nexstar deal looming last May, the company told advertisers during its pre-presentation in New York City that it was revamping all of its current shows, but not adding any new ones to the mix.
Citing Kagan research, Carter said the CW spends “almost twice” what its peers on the broadcast network do on programming, a difference Nexstar plans to eliminate.
“Over time, we will approach our CW programming strategy in a different way, leveraging our experience by spending approximately $2 billion a year on programming, attracting and monetizing viewers, and transitioning from NewsNation, our national cable news network, from WGN, while maintaining a strict focus on cash flow,” he said.
As for cost savings or staff reductions, executives did not provide details, but Carter said areas such as “corporate overhead, digital infrastructure, ad sales, and content and programming acquisition” would have the potential for significant cost savings.
Shares in Nexstar pulled back 1% early in the session and traded at about $201. The stock recently hit an all-time high of $204.62.