The CW Will Become A Profitable Network By 2025, But Also One With Broader, Cheaper Programming, New Owners At Nexstar Signal

As it transitions to new ownership, the CW will likely not look dramatically different in the near term, but Nexstar Media Group intends to turn it into a more broad-audience and cost-conscious broadcast network.

The company earlier today confirmed it is set to take a 75% ownership stake in the network, with previous 50-50 owners Paramount Global and Warner Bros Discovery each retaining 12.5%. The transaction will formally close in the next few weeks.

Executives articulated some of their initial plans during a 15-minute conference call with Wall Street analysts, though the presentation included only prepared remarks and no Q&A period.

After Nexstar CEO Perry Sook kicked off the call to reaffirm the rationale for the deal, which will see the company absorb the CW’s debt but not pay any cash or stock up front, other executives delivered more tangible news.

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CFO Lee Ann Gliha said the goal is to make the CW profitable by 2025.

“It’s no secret that the CW is not profitable,” she said, “but this is not typical for fully-distributed broadcast or cable networks. In fact, according to SNL Kagan data, no other broadcast network operates at an ongoing loss.”

One key step on the path to profit will involve a significant reduction of expenses. “We expect to invest a low 9-figure amount over this 3-year period as we implement our plan,” Gliha said. “We view this amount as a proxy for a purchase price – or an investment made over time — rather than an ongoing drag on cash flow. You know us. We are profit and cash flow focused and expect this asset to achieve profitability.”

Nexstar President and COO Tom Carter said Paramount and WBD will continue to produce scripted originals for the network, but he said that arrangement would be “primarily” for 2022-23. Beyond that, Nexstar “will have the option to extend the partnership,” but nothing on that score is guaranteed.

While the remarks didn’t include too many specifics, Carter signaled clearly that the focus will be on retooling the CW, specifically its previous cost structure under founding partners CBS and Warner Bros. In many cases, as suppliers as well as network owners, those companies saw more financial upside in programming shows that could be sold at great margins to subscription streaming outlets. The CW discontinued its longtime output deal with Netflix in 2019 as both parent companies stepped up their respective investments in new SVOD offerings.

“Our approach will be unlike other broadcast network owners,” Carter said. The company would develop its programming “without a dual agenda of greenlighting programming with potential to cross over to SVOD.”

The demographic focus of the CW will also change over time, Carter said. Historically, shows like Riverdale, All American, Arrow and Supernatural have focused on viewers in their teens through their 30s. The reality, though, is that the average CW viewer is 58 years old, and Carter said that schism explains why the CW is the lowest-rated broadcast network

He projected “lower unscripted costs,” without elaborating, and said more syndicated shows would likely be added. The CW has recently been programming 13 hours across six nights in prime time. As the Nexstar deal loomed last May, the company told advertisers at its New York City upfront presentation that it was renewing all current shows but not adding any new ones to the mix.

Citing Kagan research, Carter said the CW spends “almost twice” what its broadcast network peers do on programming, a disparity that Nexstar plans to eliminate.

“Over time, we will be taking a different approach to our CW programming strategy and will leverage our experience in spending approximately $2 billion a year on programming, attracting and monetizing viewers, and transitioning NewsNation, our national cable news network, from WGN, while maintaining a strict focus on cash flow,” he said.

As far as cost savings or staff reductions, execs didn’t offer specifics, but Carter said areas like “corporate overhead, digital infrastructure, advertising sales and content and programming acquisition” would have potential for meaningful expense reductions.

Shares in Nexstar pulled back 1% early in the session, trading at around $201. The stock recently established an all-time high of $204.62.

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