The third-quarter earnings reports from companies in the broadcast television industry paint a picture of diverse strategies, despite shared challenges. While executives express optimism about potential deregulation, the financial data suggests that success hinges more on a company's ability to adapt and transform its core business.
Perry Sook, CEO of Nexstar Media Group, views the proposed $6.2 billion acquisition of Tegna as evidence of easing regulatory barriers. He pointed to a recent court ruling that eliminated restrictions on owning multiple top-four stations in a single market. This deal would create a broadcast entity with a reach of about 80% of U.S. households, exceeding the existing 39% national ownership cap. Sook believes the acquisition will be completed by the second half of 2026, stating that “this administration, the Trump administration, and Brendan Carr at the FCC are focused on deregulating business.”
Chris Ripley, CEO of Sinclair Broadcast Group, shared this view, suggesting that industry consolidation into two similarly sized broadcast groups could generate annual synergies of $600 million to $900 million. However, Hilton Howell, CEO of Gray Media, acknowledged the current regulatory uncertainty, stating that “for the first time in the history of our business, we are really operating in the wild, wild west. No one knows what the rules actually are.”
However, regulatory changes alone won't solve the underlying challenges reflected in the quarterly results. The absence of political advertising in an off-cycle year highlighted the decline of core revenue streams. Gray Media reported $749 million in third-quarter revenue, with political advertising contributing only $8 million. They project $7 million to $8 million for the fourth quarter, significantly less than the usual $20 million to $30 million before a political year. Nexstar reported $1.2 billion in revenue, a 12.3% year-over-year decrease mainly due to the election cycle. Sinclair reported $773 million for the quarter, surpassing expectations.
Gray's core advertising decreased by 3% in the third quarter, an improvement from the 4% decline in the first half. Automotive advertising remained weak, declining by a high single-digit percentage, while legal services saw double-digit growth and became a top-five category. These varying results highlight the importance of strategic positioning. Retransmission consent revenue, which has supported broadcasters during the cord-cutting era, seems to be reaching its limit. Jeff Gignac, CFO of Gray, reported a 9% decrease in network affiliation expenses and a 6% decrease in retransmission revenue in the third quarter. They anticipate a slight decrease in net retransmission revenue in the fourth quarter.
Patrick LaPlatney, President and Co-CEO of Gray, expressed frustration with the ongoing YouTube TV carriage dispute affecting ABC stations, noting that local broadcasters have no say in negotiations between their network partners and virtual multichannel video programming distributors. Ripley of Sinclair criticized the Disney-YouTube TV conflict as an antitrust issue, claiming that the current system violates the intent of the Communications Act. But critics argue that broadcasters championed the retransmission consent regime that created this dynamic.
The companies' approaches to their challenges reflect contrasting philosophies. Nexstar is investing in scale and spectrum. Sook considers the Tegna acquisition as crucial infrastructure for monetizing ATSC 3.0 spectrum, describing the potential to develop non-video uses of NextGen TV as “the biggest value creation lever in our business as we know it today.” The company expects about $300 million in synergies from the combination, with 45% coming from retransmission revenue. Furthermore, the combined entity would control spectrum covering about 80% of the country, allowing Nexstar to form partnerships and generate new revenue streams from the technology.
Gray is pursuing targeted expansion through selective acquisitions. The company plans to enter six new markets by acquiring top-ranked local news stations and creating 11 new Big Four duopolies. Kevin Latek, Chief Legal and Development Officer, described potential “sub-$200 million deleveraging deals that improve our portfolio and our balance sheet.” Sinclair closed 11 partner station acquisitions during the quarter, with 12 more awaiting final approval and 10 pending FCC review, expecting these transactions to generate at least $30 million in incremental annualized adjusted EBITDA.
Several earnings calls emphasized sports programming as a defensive strategy. Rob Weisbord, COO of Sinclair, highlighted the growing importance of over-the-air broadcasting for live sports, noting the return of NBA games to broadcast television via NBC and reported plans by MLB for a similar move. Gray anticipates flat to low single-digit core advertising growth in the fourth quarter and expresses optimism about 2026 based on early first-quarter figures. It remains uncertain whether sports programming can counteract broader advertising declines, especially with streaming platforms aggressively competing for sports rights.
Financial stability will distinguish the survivors from the vulnerable. Gray ended the quarter with over $900 million in liquidity and a total leverage ratio of 5.77x, following refinancing transactions in July that extended its maturity profile through 2033. Nexstar suspended share repurchases to preserve cash for the Tegna acquisition, which the company projects will increase stand-alone adjusted free cash flow by more than 40%. The company returned $56 million to shareholders in dividends and made $25 million in mandatory debt repayments during the quarter.
Paramount’s third-quarter results, divided between predecessor and successor periods due to the Skydance merger, showed revenue of $6.7 billion on a pro forma basis, unchanged from the previous year. The company's television stations are a diminishing asset within a portfolio centered on streaming transformation. Paramount expects 2026 revenue of $30 billion, or 4% year-over-year growth, with declines in TV Media affiliate and advertising revenue due to ongoing pay TV industry headwinds.
The industry's enthusiasm for deregulation is based on the assumption that removing ownership restrictions will enable consolidation, which in turn will improve unit economics. This theory may prove correct, but it depends on finding willing sellers, securing financing in an uncertain environment, and achieving projected "efficiencies" (layoffs and cost cutting) while managing significant debt. Howell of Gray emphasized a cautious approach despite acknowledging “a lot of big opportunities to grow,” stressing the company’s commitment to its 10,000 employees and stating that “Gray does not believe that Gray actually has to do anything” to maintain its current trajectory.
That restraint might prove to be wise. While deregulation creates opportunities, capitalizing on them requires capital, courage, and a realistic assessment of whether scale alone can overcome the ongoing shift in how audiences consume video content.