Nexstar Media Group revealed Monday it is finally set acquire a 75% majority stake in the CW Network from Paramount Global and Warner Bros. Discovery, more than six months after first beginning negotiations for the deal.
Warner Bros. Discovery (formed through the recent merger of WarnerMedia with Discovery) and Paramount (rebranded from ViacomCBS earlier this year) have co-owned the network since early 2006, when the WB and UPN were merged after nearly a dozen years on the air into a single entity, so named for the “C” in CBS and “W” in Warner Bros. Both Paramount and WBD will each retain a 12.5% ownership in the CW and continue to produce content for the broadcaster upon close of the sale, which Nexstar expects will happen during the current third quarter.
The financial terms of the deal were not disclosed, though sources tell Variety Nexstar is not paying any cash for the purchase, but rather accepting a large chunk of the CW Network’s more than $100 million in losses from Paramount and Warner Bros. Discovery. “It’s no secret that the CW is not profitable, 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,” said Lee Ann Gilha. Nexstar’s CFO during a call with investors Monday. “Based on our plans, we believe we can bring The CW to profitability by 2025, and we expect to invest a low 9-figure amount over this three-year period as we implement our plan. 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.”
For a good chunk of its recent tenure, The CW has been instrumental in Warner Bros.’ efforts to bring its DC Comics characters to life for a new generation with a host of superhero and fantasy content such as “The Flash,” “Arrow,” “Supergirl,” “Batwoman,” “Black Lightning” and “Superman and Lois.”
Mark Pedowitz will remain the CW’s chairman and CEO with “responsibility for day-to-day operations” upon the expected close of the Nexstar deal. He has also made strides in expanding into digital content and in managing the delicate balancing act of setting a content strategy that worked for the studio parent companies and for the network’s affiliate stations. But on a pure viewership measure, CW has never achieved viewership or reach parity with its Big Four competitors. Additionally, the CW reportedly generated $366 million and $272 million of revenue in 2019 and 2020, losing money both years.
“Our acquisition of The CW is strategically and operationally compelling, as it will enable us to leverage our operational experience to improve the Network’s performance through our management of this powerful national platform,” Perry Sook, Nexstar’s newly renewed chairman and CEO, said Monday. “We plan to apply the same strict financial standards to operating The CW as we apply to our other businesses.”
Per Nexstar, “The proposed transaction is expected to create value for Nexstar shareholders by solidifying the Company’s revenue opportunities as the largest CW affiliate, diversifying its content outside of news, increasing its exposure to the national advertising market, establishing it as a participant in advertising video-on-demand services and improving The CW ratings, revenue, and profitability, by prioritizing programing for the Network’s broadcast audience.”
In May, the CW released its fall 2022 schedule ahead of its upfront presentation to advertisers, a lineup that includes “Walker” prequel “Walker: Independence” and “Supernatural” prequel “The Winchesters,” but was still a bit of a far cry from last season, which featured much more original programming as opposed to acquired series. That announcement came on the heels of the CW cancelling several of its original scripted series going into this year’s upfronts, including long-running shows like “Legends of Tomorrow” and “Dynasty.” Freshman DC series “Naomi” was also among the cancellations.
It remains to be seen what changes to programming Nexstar will make at the CW upon the finalization of the transaction, as the network has already pushed back several shows, including the seventh and final season of “Riverdale,” the new DC show “Gotham Knights,” the ninth and final season of “The Flash,” “Nancy Drew” and “Superman & Lois.”
“The CW has delivered signature programming to its broadcast and digital audiences for 16 years,” CBS chief George Cheeks said. “Together, with our partners at Warner Bros. and The CW, we have created a welcome home for content that has resonated with viewers on the network and on platforms around the world. This new ownership structure enables us to partner with Nexstar and Warner Bros. Discovery on the next chapter of The CW while re-deploying capital to other content platforms at Paramount.”
Channing Dungey, Warner Bros. Television Group chairman, added: “For 16 seasons, The CW has been home to some of the most groundbreaking and generation-defining programming in television, from the iconic DC superheroes of Greg Berlanti’s Arrowverse series to ‘The Vampire Diaries,’ and everything in between, including the ‘All American’ franchise, the original ‘Gossip Girl,’ ‘Kung Fu,’ ‘Nikita,’ ‘Riverdale,’ ‘Smallville,’ and many, many more. The network was also the home of ‘Supernatural,’ the longest-running live-action fantasy series in U.S. TV history, for 14 of its 15 seasons. We’re excited that the ‘Supernatural’ story will continue with ‘The Winchesters’ premiering this fall. We look forward to continuing to collaborate on our shared series and future projects to come under Nexstar’s leadership. We are forever grateful to our partners at The CW, especially Mark Pedowitz, who has been a great friend to the studio for so many years, and to me personally. We know that the network will continue to thrive under his leadership.”
Based in Irving, Texas, Nexstar is the core affiliate group for “Riverdale” and “Walker” home CW in major markets such as New York, Los Angeles, Dallas, Houston and Washington, D.C. So Nexstar’s pursuit of CW is a natural move for the company that owns some 199 TV stations.
Media analysts have been waiting for Nexstar to make a real entertainment play, following the slow start that its basic cable channel NewsNation (a re-launched and expanded version of WGN America) has seen since debuting in March 2021. Nexstar surprised market-watchers last August with its $130 million purchase of Washington, D.C.-based news outlet The Hill.
“Controlling the network may allow the company over time to use its CW stations, and perhaps other CW affiliates, to enhance its News Nation network,” Loop Capital’s Alan Gould wrote in a May report.
While Nexstar’s proposed acquisition is a big change for the still relatively young CW, the broadcaster has roots in TV station group parents: Tribune, which is now owned by Nexstar, held a 20% stake in the now-defunct the WB for most of its run, while UPN was originally owned by the Chris-Craft station group, before Paramount exercised 50%, and eventually all of UPN.
Kirkland & Ellis LLP and Loeb & Loeb LLP served as legal advisors to Nexstar. Guggenheim Securities acted as financial advisor and Paul Hastings LLP served as legal advisor to Warner Bros. Discovery, Paramount Global and The CW.