Analysis: Broadcasters bank on deregulation as core revenue streams continue decline

The broadcast television industry’s third-quarter earnings reveal companies operating in markedly different universes despite facing identical headwinds. While regulatory optimism permeates executive commentary, the underlying financials suggest the path forward depends less on Washington’s favor and more on each company’s ability to execute fundamental business transformations.

Nexstar Media Group CEO Perry Sook positioned his company’s proposed $6.2 billion acquisition of Tegna as validation that regulatory barriers are crumbling, citing momentum from an October court ruling eliminating restrictions on owning multiple top-four stations in a single market. The deal would create a broadcast entity reaching approximately 80% of U.S. households, more than double the current 39% national ownership cap. Sook expressed confidence that the transaction would close by the second half of 2026, declaring that “this administration, the Trump administration, and Brendan Carr at the FCC are focused on deregulating business.”

Sinclair Broadcast Group CEO Chris Ripley echoed this sentiment, arguing that consolidating the industry into two similarly sized broadcast groups could unlock annual synergies of $600 million to $900 million.

Yet Gray Media CEO Hilton Howell acknowledged the unprecedented regulatory ambiguity facing broadcasters, noting 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.”

Regulatory changes alone cannot address the structural challenges evident in the quarterly results. The absence of political advertising in an off-cycle year exposed the erosion of core revenue streams.

Gray Media reported $749 million in third-quarter revenue with political advertising hitting just $8 million, guiding for $7 million to $8 million in the fourth quarter, significantly below the $20 million to $30 million typically generated ahead of a political year. Nexstar reported revenue of $1.2 billion, down 12.3% year-over-year, primarily due to the election cycle. Sinclair posted revenue of $773 million for the quarter, exceeding guidance.

Gray’s core advertising finished down 3% in the third quarter, an improvement from the 4% decline in the first half. Automotive advertising remained weak, down high single digits, while legal services continued double-digit growth to become a top-five category. The variance in results reflects different strategic positions rather than uniform market conditions.

The retransmission consent revenue that sustained broadcasters through the cord-cutting era appears to be reaching its natural limit.

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Gray CFO Jeff Gignac reported that network affiliation expenses declined 9% while retransmission revenue fell 6% in the third quarter, with the company expecting net retransmission revenue to decline slightly in the fourth quarter. The ongoing YouTube TV carriage dispute affecting ABC stations drew particular frustration from Gray President and Co-CEO Patrick LaPlatney, who noted that local broadcasters have no voice in negotiations between their network partners and virtual multichannel video programming distributors.

Sinclair’s Ripley criticized the Disney-YouTube TV conflict as an antitrust issue, arguing that the current system violates the intent of the Communications Act. The complaint rings hollow given that broadcasters championed the retransmission consent regime that created this dynamic.

The companies’ approaches to their challenges reveal starkly different philosophies about the future.

Nexstar is betting on scale and spectrum. Sook positioned the Tegna acquisition as critical infrastructure for monetizing ATSC 3.0 spectrum, describing the opportunity 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 to realize approximately $300 million in synergies from the combination, with 45% coming from retransmission revenue. Beyond immediate operational synergies, the combined entity would control spectrum reaching approximately 80% of the country, positioning Nexstar to negotiate partnerships and develop new revenue streams from the technology.

Gray is pursuing measured expansion through selective acquisitions. The company announced plans to enter six new markets by acquiring top-ranked local news stations and creating 11 new Big Four duopolies, with Chief Legal and Development Officer Kevin Latek describing 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, transactions expected to generate at least $30 million in incremental annualized adjusted EBITDA.

The emphasis on sports programming as a defensive strategy runs through multiple earnings calls.

Sinclair COO Rob Weisbord emphasized the renewed importance of over-the-air broadcasting for live sports, noting that NBA games are returning to broadcast television via NBC and MLB is reportedly planning a similar move. Gray guided for flat to low single-digit core advertising growth in the fourth quarter, expressing optimism about 2026 based on early first-quarter numbers. Whether sports programming can offset broader advertising declines remains uncertain, particularly as streaming platforms compete aggressively for sports rights.

Financial flexibility separates the survivors from the vulnerable.

Gray finished the quarter with more than $900 million in liquidity and a total leverage ratio of 5.77x, after completing refinancing transactions in July that extended its maturity profile through 2033. Nexstar suspended share repurchases to conserve cash for the Tegna acquisition, which the company projects will be more than 40% accretive to stand-alone adjusted free cash flow. 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, split between predecessor and successor periods due to the Skydance merger, showed revenue of $6.7 billion on a pro forma basis, flat versus the prior year. The company’s television stations represent a declining asset within a portfolio focused on streaming transformation. Paramount expects 2026 revenue of $30 billion, or 4% growth year-over-year, with declines in TV Media affiliate and advertising revenue due to continued pay TV industry headwinds.

The industry’s enthusiasm for deregulation assumes that removing ownership restrictions will enable consolidation that improves unit economics.

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The 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 substantial debt loads.

Gray’s Howell stressed a cautious approach despite acknowledging “a lot of big opportunities to grow,” emphasizing the company’s responsibility 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 may prove prescient.

Deregulation opens doors, but walking through them requires capital, courage and a clear-eyed assessment of whether scale alone can overcome the continuing shift in how audiences consume video content.