DirecTV sues Nexstar for involvement in Mission, White Knight retrans dispute

DirecTV filed a lawsuit on Tuesday against Nexstar Media Group, Mission and White Knight Broadcasting, alleging the trio engaged in an “illegal conspiracy” to raise retransmission fees for ABC, CBS, NBC and Fox stations, circumventing antitrust laws.

In a lawsuit filed in New York federal court, DirecTV argued Nexstar is using Mission and White Knight as “sidecars” to coordinate on retransmission pricing in overlapping DMAs. According to DirecTV, the broadcasters aim to “extract supracompetitive retransmission consent fees” from the pay TV provider.

The conflict stems from a carriage dispute that began last October. The dispute saw 25 Mission stations and two White Knight stations pulled from DirecTV, DirecTV Stream and U-Verse, with blackouts affecting 28 markets.

Nexstar’s involvement is complicated, as it manages Mission and White Knight affiliates through a shared services agreement. FCC regulations currently prohibit a single broadcast station group from owning or controlling more than one of the top-four rated TV stations in the same DMA.

DirecTV went on to say Mission and White Knight, over the course of their ongoing dispute with DirecTV, have “effectively relinquished decision-making authority to Nexstar.” Efforts to negotiate with Mission and White Knight management “have been repeatedly rejected or ignored,” referring to DirecTV’s request to temporarily restore stations during the 2022 midterm elections.

Also, DirecTV mentioned Mission and White Knight’s public statements following the blackout “contained verbatim language” used by Nexstar during its blackout with Verizon last fall.

“These cut-and-paste talking points are not the result of independent action, but rather, constitute a concerted effort by Defendants to further coordinate in their negotiation processes,” DirecTV added.

For Nexstar’s part, company spokesperson Gary Weitman told Reuters that DirecTV's claims were "without merit" and the company would fight the provider in court. He added Nexstar’s agreements with the station groups comply with FCC guidelines.

This isn’t the first time questions have been raised over Nexstar’s involvement in its Mission and White Knight affiliates. Comcast in December lodged a complaint to the FCC arguing Mission withheld retransmission renewal for its WPIX station, and that Mission demanded Comcast carry the station under a deal with Nexstar. Comcast and Nexstar ultimately reached a new deal to restore WPIX service.

Nexstar also owns 40 CBS affiliate stations, recently extending carriage of those stations on YouTube TV. Paramount has reportedly proposed a new retransmission agreement for CBS affiliate stations on vMVPDs such as FuboTV, which lost access to a number of CBS local stations last month.

Nexstar is one of a few station owners that has expressed a desire for more direct involvement in vMVPD negotiations. On the company’s Q4 earnings call, CEO Perry Sook said, “I think you’ll see affiliates continue to press the point that we should negotiate our own agreements, and that no one else should be negotiating on behalf of our content.”

An analysis from LightShed Partners called out Nexstar for boasting about its broadcast business, referring to comments the company made at the Morgan Stanley investor conference last week.

“With broadcast taking about 40% share of total viewing, yet with regard to the fees that were paid by the distributors for their content, we’re receiving somewhere between 28% and 30%,”  said Nexstar COO Tom Carter last week on retransmission fees. “There’s kind of a 35% upside in that number with regard to what our fees could be relative to the value we bring if you determine the value based on the number of eyeballs.”

“The aggressive push to drive retrans is not slowing down, ignoring the growing industry headwinds,” LightShed wrote. “This ties to Dish’s Charlie Ergen’s recent comment that retrans costs are getting so high that it will force distributors to actually drop them, similar to what happened with RSNs.”

Lightshed also addressed Carter’s comments that vMVPDs contribute “less than 10%” of Nexstar’s distribution revenue, with analysts noting that percentage “is skewing reality.”

“Given that the broadcast networks negotiate retrans for the affiliate groups, the affiliate is only booking the net retrans, whereas with traditional distributors, they book retrans in full and pay out reverse retrans as an expense,” Lightshed added. “If you normalized for this issue, we suspect the vMVPD revenue share would be high-teens, which ties to the vMPVD share of the MVPD ecosystem industry-wide.”