• by Wayne Friedman , Staff Writer, September 30, 2015

Profits margins are still strong at TV stations -- but leverage is better for the long term.

Nexstar Broadcasting realizes this. So it made a 30% better offer than Meredith Corp recently made for Media General: $4.1 billion. (Nexstar said it actually made an initial attempt to buy the company in August before Meredith’s $3.1 billion offer).

Now, Media General says it will look over Nexstar’s plan.

Nexstar says the combination would create the second bigger owner of major network affiliates, reaching, in total, 39% of all U.S. TV homes. In terms of price, a Nexstar-Media General merger would be the fourth-largest TV station group deal ever.

TV stations already give up about half of their retransmission fees to their respective networks -- with TV networks looking to grab closer to 70% in the next few years. Right now retrans dollars can represent around 15% of a TV station groups’ overall revenue.

At the same time, TV stations worry about their affiliated networks’ long-term programming strategy, primarily the effect of selling reruns of TV programs that originate on their airwaves  to the likes of Netflix, Amazon, Hulu and others.

All that could mean local TV advertising revenues will be harder to come by -- and a greater dependence on locally produced TV content such as news or acquired syndicated TV content.

Tangential to this comes TV stations groups still having a difficult time ramping up digital advertising activity -- at best, only representing around 10% of their overall advertising business.

Projections are that over-the-air TV advertising revenues will hit around $22.1 billion in 2018, with $1.2 billion in digital ad revenue in 2018, according to BIA/Kelsey. This year, digital media for TV stations is expected be at $900 million, and $19.4 billion in over-the-air TV advertising.

TV station groups witnessed a rash of big-dollar mergers two years ago -- which in theory gives leverage to those groups. These included Tribune/Local TV ($2.8 billion); Gannett/Belo ($2.2 billion), and Sinclair buying Allbritton, Fisher and Barrington (totaling $1.7 billion).

These deals are focused on the future of traditional local TV advertising -- still the biggest revenue piece of the TV station pie by far.

Apart from the now-usual escalating spikes from political advertising, TV stations’ so-called “core-TV” business continues to be challenged every year.

In that regard, TV station groups believe bigger is better.