Nexstar-TEGNA Merger: Regulatory Risks and Strategic Implications for a Declining Industry

The proposed $6.2 billion Nexstar-TEGNA merger represents a high-stakes gamble in an industry already grappling with declining ad revenue, shifting consumer habits, and regulatory uncertainty. While the deal promises to create a media behemoth with 265 stations across 132 U.S. markets, its success hinges on navigating a labyrinth of legal and political challenges. For investors, the merger underscores the tension between consolidation as a survival strategy and the risks of regulatory pushback in a sector increasingly overshadowed by digital platforms.

Regulatory Hurdles: A Test of Deregulatory Ambitions

The merger’s most immediate obstacle is the Federal Communications Commission’s (FCC) national ownership cap, which limits a single entity to reaching no more than 39% of U.S. households [1]. Nexstar and TEGNA’s combined footprint would exceed this threshold by more than double, necessitating a regulatory overhaul. FCC Chairman Brendan Carr has signaled openness to deregulation, arguing that outdated rules hinder broadcasters’ ability to compete with tech giants like YouTube and Netflix [4]. However, legal scholars and consumer advocates counter that the 39% cap was established by Congress and can only be altered through legislative action, not agency discretion [3].

The merger also faces scrutiny under local ownership rules, which restrict station ownership in individual markets. Nexstar already operates multiple stations in 35 markets, and the deal would further consolidate power in smaller and midsize markets [1]. Critics warn this could lead to reduced local news diversity and higher retransmission fees for pay TV providers, ultimately burdening consumers [2]. Colorado Senator Michael Bennet and Denver Mayor Mike Johnston have already voiced concerns that Nexstar’s focus on “synergy” and profitability might eclipse its commitment to local journalism [2].

Financial Viability in a Shifting Landscape

Despite these risks, the merger’s proponents highlight its potential to stabilize a declining industry. Nexstar’s 2024 EBITDA of $2.112 billion—a 24.6% increase from 2023—demonstrates its financial resilience, while TEGNA’s 2025 second-quarter results show a net leverage ratio of 2.8x and $757 million in cash reserves [3]. The combined entity projects $300 million in annual synergies, with Nexstar claiming the deal would be “more than 40% accretive” to its free cash flow [5].

Yet the broader industry context is bleak. Traditional broadcast advertising is losing ground to digital platforms, which now capture over half of U.S. ad spending due to their algorithmic engagement and global reach [1]. By 2029, advertising revenue is projected to grow at a 6.1% CAGR, outpacing consumer spending’s 2.0% growth, as streaming and social media dominate [2]. Nexstar and TEGNA’s reliance on local news and retransmission fees—a model already strained by cord-cutting—raises questions about long-term sustainability.

Strategic Implications: Consolidation vs. Innovation

The merger reflects a broader trend of media consolidation as companies seek scale to compete with hyperscalers. However, critics argue that Nexstar’s strategy—focused on cost-cutting and station acquisitions—risks eroding the quality of local journalism. In Cleveland, for example, the merger would unite Nexstar’s WJW Fox 8 and TEGNA’s WKYC Channel 3, potentially reducing competitive dynamics in newsroom staffing and content [4].

Meanwhile, digital platforms are redefining the industry. AI-driven content creation and algorithmic curation are enabling smaller players to challenge traditional studios, while streaming services continue to invest in original programming [5]. Nexstar and TEGNA’s lack of a robust digital strategy—unlike competitors such as Sinclair or Gannett—could leave them vulnerable to further disruption.

Conclusion: A High-Risk Bet on Deregulation

For investors, the Nexstar-TEGNA merger is a double-edged sword. On one hand, it offers a path to scale in a shrinking industry, with Nexstar’s financial strength and TEGNA’s cash reserves providing a buffer against short-term volatility. On the other, the deal’s success depends on regulatory outcomes that remain uncertain. If the FCC fails to relax ownership rules or faces legal challenges from Congress or consumer groups, the merger could stall or collapse.

The broader lesson for the sector is clear: consolidation alone cannot reverse the decline of traditional broadcasting. Without innovation in digital content, AI integration, or new revenue streams, even the largest players may struggle to remain relevant. For now, the merger remains a test of deregulatory ambitions and a bellwether for the future of local media.

Source:
[1] Nexstar-TEGNA deal to test US FCC's deregulatory doctrine [https://www.spglobal.com/market-intelligence/en/news-insights/research/nexstar-tegna-deal-to-test-us-fccs-deregulatory-doctrine]
[2] Perspectives: Global E&M Outlook 2025–2029 [https://www.pwc.com/gx/en/issues/business-model-reinvention/outlook/insights-and-perspectives.html]
[3] TEGNA (TGNA) Statistics & Valuation [https://stockanalysis.com/stocks/tgna/statistics/]
[4] Why the Nexstar-Tegna merger matters in Cleveland [https://www.cleveland.com/entertainment/2025/08/why-the-nexstar-tegna-merger-matters-in-cleveland.html]
[5] Nexstar Media Group, Inc. Enters into Definitive Agreement To Acquire TEGNA Inc. for $6.2 Billion in Accretive Transaction [https://www.nexstar.tv/nexstar-media-group-inc-enters-into-definitive-agreement-to-acquire-tegna-inc-for-6-2-billion-in-accretive-transaction/]