Regulatory Risks and Media Consolidation: Assessing the Long-Term Viability of the Nexstar-Tegna Merger

The proposed $6.2 billion merger between Nexstar Media Group and Tegna Inc. represents one of the most consequential deals in the U.S. media landscape in decades. By combining 265 television stations across 44 states and the District of Columbia, the transaction would create a media giant reaching 80% of U.S. television households, according to a Nexstar press release. While Nexstar and Tegna argue the merger is essential to compete with digital giants like Netflix and Amazon, the deal faces significant regulatory and political hurdles. For investors, the key question is whether the merger can overcome these challenges and deliver long-term value, or if it will become a cautionary tale of overreach in a fragmented market.

Regulatory Hurdles: FCC Caps and DOJ Scrutiny

The Federal Communications Commission (FCC) has long imposed a national audience reach cap of 39% to prevent excessive media consolidation, as noted in a WKYC analysis. Nexstar and Tegna's combined footprint would far exceed this threshold, requiring either regulatory reinterpretation or congressional action-a politically fraught proposition. The FCC under Chair Brendan Carr has signaled openness to modernizing rules to help broadcasters compete with streaming services, but legal scholars argue only Congress can alter the national cap. The Supreme Court's Loper Bright decision further complicates matters, limiting the FCC's ability to reinterpret rules without explicit congressional authority.

The Department of Justice (DOJ) is equally skeptical. In overlapping markets-such as the top 100 designable market areas (DMAs)-the merger could grant Nexstar monopolistic control over ad inventory, reducing competition and inflating pricing power for advertisers. The DOJ has historically required divestitures in such cases, and this deal is no exception. A federal appeals court recently struck down the FCC's "Top Four" duopoly ban, easing one local hurdle, but the national cap remains a central obstacle.

Market Dynamics: Ad Revenue Concentration and Competitive Pressures

If approved, the merger would reshape local TV advertising dynamics. The combined entity would hold unprecedented leverage over advertisers, potentially reducing competition and concentrating ad revenue among a smaller number of players, according to a GuruFocus earnings summary. This could lead to higher ad rates but also stifle innovation, as smaller competitors struggle to compete with Nexstar's scale.

Critics warn of a "race to the bottom" in local newsroom investment. While Nexstar claims the merger will fund expanded local coverage, the reality may be different. Media consolidation often leads to cost-cutting, with newsroom jobs at risk. For advertisers, the merger could limit options, forcing them to rely on a single entity for broad reach-a scenario reminiscent of the pre-digital era when local TV stations operated in isolation.

Political and Legal Uncertainties

The political landscape adds another layer of risk. A Trump-appointed FCC appears favorable to deregulation, but congressional Democrats have framed the merger as a threat to media diversity and localism. If the Biden administration regains power in 2026, the regulatory environment could shift dramatically. Legal challenges are also likely, with advocacy groups poised to litigate any perceived antitrust violations.

Investment Implications

For investors, the Nexstar-Tegna merger embodies both opportunity and risk. On one hand, the deal could create a more resilient media company capable of competing with digital platforms. On the other, regulatory delays or rejections could erode shareholder value. The stock's recent volatility (as seen in the NXST Trend) reflects these uncertainties.

The merger's long-term viability hinges on three factors:
1. Regulatory Flexibility: Can the FCC or Congress adjust the national cap without triggering a backlash?
2. Market Adaptation: Will advertisers accept higher prices, or will they shift further to digital platforms?
3. Political Stability: How will the 2026 midterms and 2028 presidential election shape the regulatory environment?

Until these questions are answered, the Nexstar-Tegna merger remains a high-stakes bet on the future of local media.