Morningstar

Nexstar, Sinclair, and Disney: Local Stations Have Much More to Lose Than Disney if a Rift Persists

A healthy partnership with Disney is critical to these no-moat firms.

Disney logo is displayed on a smartphone with a laptop keyboard background.
Serene Lee/SOPA Images via Getty
Securities in This Article
Sinclair Inc Ordinary Shares - Class A
(SBGI)
Nexstar Media Group Inc
(NXST)
The Walt Disney Co
(DIS)

Nexstar NXST and Sinclair SBGI have chosen to preempt Jimmy Kimmel Live indefinitely in response to the show’s return on Sept. 23. They will instead air local programming during the show’s time slot.

Why it matters: In isolation, we don’t expect the decision to have a material impact on the financials of any company. All firms should lose a very small amount of advertising revenue—Disney DIS through the loss of some Kimmel viewers and the stations via less-popular programming.

  • We suspect Kimmel’s ratings are lower in the smaller, typically more Republican-leaning markets where Nexstar and Sinclair have ABC affiliates. Nexstar and Sinclair collectively serve only two of the top 20 US markets, where 45% of US TV households reside, and eight of the top 40 (62%).

The bottom line: We maintain our fair value estimates of $120 for wide-moat Disney, $14 for Sinclair, and $190 for Nexstar.

Big picture: We suspect Nexstar and Sinclair’s desire to build goodwill with the federal government, ideological preferences, and appeasement of some consumers in the markets they serve play a role in the decision, but a healthy partnership with Disney is critical to these no-moat firms.

  • Nexstar and Sinclair’s sales are almost completely dependent on broadcast-affiliated linear television programming, so maintaining affiliation is existential. In 2024, ABC affiliates accounted for 27% of Sinclair’s Big 4 network-affiliated stations and 27% of total advertising revenue.
  • Nexstar doesn’t disclose networks’ proportion of sales, but 19% of its Big 4 affiliations are with ABC. We suspect the proportion of retransmission revenue the firms receive from TV distributors (the bulk of remaining revenue) is proportionately similar to the ad revenue makeup.

Long view: If relationships with local stations completely fractured, Disney would take a financial hit, but it would face no existential threat. With its streaming services and cable networks, it could still reach the entire nation with its content.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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