Gray Television Inc (GTN) Q4 2020 Earnings Call Transcript

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Gray Television Inc (GTN 1.69%)
Q4 2020 Earnings Call
Feb 25, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Gray Television Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]

I will now turn the call over to Hilton Howell, Executive Chairman and CEO, to begin.

Hilton H. Howell -- Chairman and Chief Executive Officer

Good morning. Thank you, operator. As she mentioned, I am Hilton Howell, the Chairman and CEO of Gray Television. I want to thank all of you for joining our fourth quarter and year-end 2020 earnings call. On the line with me, as usual, are our President and Co-CEO, Pat LaPlatney; our Chief Legal and Development Officer, Kevin Latek; our Chief Financial Officer, Jim Ryan; and our Chief Operating Officer, Bob Smith.

We will begin this morning with a disclaimer that Kevin will provide. Kevin?

Kevin Latek -- Chief Legal and Development Officer

Thank you, Hilton, and good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results and the impact of novel coronavirus and its disease, the COVID-19, on our future operating results. Those statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those expressed or implied in any forward-looking statements as a result of various important factors. For more information about such factors, please refer to our company's most recent reports filed with the SEC, including our most recent annual report on Form 10-K, that will be filed today. The company undertakes no obligation to update these forward-looking statements.

Gray uses its website as a key source of company information. The website address is www.gray.tv. We also will post an updated investor deck to the website within the next two weeks. Included on this call will be a discussion of non-GAAP financial measures and in particular, broadcast cash flow, broadcast cash flow less corporate expenses, operating cash flow, free cash flow, adjusted EBITDA and certain leverage ratios. These metrics are not meant to replace GAAP measurements but are provided as supplements to assist the metric -- assist the public in their analysis and valuation of our company. Included in our earnings release as well as on our website are the reconciliations of non-GAAP financial measures to the GAAP measures reported in our financial statements.

Now I'll turn the call to Hilton.

Hilton H. Howell -- Chairman and Chief Executive Officer

Thank you, Kevin. Today, we have lots of very good news to report and to discuss. As we approach the one year anniversary of the beginning of the most eventful 12 months in my life so far, I am extremely gratified that Gray Television today is able to report record fourth quarter results, a fantastic acquisition, continuing momentum in our business and strong guidance for the year ahead. Our people and our company overcame unprecedented challenges over the past year. Last May, despite the challenges, we predicted that we would remain cash flow positive each quarter of 2020. We met the challenge. We did not withdraw on our revolver nor accepted any government financial support. We adopted work-from-home and report-from-home and even produce-from-home policies very quickly in March. We imposed no pay cuts, no furloughs, no layoffs, no benefit cuts and no benefit delays. In fact, we expanded health benefits to those exposed or potentially exposed to coronavirus.

Our stations expanded their coverage of the coronavirus, the hurricanes and fierce storms, one even known as a derecho, which I have never heard of before in my life, and widespread social unrest. In fact, in December, we paid bonuses to each and every full-time employee in recognition of their hard work during these hard times. In response, our stations and production companies teamed up to organize and lead extensive efforts to support local residents through fundraisers, virtual concerts, school on television, virtual food drives and other projects that collectively raise literally tens of millions of dollars for their local communities. And in fact, Pat LaPlatney will shortly discuss one such effort that we will be launching this weekend. Our managers and account executives throughout the company put new emphasis on sales training, new business development and new ways of selling. We also found and executed innovative ways to reduce expenses from top to bottom. Gray Television runs lean and mean, and no one in this company would have it any other way.

The results of Gray's collective efforts are now very apparent with today's earnings release. For the full year, our revenues, broadcast cash flow and operating cash flow exceeded even our pandemic expectations from one year ago. We greatly improved our balance sheet through a successful bond offering and robust stock buybacks. We continue to invest in our stations and even acquired a few new stations to date. And at the end of the year, we intensively dogged into our planned acquisition of Quincy Media, which, as you know, we announced on the first of this month. Today's earnings release announces record results, which have made us very happy even if 2020 did not throw a pandemic, a recession, multiple hurricanes, derechos, severe storms and social unrest our way. Our total revenue for the fourth quarter was $792 million, an increase of $213 million or 37% from the fourth quarter of 2019. Net income attributable to common stockholders was $211 million or $2.22 per fully diluted share, which is an amazing 174% increase from the fourth quarter of 2019.

Broadcast cash flow was $424 million, an increase of $195 million or 85% from the fourth quarter of 2019. Our adjusted EBITDA for the fourth quarter of 2020 was $404 million, an increase of $189 million or 88% from the fourth quarter of 2019. Our total core revenue continued its sequential improvement from the troughs of April, reflecting better business conditions at the national and local levels. We ended the year with a total leverage ratio as defined in our senior credit facility of 3.95 times on a trailing 8-quarter basis, netting our total cash balance of $773 million and giving effect to all transaction-related expenses. During the fourth quarter of 2020, we repurchased roughly 973,000 shares of our common stock at an average price of $16.44 per share, including commissions. For all of 2020, we repurchased in the open market 5.5 million shares at an average price of $13 and change for $75 million. The big stories of the fourth quarter were the refinancing that we addressed on our prior earnings call in November and political advertising revenue, which we also addressed on that call, yet continued robustly even after election day.

And while those topics certainly deserve attention, I want to end my opening remarks, addressing two items that occurred after the close of the fourth quarter. First, we announced our acquisition of Quincy Media on February 1. Upon closing that transaction, Gray Television now owns stations serving 102 television markets that collectively reached 25.4% of U.S. television household, leaving us ample room for continuing mergers and acquisitions. These 102 markets include the number one ranked television station in 77 markets and the first or second highest-ranked stations in 93 markets. Those are impressive statistics at any time and all the more so because it was only a few years ago that Gray owned stations in just 30 markets. And at that time, our leverage is more than two times higher than it is now. In our press release announcing our planned Quincy acquisition, I expressed how honored and humbled we are to be selected by Quincy shareholders to acquire their terrific company. Those words were heartfelt. Quincy is a very fine company with tremendous television stations and tremendous people.

And it has been led for many years by a true giant in our business, Ralph Oakley. The only regret that we have and the only regret that I have in this transaction is that the broadcast industry will lose Ralph's immense contributions to the NAB, to the NAB pack, to the affiliate boards and countless other important endeavors for the people who work in broadcasting and for the local residents and businesses who rely on our stations. We pledge to operate the fine stations that we acquire from Quincy in tribute to Ralph's lifelong contributions to local service through local broadcast stations, local journalism and love of community and country. The final big news is the announcement we made this morning concerning our dividend. As you know from our prior earnings calls, Gray's Board of Directors has been intending to formally consider where the market conditions permit us to return to paying quarterly dividends once our total leverage ratio as defined in our senior credit facility falls below four times.

As you saw in our release this morning, our net leverage ratio did fall below four times at December 31, 2020. Accordingly, at yesterday's quarterly Board meeting, after careful discussion, the directors decided to restart Gray's regular quarterly cash dividend for our equity shareholders at $0.08 per share or $0.32 a year. Those of you who follow us closely may remember that Gray consistently paid a quarterly dividend for decades prior to the Great Recession. At that time, we electively suspended the dividend to preserve our capital. Thereafter, we placed the highest priority on reducing leverage, growing the company and more recently, resuming robust stock buybacks. Executing on these priorities has been the singular goal of the management team through really all of the past 12 years. And now today, Gray is several times larger than it was in 2008, with a balance sheet and workforce and portfolio that have never been stronger.

The Board surveyed this remarkable progress and determined that now is the appropriate time to resume paying a quarterly dividend. This historic move is, therefore, another confirmation that gray has successfully executed the long-term recovery and growth plans that we put in place in the darkest hours of the Great Recession. We are especially grateful to our equity and credit investors and bankers for their support of our efforts. With the dividend now returning, Gray's capital allocation priorities will be slightly altered, yet our priorities remain: first, to reduce our leverage over time; and next, to return capital to shareholders explicitly through opportunistic stock buybacks and a regularly quarterly dividend. We also anticipate that the future will present opportunities to grow Gray strategically. And as I mentioned earlier, we have ample room under the ownership cap, so that we will, as always, evaluate acquisition opportunities in terms of our long-term growth goals and capital allocation policies. In short, today is a good day at Gray. We are very proud of our business, our stations, our communities and most importantly, of our people. And as you will hear next, we look forward to a very strong year ahead.

At this time, I turn the call over to Pat, Kevin and Jim to provide additional color to today's earnings release. Thereafter, we will open up the line to questions for all of us and for our COO, Bob Smith, who, as usual, joins us today to help answer questions in his area. So Pat?

Pat LaPlatney -- President and Co- Chief Executive Officer

Thank you, Hilton. Gray was blessed throughout 2020 with political advertising revenue at historic levels in a very wide field of competitive races across our footprint. Geographical location plus high-quality, highly rated local news operations were once again the one-two punch that's unbeatable. Recall that our earnings call one year ago, we predicted full year political advertising revenues in the range of $250 million to $275 million. Later, we increased our estimate to be between $275 million to $300 million. When we reported third quarter results in early November, we raised our full year political advertising revenue guide to at least $380 million. Then in late December, we announced that we had broadcast over $400 million of political ads through that point in the year, with more orders on the books and anticipated to arrive thereafter. Today, we are thrilled to announce that our political advertising revenue crossed $245 million in the fourth quarter alone, which exceeded our political revenue in all of 2016, as well as exceeding what was nearly our expectation for all of 2020 at one time.

In the end, our political advertising revenue was $430 million for full year 2020. I'd like to put that number in perspective, if I can. In 2016, on a combined historical basis through year-end, Gray generated $9.63 of political advertising revenue per TV household despite the lack of historical presidential spending levels and some real lackluster statewide races. In 2018, on a combined historical basis through year-end, and with no presidential races at all -- president race at all, Gray generated $8.80 in political advertising revenue per TV household. In 2020, that figure was $17.57 per TV household or 82% more per household than in 2016. It's worth noting, too, that Gray's political advertising revenue per TV household was the highest across all publicly traded television group owners in '16, '18 and 2020. Our combined local and national broadcast revenue, excluding political, which we call total core revenue, was also relatively strong in 2020 despite the pandemic, recession and political displacement. In each of our 2020 earnings calls, we told you that while April seemed to be the very worst month for our business, we saw continual improvements in core, retrans and political advertising revenue as the year went on.

The fourth quarter of 2020 continued this trend even amid all the political advertising. Our total core revenue decreased approximately 8% compared to the fourth quarter of 2019. While significant, much of this decline can be attributed to historically strong political displacement in a large number of our markets. In October, total core revenue declined 22% from the prior year, again, largely impacted by political displacement. In fact, our political advertising revenue in October of $179 million dwarfed our total core revenue in October of $81 million. In November, with political advertising revenue mostly disappearing outside of Georgia, total core revenue declined less than 1% from the prior year. In December, with the resurgence in political advertising in Georgia, total core declined just 2% from the prior year. Overall, the momentum that began in May with the first stage reopening continued essentially throughout the year and, thereby, gradually diminishing the effects of the pandemic on our business.

As we've mentioned previously, when our core business slid in the spring as lockdowns affected many of our clients and nearly all of our viewers, we used the newfound time to refocus on sales training, developing new products for clients and prospecting for new business. Those back-to-basics exercises helped us post lower core declines and faster recoveries than many of our peers, largely due to new business development. We also believe that these investments in 2020 will continue to benefit us in 2021 and beyond. It's worth highlighting one particular category we're seeing very strong growth right now that we believe will continue for some time. In 2019, we started to see new advertisers and growing budgets for gambling, which historically included state-run lotteries as well as casinos. With the increasing legalization of sports betting on a state-by-state basis, this category grew to a few million dollars in 2020 where most of other categories were down for the year. The business has only accelerated in the last few months.

Our pacings, which are not necessarily a great predictor for future revenue, are still very encouraging because the gambling category is now pointing to more than 250% increase over 2020. If anything near that holds, gambling would be the fastest-growing core ad category for us for this year. We are hopeful about a return to more normal operating levels in our core business in 2021. So far, our pacings have begun the year in a good spot, and we are increasingly optimistic that we will push back toward 2019 core levels in the second quarter of this year. We also need to highlight the continued growth and momentum in our digital business. We've often mentioned that our digital usage is breaking new records, and that feat continued throughout last year. With the 2020 now closed, we can report that over the course of the entire year, our total online sessions raised 24% over 2019. Our users rose 37%, and our page views and video views, each rose 13% over the prior year. A year ago, we announced on this earnings call that Gray's digital sites had just surpassed 100 million monthly unique viewers for the very first time in December of 2019.

In 2020, we did pass that achievement by averaging 123 million users across all platforms each month. Many of you will recall that Gray joined a number of other broadcasters in placing individual local stories, live events, and local news live streaming on Syncbak's new app called VUit, which is best thought of as the Netflix for live, local and free content. For example, Gray's KCRG in Cedar Rapids streamed its Friday Night Lights 2020 high school football coverage on VUit. Through VUit, this series reached online viewers in 108 DMAs, with one game alone reaching 53 DMAs. Today, VUit host content from a total of 164 local broadcast stations, including most Gray stations. The average VUit user visits the app 18 times per month and spends 30 minutes per session. Finally, I'd just like to echo Hilton's comments about the remarkable work being done in all of our markets by our dedicated staff. The extraordinary weather events of last week presented yet another very difficult challenge for news coverage, not only in Texas but many other states.

Our journalists and other team members did heroic work again in making sure that our markets had up-to-the-minute news and critical information. In addition to providing extensive coverage of the weather emergencies, we've teamed up with the Grand Ole Opry and Circle network to leverage this Saturday's live Opry broadcast to help raise money and awareness in food and security. The Opry broadcast were at 9:00 p.m. Eastern on virtually every Gray station, and I'm happy to report also on Graham's KPRC in Houston and additional stations owned by the good people at Hearst, Nexstar and Meredith. All proceeds will benefit Feeding America, a network of 200 food banks and more than 60,000 food pantries in nearly every community across our country.

I'll now turn the call to Kevin.

Kevin Latek -- Chief Legal and Development Officer

Good morning again. To state the obvious, we are thrilled to have reached an agreement to acquire Quincy Media, and the stations that will join Gray Television are precisely the type of strong local institutions that we have consistently strived to add to our portfolio. In this case, the new markets are also a hand-in-glove fit for Gray's geographic footprint and even more perfect fit with our company culture of empowering local managers and local professionals to make the content, sales, operational and staffing decisions that they believe best suit their individual local needs. As disclosed in our Quincy press release, we are divesting the Quincy television stations in all six markets, in which both Gray and Quincy already own a full-power network-affiliated television station. Wells Fargo commenced a formal divestiture process on the same day that we announced the Quincy acquisition.

While first on bids are not due until tomorrow, we are very encouraged at the level of interest in the divestiture stations that we have seen so far. We are also gratified that the pool of interested parties is wider and more diverse than we've experienced in prior divestiture processes. We expect the process will continue to move quickly with final contracts executed, announced and submitted to the SEC and DOJ in April. Another major recent development is our successful completion of a negotiation and renewal of our largest batch of retransmission consent agreement. This batch of contracts will expire between late 2020 and January of this year, covers a bit over 40% of our paid MVPD subscriber base through individual contracts with more than 480 different MVPDs. That includes one of its two DBS companies, several of the largest cable operators and nearly all of our small and midsized cable operators. We successfully concluded retransmission negotiations without interruption to the public with all of those MVPDs, other than two relatively small telco overbuilders, representing less than 1% of our total MVPD sub base.

Today, only one bankrupt telco operator has refused to continue carrying Gray stations, and that impacts about 0.2% of our MVPD sub base and an even smaller portion of our total paid subscriber universe. Consequently, we once again began and quietly ended another significant renewal cycle with a success ratio at close to 100%. Looking ahead, we have one postponed negotiation that will occur later this spring that will be priced retroactively to January 1. This summer and at year-end, we will have a small number of negotiations with MVPDs to cover about 25% of our paid MVPD sub base. Then in the middle of 2022, we will renew another small number of negotiations with MVPD to cover around 20% of our paid MVPD sub base. For the first quarter of 2021, we anticipate retransmission revenue will increase by about 15% over the first quarter of 2020. Retransmission revenue should increase in the next quarters this year by larger amounts as a result of the renewal repricing that will occur over the next few months.

To put these estimates in perspective, I'll remind you that our retransmission revenue increased 4% in the first quarter of 2020 on a year-over-year basis and 9% in the second quarter last year and then 11% year-over-year in both the third and fourth quarters of 2020. For the full year 2020, our retransmission revenue increased nearly 9%. These revenue increases are the result of both annual escalators and all of our agreements as well as repricing of a portion of our MVPD sub base in the first quarter of last year and a significant repricing in April one of last year. Finally, we have now received subscriber reports from MVPDs and OTT providers, covering nearly all of the three -- first three quarters of 2020 and a good portion of the fourth quarter of 2020. With more comprehensive data in hand today than we have had available to us at any point last year, we can now report that our total sub counts for 2020 held up much better than anticipated in the darkest days of last summer.

As an aside, when we discuss total sub counts, we are only looking at subscribers for whom we are paid a fee because they receive a Big four affiliated channel from Gray. But in particular, with the benefit of a nearly comprehensive set of MVPD and a more complete set of OTT subscriber reports for 2020, we saw relatively significant increases and decreases at many of the operators throughout the year. Overall, however, Gray's total subscriber count in -- for the full year of 2020 declined only 1.1% from the total subscriber count and the -- I'll back up. The total subscriber count in the fourth quarter of 2020 declined only 1.1% from total subscriber count in the fourth quarter of 2019. Given all of the challenges that 2020 threw at everyone, we're certainly pleased that the more comprehensive data reveals our total subscriber count declined by such a small amount.

Thank you for your time. I'll now turn the call to Jim Ryan.

James Ryan -- Chief Financial Officer

Thank you, Kevin. Good morning, everyone. In addition to this morning's release, we will be filing our 10-K later today, which will have a great deal of additional information for you. Also, as a quick reminder, remember that beginning in the first quarter of 2020, all of our reporting is on an as-reported basis because we considered the acquisitions and dispositions of late 2019 and during 2020 as being immaterial. One final quick comment about political. Yes, Q4 was all about the $245 million of political, but I just wanted to point out that, that $245 million actually exceeded the $235 million combined historical political from 2018. As Hilton mentioned earlier, our leverage ratio at the end of the quarter was 3.95, netting $773 million of cash on hand.

And we stated with the announcement of the Quincy transaction at the first of the month that at the end of this year, with the Quincy transaction having been closed, we expect our leverage ratio pro forma for Quincy to be approximately four times. During fourth quarter, we increased our cash by $306 million. And as of today, we have an undrawn $300 million revolver, so we're in a very strong liquidity position. At this time, we expect we will continue to generate significant amounts of free cash during each quarter of '21. As of today, we have approximately 95.4 million shares outstanding. In 2020, we generated full year free cash of $559 million or approximately $5.86 per share with the record-setting political revenue. As we look to 2021, a nonpolitical year, we currently anticipate total year free cash will range between $300 million and $325 million.

That is excluding any additional free cash generated by Quincy -- the Quincy acquisition, post-closing that transaction. So to sum it up, our average '19/'20 free cash flow was about $459 million, and we anticipate that our average 2021 free cash flow, excluding Quincy acquisition, will be in a range of approximately $430 million to $442 million. Given our strong liquidity position, free cash generation, low leverage and no debt maturities until 2024, we believe we are in a very good position to thrive, emerge from the effects that the pandemic made just as we are today, one of the strongest local broadcast companies in the country. You'll also see in the release that we've returned the formal guidance for Q1. We're pleased with what we're seeing so far at the start of the year.

Our total core revenue, we're guiding to an increase of flat to up approximately 2%; retransmission revenue growing 15% to 16%. And given, as Kevin mentioned, the timing of some additional renewals a little bit later this year, that quarter-over-quarter cadence will pick up a little bit in the back part of the year. Total broadcasting revenue, again, we're guiding to be flat to up approximately 2%, and the production companies will generate about $13 million in Q1 in revenue. Operating expenses, our broadcast expenses will be increasing 8% to 9%. That's about a $29 million increase. And of that increase, $24 million is represented by increasing reverse comp to the networks. Production company expenses will be about $16 million. Corporate expenses, including transaction costs related to Quincy, we're anticipating to be about $20 million.

To add a little more color on the core revenue in Q1, January was down low single digits. February is up low single digits. And currently, March is appearing to be up low to mid-single digits. So we're very encouraged by the cadence month-over-month of the continuing sequential improvement of core revenue. A couple of quick liquidity items for full year 2021. We anticipate cash interest will approximate $180 million, our capital expenditures of about $80 million, and cash taxes will be in the low $20s millions.

At that, I'll turn the call back to Hilton.

Hilton H. Howell -- Chairman and Chief Executive Officer

Thank you very much, Jim. Let's begin with any questions that everyone may have.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Kyle Evans of Stephens.

Kyle Evans -- Stephens -- Analyst

Thanks. Jim, you rip through those free cash flow numbers. If you don't mind, could you just slowly tick back through them again? And if you didn't give one for Quincy, can you help us think about that plug? Then I've got some follow-ups.

James Ryan -- Chief Financial Officer

So the 2020 free cash was $559 million, and that translates to $5.86 per share, with 95.4 million shares outstanding as of today. We believe our free cash, excluding Quincy, this year in '21, will range somewhere between $300 million and $325 million. So our blended two year '19/'20 free cash flow average is $459 million, and that would imply a 2021 free cash flow prior to Quincy of between $430 million and maybe $442 million. The free cash flow generation from Quincy, obviously, is going to be dependent on when we close. We are currently anticipating a close sometime in the middle of the year. And obviously, Quincy is free cash flow accretive.

We haven't gotten into exactly how accretive that will be right now, in part because Quincy is a private company and we're trying to respect their private information. We'll have more to say once we close the transaction on how much additional free cash flow Quincy will bring in sometime in the second half of this year. But I think it would be fair to say that on a two year blended average basis, whether it's '19, '20, 2021, even without Quincy, it's a very, very compelling free cash flow story and especially on a free cash flow per share basis.

Kyle Evans -- Stephens -- Analyst

And historically, you've given great CHB numbers when you do deals. Do you anticipate this with Quincy?

James Ryan -- Chief Financial Officer

Yes. Quincy is large enough that we will update CHB for Quincy once we close it. It may -- I will caution, it may take a couple of weeks or a little bit of time post-closing to get that all pulled together. But that is our intention, yes.

Kyle Evans -- Stephens -- Analyst

Great. Thanks. And then, Kevin, you kind of gave us the cadence on retrans growth in '20, and I think you said 4%, 9%, 11%, 11%. Were you implying that we would -- we should be thinking about those same deltas off of the 15%, 16% year-over-year guide for the 1Q for the balance of the year?

Kevin Latek -- Chief Legal and Development Officer

No. It's not implying that. I was just simply referring to accelerated -- acceleration in growth because we were renewing a group last year and a large group this year. Given what we have had, certainly, as Jim and I both mentioned, that retrans should be higher -- the year-over-year increases should be higher in subsequent quarters than we have in this quarter. But I don't think the cadence last year is going to be indicative of this year because we renewed 40-plus percent of our sales on January 1. We didn't have that last year. And we didn't -- we won't have a big April one renewal like we had last year. And then we had something going on this summer that we did not have last year. So I don't think last year is really indicative except for the trend line of getting continued increase for the year.

Kyle Evans -- Stephens -- Analyst

Okay. While I have you, can you help us think about the virtual component of your retrans sub base? Could you size that from a number or revenue perspective? And then -- and if not, which, I'm guessing you won't, will you talk a little bit at a high level about what the per sub per month rate has done in virtual since inception? Has it tracked the more traditional cable satellite? And then one more follow-up. Thanks.

Kevin Latek -- Chief Legal and Development Officer

The OTT is certainly bigger than we thought it was going to be, and it's grown much faster than we thought it would grow. You've heard this from us before with a couple of big guys out there and some very, very small OTT providers. And each network taking a different approach by operator, there's -- we don't have growth and -- growth and reverse arrangements with everybody. Some of it's just simply, we paid a fee by the network, others would negotiate directly and pay a fee. And so there's a lot of variation. Overall, I would say that our -- we -- our preference is to have people in the pay-TV ecosystem. If we had the luxury of choosing, we'd all want them to be with the operator who's paying us the most, not the operator who's paying us the least. In some cases, the OTT guys are the least; in some cases, they're higher than MVPD.

So it's a mixed bag. There's a lot to do with when the deal was last negotiated. A deal that we did -- that we negotiated three years ago is not going to be anywhere close to deals that we've negotiated in the last week. So it's hard to put generalities around the OTT. Those all renew at different times as well. So the rates there have been going up just as they've been going up in the MVPD place. There's a lot of room to grow on both of them. I mean the headline -- the OTT providers are definitely large. They've become a meaningful component of our sub base at this point.

Kyle Evans -- Stephens -- Analyst

Great. And then lastly, you guys didn't do a call around Quincy. So a public congratulations to you and especially Ralph. I hope he's playing golf right now. Could you help us think about the opportunity to further consolidate and grow for your station, group M&A? And maybe in thinking about that or talking about that, touch on the Supreme Court case and the UHF discount. Thanks.

Kevin Latek -- Chief Legal and Development Officer

Okay. I'm going to assume that's for me. We think there's still plenty -- we still think there's still a lot of stations out there and smaller groups that we think will be good fit for Gray, geographically, operationally, culturally. There obviously are some that would not, but we -- it's a small industry, and folks are -- in this industry are very involved in joint efforts as just the example Pat mentioned on this weekend, Opry. Actually, that happens all the time in this business. So we know the people who own the stations that we would like to own. They obviously know that we're interested in buying it at some point. And hopefully, that will happen. I think it's a fairly safe bet that the UHF discount will not survive over the next four years. And at this point, as you know, it doesn't impact us. With a discount, we're at 17%.

Without the discount, we're at 24%. After Quincy, we'll be at 25%. So we still have a great amount of room to grow the company without worrying about whether the UHF discount is in place or not in place. So it would appear based on the Obama administration policy views that are reflected in this administration that UHF discount will go away. It's unclear if they'll also raise the cap. I don't -- those discussions haven't really seem to have started yet. There are other focuses that at FCC today, which are obviously split Q2 as we sit here today. What was the last question, which is probably the first question you asked me?

Hilton H. Howell -- Chairman and Chief Executive Officer

Supreme Court case.

Kyle Evans -- Stephens -- Analyst

Yes.

Kevin Latek -- Chief Legal and Development Officer

The Supreme Court case, obviously, we benefited from the 2017 deregulation that we spent a lot of time lobbying for and supplying lots of evidence to the FCC that acquiring non-Big four TV stations is not the end of the republic. And we backed that up this past fall with a study by BAA that showed that acquiring non-Big four stations and even acquiring Big four stations in our markets result in higher news and more news. And we've demonstrated again and again and again that we offer hard data to prove that. The Supreme Court case, which Gray asked CFC -- asked the Supreme's to take up an amicus, and then we have to address our unique experience here, unique from other broadcasters. In a different perspective, we were very encouraged by the oral argument. We're encouraged by the briefs.

We have no insight into when the Supreme Court is going to act other than the Supreme Court almost always issues its decisions by the end of June. So I think we'll see a decision by the end of June. I would caution again, though, a lot of folks think the Supreme Court is going -- is considering getting rid of all ownership rules. That's not what it's for. The 2017 FCC deregulation was a very small step that allows us to acquire non-Big four stations outside of the largest market. The FCC has allowed non-Big four acquisitions in its largest market since '99 and outside the largest market, only be a waiver in certain circumstances. So the 2017 is a very small step of common sense. It is not going to unleash great station trading activity, at least with respect to Gray, perhaps a little with others, but we don't see a great opportunity to be swapping away our legacy number one TV station, so that we can pick up a MyNetwork affiliate or a Telemundo in some other market.

So again, other people may have different views on what the court decision might mean. But for us, it would mean that there may be some additional independent stations, off-air stations, Telemundo affiliates, CW affiliates that are -- that might make sense for us to acquire as we've done sort of steadily and quietly for many years through waiver processes, just to eliminate the need for a waiver process. So we're encouraged. We -- but it does not open floodgates to massive consolidation, as I've read so many people predicting.

Kyle Evans -- Stephens -- Analyst

Thank you so much. Your next question comes from the line of John Janedis of Wolfe Research.

John Janedis -- Wolfe Research -- Analyst

Okay thank you. Can you guys talk about what you're seeing on the ground from an advertising perspective? Meaning it sounds like you're tracking flattish, call it, for the last four months or so before any of the COVID comps and with a few categories dark. And I think the market would have expected more pressure and results with some of the other station owners were a bit softer than what you guys are seeing. So are you seeing market share gains from lower-rated stations even given your market share where you are today? So any market share stats you can share, I think, would be helpful. And as the weaker categories come back into the market, can there be a tailwind that translates to a few points of growth? And I guess, finally, you talked about the dollars, but how does your gambling footprint look?

Hilton H. Howell -- Chairman and Chief Executive Officer

Bob, you want to take that one?

Robert Smith -- Chief Operating Officer

Sure. I'll address the gambling issue first. First of all, it's -- there's a tremendous upside, in our view, for the entire year. We're already seeing it in the first quarter. We saw it in the fourth quarter as well. The gambling money is going to be a significant category from this point forward. And currently, we're active. And when you talk about it, I should add that most people think of FanDuel and DraftKings, for example, because you see those all the time. But there are several more players in the market, and they're all pretty active. And they're active currently in eight of our states with pretty heavy schedules in the first quarter. There's four other states that are approved but not live yet. But three of them will impact our markets, and we assume that will happen yet this year, and it could -- early the second quarter, we could add those three other states. In addition, there's 14 other states, the pre file legislation that, potentially, we could see those states become active in the second half of the year.

So even on its own, in the eight states that are active, it's pretty robust schedules, and our stations are benefiting greatly from that. With regards to the other questions, our market shares are growing. We've outperformed in most of our markets. We have extraordinarily strong sales team, sales management. We probably have the, in my opinion, the best sales training program in the business. And all that together combined has allowed us to, in often cases, in a lot of markets, outperform our market share -- or already is market share. So we're -- I can speak for our group and our senior vice presidents who oversee the stations, but they're pretty bullish as the year goes on. I think you're going to see more and more local sales activity. And in our case, we spend a lot of time on direct local new sales development, and we're seeing some terrific numbers in that regard.

John Janedis -- Wolfe Research -- Analyst

Okay. Thank you. And maybe, Kevin, one quickly for you. On the sub count, that 1.1% decline looks like an outlier. Anything in terms of relative over or underexposure in a region or with a distributor to call out there?

Kevin Latek -- Chief Legal and Development Officer

John, as I said, we saw a lot of noise within the numbers. It's been no surprise when the public reports kind of which big MVPDs have been shedding a lot of customers over the last year. But then we saw other folks picking them up. So what we've been looking at with last year and this year, in these comments, we try to get -- try to break through the noise is not to pick a date certain because, obviously, people all report differently, but to try to look at our total number of subs in the fourth quarter. So what we take is a little, as I said, the total paid Big four subs, we were paid on in the fourth quarter of 2019 for which we have complete records now.

And we have a good number of records and estimates on the complete Big four OTT and MVPD revenues we'll get, and the total sub base year-over-year from fourth quarter to fourth quarter relative to that was just slightly down. That's a big improvement from where we -- what we were looking at earlier in the year. So we said folks were going to come back. They got jobs, and hotels reopened, and bars reopened, and sports returned. And that did certainly -- did seem to occur. So we're trying to smooth out the noise talking at full quarter versus full quarter. But I don't mean to say that everyone's kind of moving a lot. Actually, it's the opposite. There are some -- when we look at the top 15 operators, I bet you, half of them has double-digit moves over the course of the year, up or down. There was a lot of noise in there that shakes out that negative 1%.

John Janedis -- Wolfe Research -- Analyst

Thanks a lot.

Operator

Your next question comes from the line of Aaron Watts of Deutsche Bank.

Aaron Watts -- Deutsche Bank -- Analyst

Thanks for taking me on. A couple of questions. Let me start with just an advertising question. Can you talk about what you saw from the auto category in the fourth quarter and maybe how it's starting off the year here in first quarter, second quarter?

James Ryan -- Chief Financial Officer

So in fourth quarter, auto was still down, but remember, there's a huge amount of noise in October. Political advertisers and auto advertisers always love your local news. And so obviously, it's -- I think the whole quarter is not necessarily indicative. If you look at November, it was down about 10% and maybe a little bit softer than that in December, which is still a marked improvement over where it was last April. So far this year, it is still lagging. I'd say it's -- overall for the quarter, it's down.

Pacing -- on pacing, which is not necessarily completely indicative of where you end up but down about 10% for the quarter. January was pretty good. February was softer. And March is, it's still kind of early to see how that breaks. But it is definitely better than it had been for many quarters last year. And it does look like it's slowly coming back. And Bob, I don't know -- or Pat, I don't know if you want to add something to that.

Robert Smith -- Chief Operating Officer

Yes, I would just add that a couple of our key advertisers, including Ford, the same one is that's a real bright spot for us and showing some real positive comps. And the only other thing I'd add that is Stellantis, the new name for Chrysler Jeep Dodge advertising, is -- has been dark for -- it was dark in fourth quarter and really for a considerable amount of time on -- in local spot. But they're coming back or have come back here in first quarter. Most of those dollars are in March, but there's some still in the process to be in place. So that's a positive sign to see them back in play.

Pat LaPlatney -- President and Co- Chief Executive Officer

Yes. I would just add, we still have issues with chip shortages impacting manufacturing. And I think once that gets ironed out, the supply chain gets ironed out, you're going to see that category come back much stronger than where it is right now.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. That's really helpful. Second question, Kevin, I think I'll point this one at you. With the renewals that you got done at the end of 2020 and early this year, are you comfortable enough yet to get -- put some goalposts around what net retrans growth could look like over the next few years for you guys?

Kevin Latek -- Chief Legal and Development Officer

No, not really. Short answer.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. Okay. All right. Let me ask another way. I guess, with the renewals you've done on the distribution side and then also with your visibility on the affiliate side, how -- can you give us any more color on how to think about margins for retrans?

Kevin Latek -- Chief Legal and Development Officer

The retrans margin will be better this year than last year. Remember that we had repriced our network contracts at various points in 2019. On the first of January -- January one of 2020, all of them had an annual step-up. And we knew that was coming. We predicted it for five years. It was a timing issue. So last year was just as we thought it would be. This year, with so many of the retrans repriced somewhat -- starting last year and now this cycle, net retrans margin should be better.

I would say without quantifying our net retrans certainly will grow this year over last year in absolute dollars, and that's what we care about. As you know, we don't -- we're not running the business for margin. We're running for dollars. Net retrans, as we've said, will grow over time. In some years, it's going to be a little challenge. That was 2020. This year's net retrans will be higher than last year's, for sure.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. Got it. Thanks for that. And last question for me. Just with the acceleration in streaming service adoption, there's been plenty written on the pressure that prime time viewership has been under. And I appreciate that the last year hasn't been a normalized template for viewership. But assuming continued pressure for prime time audiences on broadcast, how do you think about that impacting your business on the local level, both from an audience perspective as well as kind of advertising coming in and perception on that?

Pat LaPlatney -- President and Co- Chief Executive Officer

Yes. So it's Pat. I -- look, it's not a great trend. On the other hand, it's a trend that's been sort of out there for a number of years. And at this point, prime time in terms of the revenue it represents to our company is -- yes, I think I've got some kind of range or a point, but it's below 20%, I think, or lower. So it's not what it used to be. It's not as important as it used to be, and it's nowhere near the amount of money or -- on a percentage basis that our local news represents. So Kevin, you might have something to add there.

Kevin Latek -- Chief Legal and Development Officer

Yes, we -- the exact numbers, 2019, 2020 revenue by time period, network prime time was 15% to 16% of our total revenue. So 50% of our revenue comes from local news year-in, year-out, again 2019 and 2020. Network prime time is 16%.

Aaron Watts -- Deutsche Bank -- Analyst

And Kevin, I guess, just as a follow-up. I appreciate that prime is not driving your revenue base. But as you think about your local news viewership and other local content, have the ratings been holding up there considerably better than what we've seen at the prime time, time slots? I guess I'm just trying to think about kind of the overflow effect on your local content.

Kevin Latek -- Chief Legal and Development Officer

Bob, do you want to talk about ratings?

Robert Smith -- Chief Operating Officer

Yes. Yes. Actually, the old days of how much prime had an impact on local news is not really an issue anymore. Local news tends to stand on its own. And so really the lead-in and lead-out factor, that was certainly a term used much more prominently many years ago is really not an issue today. So my point is that local news can stand on its own. So -- and then necessarily not coming to ours, 6:00 news or 10:00 news or to prime or in the prime access or anything like that. And so, I guess, the bottom line is that the prime does not have much impact on our local news viewership.

Pat LaPlatney -- President and Co- Chief Executive Officer

Yes. I would just add that...

Robert Smith -- Chief Operating Officer

Or not as much. Sorry, Pat.

Pat LaPlatney -- President and Co- Chief Executive Officer

I would just add that the local news in 2020 had an extraordinarily strong year for a lot of good reason. We've -- we've found younger viewers actually discovering local news. And while viewing levels have moderated, it's still very, very strong.

Aaron Watts -- Deutsche Bank -- Analyst

Okay. Thanks again for the time.

Operator

Your next question comes from the line of Steven Cahall of Wells Fargo.

Steven Cahall -- Wells Fargo -- Analyst

Thanks. Maybe to start off, Pat, you made some really interesting comments about Q2 being back to those 2019 core levels. And you talked about some really strong growth in gaming or gambling. So as we think about the mix, as you get back to 2019 levels, it sounds like sports betting and others will be a much bigger percentage. Are there any sectors that you think will be a smaller percentage going forward? Or anything else like gambling that you think is also kind of growing a lot more?

Pat LaPlatney -- President and Co- Chief Executive Officer

Yes. So I think the legal category for a long time has been growing, and we're continuing to see growth there. The health category, which we have a sort of a companywide focus on, we have a health team, continues to show pretty solid growth. I think that -- look, I think right now, as we talked about, auto is soft for -- there's a lag of cars and -- or issues in the supply chain have caused availability issues. So I think that -- I think once automotive comes back, and I think it will, that's going to put even more pressure out there. So that's encouraging.

Steven Cahall -- Wells Fargo -- Analyst

Yes. And then, Jim, I think before you talked about maybe putting a buyback structure in place that can be automatic during blackout periods or on a grid system, given the Quincy deal, will you be foregoing that, so that you're just going to focus on the dividend and deleveraging through that transaction?

James Ryan -- Chief Financial Officer

No.

Steven Cahall -- Wells Fargo -- Analyst

Great. And then maybe a last one. Last night, Paramount Plus talked about a lighter tier that doesn't include local station content, and Peacock has done some of that within NBC. Those are really, obviously, big constituents sort of partners of yours. How do you think about the evolution to streaming and how to make sure that your really important local station content is included in a lot of those services going forward? Thank you.

James Ryan -- Chief Financial Officer

Because it's virtual, we can -- you can't point to someone in the room and tell them to answer the question. So apologize for that. Also, the Paramount news is we know as much about it as you do. So we're -- we need to -- we have a lot of questions, and we'll learn -- and obviously, we'll learn more as time goes on, but we don't know enough about it. We are -- in terms of streaming, we're in the big streaming packages, obviously. In terms of local news, it's just people can get local news on any device currently. It's obviously part of VUit as well as our local websites and our station apps. So we're there, whether we need our local news and other packages, and there's obviously no end to it. There's no shortage of streaming packages and streaming platforms at this point.

It's a -- we're looking at some of them, and some will be a part of, and some, we won't. Some will be good to be a part of, and some we'll wish we were part of, and some we don't really need to be a part of. So it's a mixed bag. It's just -- we keep -- every day, I think if there's another streaming package, the whole world is obviously getting a lot more complicated. And we need to be in some of them, and we don't need to be in others. But where -- what exactly Paramount Plus means to us is that the news came out after the market closed last night, and we yet to have a conversation with the network, and I know all of its broadcasters are looking for more information from CBS on that.

Steven Cahall -- Wells Fargo -- Analyst

Yes. Thank you.

Operator

Your next question comes from the line of Jim Goss of Barrington Research.

Jim Goss -- Barrington Research -- Analyst

Thanks. A couple. First, with regard to your capital allocation priorities. I wonder if you could talk a little more about them right now in the light of your resumption of a dividend for the first time in more than a decade and now with the new acquisition of the Quincy stations. And also, with -- on a related basis with Quincy, with the $925 million purchase price, it looks like you're adding nine stations but divesting about 6. Is there any guidance you can give in terms of what that net purchase price might be?

James Ryan -- Chief Financial Officer

No. We have no guidance on what that net is, Jim. I think you can -- you understand why we're certainly not negotiating in public on potential -- with divestiture buyers. When the contracts are signed up and done, we will -- just like we did with other divestitures in the past and other transactions, we'll let everybody know where that net number lands. As far as capital allocation goes, I think, first and foremost, look at the free cash flow generation of the company, there is ample room now, a, continue to return to shareholders in part with the reinstatement of the dividend starting this quarter. As Hilton made clear a couple of minutes ago, there will, from time to time, be a stock buyback. We will continue to reduce our leverage over time.

And it makes very clear on many, many calls that if a good opportunity for a station or a group of stations that our criteria become available, we will always take a look, and we will always be interested. Whether we transact or not, it depends on the facts and circumstances at that point in time. But I think our allocation will be a mix because our cash flows now are large enough and, especially, on a two year-blended basis, stable enough that we have the luxury of being able to do a mix of the allocation rather than having focused primarily on de-levering over the past several years.

Jim Goss -- Barrington Research -- Analyst

Okay. And maybe...

Hilton H. Howell -- Chairman and Chief Executive Officer

And Jim, this is Hilton. Let me just add just one thing to that. I mean really, when the Board took on the discussion yesterday, I mean, it was pretty clear and use a cliche, you can walk and chew gum at the same time, all right? I had probably been the highest one about reinstating the dividend because we have focused and I have frequently said that our -- besides delivering post acquisitions, that growing the company is our number one priority. It still remains an extremely high priority, but we truly believe that we can do both. I chimed into a previous question with regard to our stock buybacks during blackout periods. We have that in place at a certain price level. I hope we never get to that price level again because we are a much better company. One of the things that the Board considered and that I certainly want to tout is that this management team is now responsible for a company with the finest balance sheet, the finest group of assets and the highest free cash flow generating capacity that we have ever, ever had. And I've been with the company since 1993.

And so that free cash flow capacity is going to give us the ability to do a lot of things opportunistically and otherwise. But this dividend is important. We hope that as we continue to run lean and mean that we'll be able to increase the dividend. And then as we look at relative weaknesses, we will step into the market and buy back stock if we have -- if it begins to fall excessively. I would say you guys, and this is just sort of an aside, candidly, Jim. But this time about a year ago, I made a comment during the Q&A session, and Harry Jessell of TVNewsCheck picked up on it. And that was during a pandemic, in COVID-19, broadcast stocks with a perfect safe haven. And that's proven to be true. At the time, Gray was in the 9s. Nexstar was in the 40s to 50s, and Tegna was in the 9s. And you can see what the course of the pandemic has done for our stock prices. So we have a heck of a business. We're going to be able to handle all different pieces of it.

Jim Goss -- Barrington Research -- Analyst

Okay. Thank you. One other thing then. Yes, clearly, local news and other local programming is the most profitable thing any local broadcaster can do in terms of owning your own content. I wonder if you feel you have more room to add additional programming right now that might -- you might be able to take advantage of in that way and how that might be impacted by the tremendous surge in additional content availability with all the new streaming services.

Pat LaPlatney -- President and Co- Chief Executive Officer

It's Pat. I'll -- I think -- and I want to make sure I understand your question. So I think, look, we will add local news at every opportunity, whether it's a recent acquisition or stations we've had for a long time. Where we add local news, it's a better service to our community and candidly a better business. So I hope that answers your question. Are you suggesting -- was the question around how we're distributing local news on OTT platforms?

Jim Goss -- Barrington Research -- Analyst

No. It's more that -- to the extent that you can replace programming, you have to pay a syndication fee for and replace with something you create on your own and you own all of the content or all of the aspects. That tends to be the most profitable thing any local broadcaster can do. And I wonder if there's more room for more of that. Or is that -- is there more of a challenge because of the abundance of programming that's becoming available?

Pat LaPlatney -- President and Co- Chief Executive Officer

No. I would say that there is room to do more local programming, and we will do -- and we've been going down that path for some time now, and that's going to continue. So I think you could plan on seeing more, not less, local programming on Gray station side.

Robert Smith -- Chief Operating Officer

If I could jump in, this is Bob. Just to further answer that question, we've actually eliminated quite a bit of syndicated programming over the last two year period and saved a substantial amount of money and replaced it, in most cases, with local news. And in fact, we have a couple of our markets currently with no syndicated program, whatsoever. And they're substantially larger markets that rely mostly on local news. So it's something we believed in for a long time. And certainly, any time we get that opportunity to add local news, we try to do that.

Jim Goss -- Barrington Research -- Analyst

Okay. Thank you,

Operator

Your next question comes from the line of Michael Kupinski of NOBLE Capital Markets.

Michael Kupinski -- NOBLE Capital Markets -- Analyst

Thank you and thanks for taking the questions. First of all, congratulations on your quarter, and congratulations on Quincy. Regarding Quincy, you indicated that there are going to be $23 million in synergies. And I was wondering, can you break that up between revenue and cost synergies? And also, are you expecting that in your first year of operations? Or is this multiple years?

James Ryan -- Chief Financial Officer

First of all, when we talk about synergies, we don't include revenue synergies other than whatever our retrans uplift is given our contractual rights. The $23 million in Quincy is roughly 1/3 retrans uplift, roughly 1/3 other contractual advantages we bring to the table and roughly 1/3 of elimination of duplicate costs. So it's a nice mixture. And the way we have consistently defined a synergy is a fully annualized 12-month amount that the synergy can be achieved and implemented sometime within the first year. So to say that a little differently, if you can achieve the synergy day one, then a full 12 months, obviously, accrues to our benefit. If we achieve that synergy on day 364, we will still score as a synergy the full 12-month annualized amount because we were able to put it into effect within the first year.

Michael Kupinski -- NOBLE Capital Markets -- Analyst

Perfect. Thanks for that color. And then as the company has obviously played in smaller markets and you just brilliantly executed, now that your reach is 25%, it may indicate that you need to move into the larger markets. And as you see the television industry consolidate, kind of have you changed your thoughts on where Gray plans to position itself in the industry? What is the limit in terms of the size of markets that you might consider? And is it important for the company to reach that 39% ownership cap? And how urgent is that in you achieving that target to get there?

Kevin Latek -- Chief Legal and Development Officer

So Michael, this is Kevin. We have not been buying small market stations because we like small market stations. We've been buying high-quality TV stations. Most of them happen to be in mid-sized and small markets because that's where the opportunity set has been. In the top 50 markets, there are less than five TV stations that are right number one or number two that are not already owned by a network or one of the larger owners like Hearst or Tegna. In the market 100 to 210, there are still a very large number -- or there's a sizable number of TV stations that are not owned by a network or one of the large group owners that meet our requirements to be a number one or strong number two. We have participated in every single TV option. I've been with the company for nine years now that involves a TV station, and that's the number one, number two test regardless of market size. We just simply were outbid with stations in larger markets like San Diego, like Las Vegas came in the market.

And while we certainly could have purchased those and we weren't afraid of the market size, it was rather our priority. We talked -- Hilton talked about our priorities of paying debt down and managing the balance sheet is more important than adding one more TV station. So while we certainly regret not being able to buy those great TV stations that were available, we needed to put our -- our emphasis is on the balance sheet first, and we purchase what we can afford. And if we can't, then we move on. It's not -- there is no must-have station. So I first want to correct the idea that we buy stations in midsize and small markets because that's what we like. No, that's where the opportunity set is at. As we look out, again, there are very few opportunities in large markets to own TV stations that meet our requirements. If they become available, we will participate. If there's an opportunity for us to buy more TV stations that meet our requirements, we absolutely are going to look at it.

We've said that many times. Nothing has changed it, and we're going to look at it in terms of what we can afford and what's in the best long-term interest of the company. So there is no magic market size. There is no magic cap or ceiling or core in which we look at these things. We look at number one and strong number two TV stations. I think we will get closer to the cap over the next couple of years if the UHF discount goes away and station groups come in the market that would allow us to get there. Those are two pretty important requirements. If no one's offered for sale, then it's going to be a long slog to get to 39%. And if some groups become available that we can strike a deal with and that makes sense for us, then we could be at the cap pretty quickly. But we just -- we can't control what comes in the market. So that's part of the gating issue. And then, of course, the other is UHF discount. If the discount goes away, some of our competitors for those stations would not be able to participate in those options or those sale processes.

So the UHF discount is here. Obviously, some of our broadcast peers can continue to consolidate. If discount goes away, there's a smaller number of folks that can compete for larger market stations. Did I answer your question?

Michael Kupinski -- NOBLE Capital Markets -- Analyst

Yes, you did. Thanks for the clarification. Appreciate that. That's all I have. Thank you.

Operator

Your next question comes from the line of Alan Gould of Loop Capital.

Alan Gould -- Loop Capital -- Analyst

Thanks for taking the question. I've got two, please. One, we see what's happening with the big Internet platform starting to pay for newspaper content. Do you think there's a possibility that they will also start paying for broadcast news content? And how much of your broadcast news content finds its way onto the large Internet platforms? And then the second question is with respect to the reverse comp. Based on your guidance for first quarter, it looks like it's up 20% year-over-year. That seems like more than just escalators. So I was wondering if I'm missing something in there. Thank you.

Kevin Latek -- Chief Legal and Development Officer

On reverse comp, we had a large step-up on reverse on January one this year and last year. Last year, we did not move the top number, the growth very much. And so we were -- our margin was higher, and our reverse comp was not as good last year as it has been in prior years. And that was, again, a function of renewing all of our network contracts in 2014 with five year terms. This year is going to be a better year. And I think you'll see -- coming in a particular margin, I think you'll see a better reverse -- a better retrans margin this year for that reason. We're in the process of renewing so many contracts that's going to drive the gross number up. Again, you got 15% this quarter on a year-over-year basis. That's going to continue through the year.

Pat LaPlatney -- President and Co- Chief Executive Officer

And on your first question...

Kevin Latek -- Chief Legal and Development Officer

We can go to Pat, yes.

Pat LaPlatney -- President and Co- Chief Executive Officer

Yes. Sure. So look, we don't -- we can't say whether our stations will benefit from the move to have the large platforms. Begin paying as they are in Australia. I think there is a chance of that happening. And I think, in general, supporting the originators of content, which, in many instances, are local TV stations, is a positive development. And so what will happen, not sure. We certainly hope it does, but I can't say at this point.

Alan Gould -- Loop Capital -- Analyst

Okay. Thanks for the answers.

Operator

At this time, there are no further questions. I will now return the call to Hilton Howell for any additional or closing comments.

Kevin Latek -- Chief Legal and Development Officer

Hilton, you may be on mute.

Operator

And it does appear that he has disconnected.

Kevin Latek -- Chief Legal and Development Officer

He has. And we just want to thank everybody for participating today, and enjoy the rest of your day. Thank you.

Operator

[Operator Closing Remarks]

Duration: 80 minutes

Call participants:

Hilton H. Howell -- Chairman and Chief Executive Officer

Kevin Latek -- Chief Legal and Development Officer

Pat LaPlatney -- President and Co- Chief Executive Officer

James Ryan -- Chief Financial Officer

Robert Smith -- Chief Operating Officer

Kyle Evans -- Stephens -- Analyst

John Janedis -- Wolfe Research -- Analyst

Aaron Watts -- Deutsche Bank -- Analyst

Steven Cahall -- Wells Fargo -- Analyst

Jim Goss -- Barrington Research -- Analyst

Michael Kupinski -- NOBLE Capital Markets -- Analyst

Alan Gould -- Loop Capital -- Analyst

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