• by Paul Gough , January 23, 2004

E.W. Scripps' revenues from cable channels HGTV and Food Network propelled the company in the fourth quarter, outpacing results from its newspaper and broadcast TV units.

Scripps posted revenues of $514.3 million in the quarter ended Dec. 31, up 13 percent from $456.3 million in the fourth quarter of 2002. Scripps Networks--which includes HGTV and Food Network along with digital channels DIY and Fine Living--saw revenues rise 31 percent to $155 million and profits up 59 percent to $66.4 million. Ad revenues and affiliate fees tallied healthy increases; ad revenues jumped 31 percent to $128 million and affiliate fees rose 24 percent to $23.9 million, which included first-time payments some cable operators made for the Food Network.

Pricing for scatter inventory is up 8 percent to 9 percent over the upfront, which a Scripps executive noted Thursday morning is higher than the industry-wide average of about 3 percent to 4 percent. That's on top of increases in pricing between 13 percent and 14 percent in this year's past upfront.

And it isn't expected to stop, at least for the time being. Scripps told Wall Street on Thursday that it predicts advertising revenues will surge 30 percent in the current quarter, which ends March 31.

"Our pacing is strong and our forecasts for advertising revenue are quite bullish," said Frank Gardner, senior vice president of E.W. Scripps and chairman of Scripps Networks.

At the newspaper division, profits increased, but not as substantially as at the cable networks. Advertising revenues rose 1.8 percent to $144.3 million, and profits were up 2.3 percent to $77 million. But it was a mixed bag in ad categories, with the largest (classified) up slightly and the second largest (local) down slightly. Classified advertising rose 2.2 percent to $50.4 million in the quarter, and local fell 3.8 percent to $46.4 million. National advertising was strong, up 10 percent to $11.9 million. Preprint advertising rose 6.6 percent to $36.6 million.

"We had tough comparisons in the fourth quarter," said Alan Horton, senior vice president/newspapers. "We had, relatively speaking, a strong quarter the year before." Kenneth Lowe, chairman and chief executive officer of E.W. Scripps, said that weakness in local retail and help wanted persisted in the quarter.

A few weeks ago, Gannett told Scripps that it would not extend their joint operating agreement over the Cincinnati Enquirer and Cincinnati Post/Kentucky Post beyond its expiration date of 2007. It threw the fate of Scripps' Post into question following the end of the agreement, which provides for common back-office operations between the two newspapers even though editorial staffs and identities remain separate.

Scripps said that the Post--and an edition for nearby Kentucky-would continue to publish until Dec. 31, 2007, but declined to say what would happen afterward.

"That gives us four full years to explore the future of our Cincinnati newspaper, past the JOA expiration date," Lowe said. However, Scripps took a $1.7 million restructuring charge to pay for what it said were estimated severance costs to unionized editorial employees at the Post, four years from now.

Scripps' broadcast TV stations took a deep hit as expected during the fourth quarter, victim of comparisons to the fourth quarter of 2002, which booked $24 million in political advertising. Revenues dropped 9.1 percent to $82.9 million, and profits fell 28 percent to $26.4 million.

Lowe said the broadcast TV stations did a good job in 2003 compensating for the millions they didn't receive in political advertising, but it wasn't enough to make up for it all. Full-year revenues were just about even with 2002, however. And Scripps--with TV stations in Florida, Ohio, and Michigan--expects to cash in during the primaries and in the general presidential election in November, as all three are expected to be battleground states between the Democrats and the Republicans.