Road Trip: Discovery's Travel Soars In Value


Less than a year after grabbing a controlling stake in the Travel Channel, a Wall Street analyst indicated the value of Scripps Networks' investment should soar over the next two years. When the company took a 65% position in November, the network was valued at $975 million. By 2012, the figure should be $1.5 billion-plus, according to Barclays Capital's Anthony DiClemente.

"Exceeding initial expectations" ... "we believe [Travel] will continue to drive industry-leading growth" at Scripps, DiClemente wrote in a Friday report. Ad sales have benefited from existing relationships that Scripps has with marketers via the Food Network and HGTV, while those networks have helped promote Travel.

While Travel recently extended a deal with star Anthony Bourdain, Barclays suggested that programming costs are low, helping the network significantly drive Scripps' earnings growth over the next two years.



With Discovery Communications unable to make a bid due to tax issues, the opportunity to acquire a controlling stake -- it bought 65% from Cox Communications -- seemed a couldn't-miss for Scripps. No fully distributed cable channels are likely to ever be launched again, while the network dovetailed with Scripps' emphasis on "lifestyle" programming.

In addition to ad sales, DiClemente said Travel is earning affiliate fees of about 8 cents a subscriber a month now, offering an opportunity for revenue growth of perhaps $23 million-plus in 2012 -- and much more after via renegotiations scheduled for 2012.

In ad sales, Scripps has made efforts to eliminate such a strong reliance on direct-response advertisers, which had accounted for about 30% of inventory.

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