Scripps Forecasts Revenue Jump For Its Networks

Scripps Networks executives are confident that even if the upfront yields low increases in CPMs (if at all), volume will increase for their networks. Scripps Co. CFO Joseph NeCastro said Monday that the network group led by HGTV and Food will receive a 10 to 14 percent jump in ad revenue in the fourth quarter--the first time period sold in the ongoing upfront.

NeCastro said stronger ratings at the two networks--HGTV was up 33 percent in prime time among its target 25-to-54 demo last season--would lead to the revenue jump. He also said that even though it's difficult to forecast the upfront, which is still in its early stages, Scripps will be able to garner CPM jumps. That would be a heady accomplishment, with many networks struggling to keep their pricing at flat levels.

"I am confident we will be near or at the top of the marketplace as we were last year," he said. A year ago, Scripps pulled in CPM increases of 4 to 5 percent, with volume up 15 to 18 percent, he said.

NeCastro made his comments on a conference call with analysts to announce the Scripps Co.'s second-quarter results.

The networks posted a strong quarter, despite some analysts' recent assertions that cable pricing weakened in the first half of the year. They posted a 15 percent ad revenue jump to $233 million. And profits rose 22 percent to $150 million.

Credit Suisse analyst William Drewry wrote Monday that even if CPMs show sluggish growth in the upfront, Scripps should be able to essentially trade lower pricing for volume increases. "We think as the market shifts from price to volume, the more mature networks, Food and HGTV, should be able to sustain strong growth rates ... According to our proprietary contacts, advertisers are not reducing allocations to cable networks," he said, "and we therefore think the lack of pricing will be compensated for in volume."

In addition to HGTV and Food, Scripps operates the DIY Network, Fine Living and Great American Country outlets.

"It's all about targeting clearly defined lifestyle categories ... and creating dynamic marketplaces that efficiently match advertisers with engaged media consumers," said Ken Lowe, corporate president-CEO.

The company expects DIY and Fine Living to each be in 40 million homes by early next year. DIY will become a Nielsen-rated network in the fourth quarter and is being sold as one for the first time in the upfront. Fine Living is expected to become Nielsen-rated some time over the next year.

While Scripps' cable networks grew significantly, its local television stations posted a less robust quarter, with revenue up only 3.9 percent (to $86.4 million)--even in a political and Olympic year (the company has three NBC stations). Profit fell 2.5 percent to $26.4 million. The company operates 10 stations.

The local television industry is struggling in general as consumers increasingly turn to the Web for news, its revenue bread and butter.

Still, Lowe said revenues are expected to pick up as politicians loosen the purse strings in battleground states in the third quarter. "Our stations in Florida, Ohio and Michigan are in excellent positions to fully capitalize on the return of political advertising in the weeks ahead," he said.

The company projects that revenue will increase 10 to 14 percent in the third quarter for its local stations.

In response to questions about whether Scripps would look to sell some of its stations--as other station groups have done recently to dump slower-growth assets--executives said there were no plans to do so, in part because the stations help drive affiliate fees for the cable networks through retransmission consent.

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