Scripps said it would pay $184 million for 45 million shares in Summit America, a publicly traded company that previously owned all of Shop at Home Network. Scripps purchased 70 percent of Shop at Home from Summit America in October 2002. The deal is contingent on approval by Summit America's shareholders, the Federal Communications Commission and the Securities and Exchange Commission.
Scripps' move is part of a larger shift in the television retailing sector, which has seen entrepreneurial vision, investment by big media players and a change in ownership in several networks in the past few years. ValueVision was purchased by NBC and renamed ShopNBC a few years ago. Earlier this year, Comcast Corp. said it would sell its majority stake in QVC under the terms of a deal with Liberty Media Corp., which owns 42 percent of the shopping channel. Comcast's stake amounts to 58 percent of QVC, which it will sell to Liberty Media for $7.9 billion.
At the same time, Scripps has become more and more enthusiastic about owning a retailing channel. Kenneth Lowe, president and chief executive officer of E.W. Scripps, said owning one has been part of Scripps' strategy since "day one." In addition to Food and HGTV, Scripps owns emerging networks like DIY and Fine Living. Lowe said Scripps had looked for a long time for a retailing channel and Shop at Home fit the bill.
In the past year, Scripps has been building connections between Shop at Home and its other properties, namely selling products for the existing channels and featuring personalities from them on Shop at Home.
"This is the next stage of evolution in creating more brand value, particularly Home and Garden and Food Network," Lowe said.
Almost as important as owning the entire network, the deal announced Friday includes the five broadcast stations in San Francisco, Boston, Cleveland, Raleigh/Durham, N.C., and Bridgeport, Conn. Scripps said the TV stations reach about 5.3 million cable TV households and it's among the most productive portions of the Shop at Home Network's audiences.
"These are some of Shop at Home's most productive households," said Lowe. "We're bringing these subs in [to Shop at Home] because it's the smart thing to do."
Scripps executives said the deal was done now, compared to a year ago when it first bought the stake in ownership from Summit America, because the pricing for broadcast television stations had come down from highs in anticipation of changes in FCC ownership regulations that never occurred.
The deal was at an opportune time, said Richard Boehne, executive vice president. They considered the purchase of the stations as an easier way to guarantee carriage on cable TV households.
"There's always the risk that Summit would have sold these stations and we would have had to replace the carriage," Boehne said. "That would have been viewed as a job that we would really not want to take on, but we wouldn't have feared it. This is an opportunistic buy."
Scripps also didn't rule out buying more stations, particularly in markets judged good for TV retailing.
"This was not carriage that we wanted to lose. We wanted to nail it down, and build on that foundation," said Lowe.