Scripps' Split Solution

[Teddyo]

In the continuing media companies saga of trying to fit into the 21st Century, E.W. Scripps announced last week they were splitting off their successful lifestyle cable tv networks (HGTV, Food, etc.) and internet-based shopping business from their newspaper and broadcast tv businesses. This is different than the approach Belo took earlier which separated their newspaper assets from their tv stations.

I posted a message some time ago that Scripps has been searching for a way, under intense pressure from the investment community, to dump its newspapers and local tv stations and concentrate on its higher-growth cable and Web businesses. Problem is, there are no buyers out there for most of the assets. The newspaper business is completely in the dumpster, and broadcast tv isn't exactly booming.

So, Scripps is forming a new separate company, Scripps Networks Interactive, to house the cable and Web businesses (aka "the future") and the old E.W. Scripps company will house the 17 newspapers, 10 tv stations (including KNXV, ABC15), and syndicator United Media (aka, "the media dinosaur graveyard").

In case you're wondering which of the two firms that Scripps management thinks has the rosier future (Duh!), CEO Ken Lowe has announced that he'll take control of the new Networks Interactive and some poor lesser suit, who got the short straw, will head up the old media unit.

So where does this put local Scripps tv stations like KNXV, that are already barely holding their heads above water (and maybe even aren't)? Well, they're now hanging out there on their own. Oh wait -- I forgot, that's Belo! In the Scripps' tv station scenario, they have to also prop up their 17 loser newspaper partners, which is probably the worst business in the world to be in right now.

Hey, have fun!

 

[DrAkbar]

Being a publisher aint exactly where it's at in the age of Al Gore's Internet. In the case of Scripps, it was family members who dragged their feet on splitting the company into old tech and new tech companies. This solution allows them to receive their hefty dividends (family owns the A shares, and slobs like me and the Nurse have B shares) while getting shares in the new company as a future hedge. Smart move, even though it took too long to make. As far as ABC15 goes, the ratings may be crappy but it is a cash cow. Moooooo!

 

[Teddyo]

This horse (or cow ) probably ain't worth beatin' anymore, but Scripps just released their financial results for 3rd Q and estimates for 4th Q. I think they illustrate nicely the issue for the "old" media companies' pressing need to morph into the high-growth, "new" and improved model.

I suspect this is typical for some similar companies but Scripps reports for 3rd Q :

Lifestyle Cable Networks -- revenue up 16%, profit up 18% (group accounted for about 1/2 of all company's revenue)
Broadcast TV stations -- revenue down 10%, profit down 42%
Newspapers -- revenue down 6%, profit down 7%

4th Q Scripps estimates:

Cable Networks -- revenue up 10-12%
Broadcast TV -- revenue down 15-20%
Newspapers -- revenue down 6%

 

[double07]

But you've got to also remember... 2006 was an election year... profits were higher because of political ads.

Of course, you're going to see a major drop off this year.

But while the industry IS shrinking, you can bet 2008 returns will be a lot higher.

It's an back and forth game.

 

[DrAkbar]

True, double Oh....nothing like a crappy quarter to make you look like a hero the next. Provided you get to hang around that long! ;D ;D