Scripps Nets Cooks Up Tasty Q2


Scripps Networks Interactive enjoyed a stellar second quarter, as an improving advertising sales marketplace and steady gains in affiliate revenue helped boost profit by 34 percent versus the year-ago period.

Home to the cable properties Food Network, HGTV, Travel Channel and others, SNI notched $106 million, or 63 cents per share, in Q2 net income, up from $79.5 million, or 48 cents per share, in the second quarter of 2009. Excluding a tax benefit related to discontinued operations and $8.6 million in costs associated with integrating its Travel Channel acquisition, earnings per share would have been 59 cents.

Total revenue from the company’s Lifestyle Media segment was $475 million, up 36 percent from the year-ago period. Excluding Travel Channel, in which the company acquired a controlling interest on Dec. 15, 2009, the unit boosted its overall revenue 18 percent to $413 million.

Ad sales revenue soared 27 percent to $331 million, as Food, HGTV and Travel reaped the benefits of a robust scatter market. Affiliate revenue leapt 73 percent to $139 million.

Excluding Travel Channel, ad sales dollars were up 13 percent, while carriage fees increased 42 percent.

“The strength of the current scatter marketplace drove ad sales higher during the quarter and contributed to the decisive success that we had in this year’s upfront,” said SNI chairman and CEO Ken Lowe during the company’s earnings call. “We finished the upfront at or near the top of cable and pricing, and we grew total volume sold well beyond last year’s level.”

Lowe told investors that the strong upfront is a sign of good things to come in the coming year “provided the economy holds.” Operating revenue at HGTV was up 6.2 percent to $174 million, while Food Net boosted its haul by 35 percent to $173 million. Travel Channel increased its operating revenue 13 percent to $61 million.

SNI chief operating officer Joe NeCastro offered some more insight into the health of the ad sales market, noting that current scatter-versus-scatter pricing “continues to be up in the mid- to high teens over 2009, and scatter versus the upfront is up as much as 25 percent to 30 percent.” Food, CPG and retail have been particularly active in the last several weeks.

“As far as we can determine, once all is said and done, we came out of the upfront at or near the top of our competitive set once again,” NeCastro said, adding that the strength in Q2 scatter translated to “solid growth in CPMs,” which in turn led to a 30 percent increase in upfront dollar volume versus the 2009-10 bazaar. By comparison, the cable industry as a whole saw upfront volume increase 18 percent.

The only outlier in the ad sales space is digital, which grew a mere 3 percent in Q2, as the housing downturn continued to take a bite out of the company’s home-related online properties. “The good news is we’ve seen a marked improvement in digital ad sales during the past six weeks,” NeCastro said.

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