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.Speaking to investors Monday morning, Lowe took time to talk up the successful transition from Fine Living to Cooking Channel, saying that the new service has seen deliveries among adults 25-54 grow “anywhere from 30 percent to 100 percent, depending on the day part.” Lowe added that clients had rallied around the Cooking Channel concept, saying the new brand “resonated with our advertisers from the day we started selling it.”Lowe noted that all 58 million Fine Living households have been converted to the Cooking Channel brand. The refreshed service bowed Memorial Day weekend.“The re-branding was a great opportunity in the upfront to bring in some significant new dollars,” Lowe said. “Our sales teams were successful in bringing nine advertisers in at $1 million or more for the new Cooking Channel, and that was only 30 days after its launch. And the volume growth on Cooking in the upfront over Fine Living is nearly 90 percent.”Meanwhile, Travel Channel has exceeded SNI’s early expectations, as svp, sales Greg Regis and his team added 30 new advertisers in the upfront, while increasing dollar volume 60 percent from the 2009-10 bazaar. Regis has also reduced the amount of direct-response business on the network. “When we took over selling Travel Channel, the direct-response represented upwards of 30 percent of the inventories sold,” said SNI president John Lansing. “For our big networks, that percentage tends to range between 5 percent and 8 percent. Our ad sales team has done a fantastic job replacing a great deal of that with spot business. And as a result, we’re seeing excellent growth on the ad side for Travel.”One of the only uncertain notes that registered during the SNI call came during the Q&A session, when Lowe was asked about Food Network star Paula Deen, whose contract with the network expired in May. “We can’t comment specifically on the Paula Deen negotiation,” Lowe said. “It’s still an open question, in fact.” While Lowe opted against making any predictions about Deen’s return, he was quick to note that the channel has always been particularly adept at finding and developing home-grown stars. “Our strategy is to continue to make Food Network a great place to develop talent and a great place for successful talent to want to stay for as long as it’s good for both parties.”

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Scripps Nets Cooks Up Tasty Q2

Anthony Crupi

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Anthony Crupi