Scripps’ Hardball Tactics Pay Off

2/14/2011 12:01 AM Eastern

Scripps Networks Interactive
showed last week that an aggressive stance on
affiliate fees can pay off , reporting a 69% hike
in affiliate-fee revenue in 2010, including a
61% increase in the fourth quarter.

Scripps embarked on a mission to extract
more value for its networks — which include
HGTV, Food Network, the Cooking Channel
and Great American
Country — last year, after
about a decade of low

That translated into at
least one nasty carriage
battle — HGTV and Food
went dark for three weeks
to Cablevision Systems
customers in January and
dropped off AT&T U-Verse
for a weekend in November — and less-contentious
negotiations with others, including
Time Warner Cable and the National Cable
Television Cooperative.


Scripps’s aggressive stance paid off : For the
full year, affiliate fees soared to $551 million,
from $326 million in 2009.

In the fourth quarter, those fees rose to $138
million from $85.7 million in the prior year.

That level of growth will be short-lived,
Scripps executives

SNI chief financial
officer Joe NeCastro
said in a Feb. 11 call
with analysts that affiliate-fee growth will
“moderate considerably”
in 2011, as many
contracts were front-loaded.

He estimated that affiliate fees will rise in the
mid-single digit percentages in 2011.

Discovery Communications, similarly, could
be looking to increase rates in the coming
years. Like Scripps, which rebranded its Fine
Living Network as the Cooking Channel last
year, Discovery rebranded two of its channels
— Discovery Kids became The Hub in October
and Discovery Health morphed into OWN: The
Oprah Winfrey Network in January — and has
kept fee increases moderate over the past several

Discovery’s domestic affiliate fees rose 7% in
2010, and though it doesn’t start the renewal
process until 2012, 2013 and 2014, CEO David
Zaslav is optimistic the rebranded channels,
improvements in existing channels and expanding
deals to include
“authenticated” offerings
like TV Everywhere
could translate into more
robust rates.

“If we improve these
channels, our hand gets
better,” Zaslav said on a
call with analysts. “For
the near term, it’s really
how the industry grows.
We’re rooting for the distributors.”

Discovery’s main growth engine continues
to be advertising. Ad sales rose 13% in the quarter
and for the full year, coming off a year (2009)
when the company led the industry in ad-sales
growth. Chief financial officer Brad Singer said
Discovery expects 2011 to outpace 2010.


At Scripps, ad sales for the lifestyle networks
(Food, HGTV, Cooking, GAC and
DIY) were up 22.8% in the quarter and
nearly 28% for the full

Overall for SNI, revenue
rose 33% in the
quarter, to $573 million,
and net income
was up 39%, to $131
million from $94.4
million in the prior year.

Scripps said it expected the advertising
market to be strong in 2011; it projected that
its total revenue would grow 10% to 12% for
the year.

Programming expenses are expected to
rise 6% to 9% for the year, primarily because
the programmer has an aggressive slate of
new shows expected to launch in the second
half of this year.


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