Scripps Homes In on Revenue10/31/2008 8:00 PM Eastern
Scripps Networks Interactive is still bucking downward trends in advertising, reporting strong growth in domestic ad sales despite the dismal economic climate.
SNI, in its first full quarter since the July split-off from E.W. Scripps Co., reported revenue growth of 8.9% in the quarter to $375 million and operating income was up 2.7% to $116.4 million.
|Operating Revenue (in $millions, except percentages)||3Q08||3Q07||Change|
|SOURCE: Company reports|
|Revenue||$2.1 billion||$2 billion||2%|
|OIBDA||$414 million||$487.3 million||(-15%)|
|Operating Income||$368.6 million||$444.2 million||(-17%)|
Net income for the period was flat at $57.3 million (35 cents per share), primarily because of costs associated with the spinoff.
At the Lifestyle Media segment — which includes cable networks HGTV, Food, DIY, Fine Living and Great American Country — overall revenue rose 7.8% to $312 million and profit was up 5.1% to $144 million.
DIY and Fine Living networks had the largest percentage increases, with operating revenue gains of 28.3% and 24%, respectively.
Bigger networks HGTV and Food Network also had strong quarters, with revenue growth of 5.1% and 8.8%, respectively.
Advertising revenue at the Lifestyle segment grew 5.4% to $236 million and affiliate-fee revenue rose 15.6% to $69.9 million.
SNI chairman and CEO Ken Lowe said the results reflect Scripps' strong performance in the face of a challenging economy. “The momentum we've created at our national lifestyle networks sustained our continued growth and it appears likely that it will carry us across the finish line for the full year, fulfilling the expectations we set 12 months ago,” he said in a statement.
SNI also restated previous guidance, estimating fourth-quarter revenue at the Lifestyle Media segment will rise in the mid-single-digit percent range compared to last year.
The strong advertising growth numbers bode well for other cable networks, scheduled to report third-quarter results in the coming weeks.
SNI stock was up $1.34 (5.2%) to $27.50 last Wednesday.
Scripps is in marked contrast to the predicament television broadcasters find themselves in.
Last Thursday, CBS reported a 3% increase in overall revenue, mainly from higher television license fees, driven largely by the syndication sale of CSI: New York, and higher home entertainment and affiliate revenue.
Ad revenue at CBS plunged 14% in the period, partly due to lower ratings because of the Beijing Olympics broadcasts on rival NBC.
Operating income before depreciation and amortization at the television segment declined 15% to $414 million in the period and operating income declined 17% to $368.6 million, amid a weak ad-sales environment.
Still, CBS stock was up about 8% (73 cents) to $9.45 each in early trading Oct. 30. Down more than 60% since the beginning of the year, CBS has been pressured by the overall economic recession and weakness in the advertising market. Last Thursday's rise was more likely due to CBS chairman Sumner Redstone's announcement that his National Amusements — which holds his shares in CBS and Viacom — had no intention of selling additional stock.
CBS and Viacom took hits the past few weeks after it was revealed that Redstone was forced to sell about $233 million worth of stock to cover loan covenants at NAI.
On a conference call with analysts last Thursday morning, Redstone said NAI was negotiating with lenders and that he has no plans to sell “a single share of Viacom and CBS.”
“This is not something that NAI wanted to do, and it's not something that NAI intends to do,” Redstone said on the call. “These were extraordinary circumstances that resulted in NAI having to take action that is clearly atypical.”
Redstone said negotiations with NAI's lenders are “extremely constructive” and he expects that a reasonable deal will be reached.
While Redstone appears to be climbing out of the woods regarding his loan problems, CBS continues to struggle with a weak ad market and a worsening economy. In a statement, the broadcaster said it expects OIBDA and operating income for the full year to decline in the mid-teen percentages compared to the previous year.
At Scripps, the outlook is far rosier. In the fourth quarter, it expects total revenue for the Lifestyle Media division to be up in the mid- to high-single digits on a percentage basis. In the third quarter, Scripps Networks flagship property Food Network enjoyed its highest prime-time ratings ever and DIY's primetime ratings reached all-time highs.
Scripps executive vice president John Lansing said HGTV was hit by the Olympics; by unfavorable timing — new episodes of last year's highest-rated program, Design Star, didn't air in the quarter as they were in the previous year — and the heavy news cycle fostered by the economic crisis. (HGTV viewers are generally heavy news watchers.) Still, HGTV network exceeded expectations with a 5.1% increase in revenue during the quarter.
Fourth-quarter results are likely to better reflect the company's ability to weather the economic downturn — which got serious in September — but executive vice president John Lansing believes Scripps has momentum that will continue. On a conference call with analysts last Wednesday, he said blended scatter market pricing in the fourth quarter is up by about 4% year over year.
“Our brands tend to be safe havens during difficult economic times for many advertisers,” Lansing said. “Today we're bucking the trend and we don't see why that wouldn't continue into the first quarter, although we don't have a lot of visibility at this point.”