Scripps Affiliate Fees Rise 69% in 2010

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A concerted effort to drive carriage fee increases helped push affiliate fees at Scripps Networks Interactive up by 69% in 2010, but company executives warned that despite multi-year deals, those increases will level off in 2011.

Scripps, the parent of HGTV, Food Network, The Cooking Channel, Great American Country and DIY, said that affiliate fees climbed 69% for the full year to $551 million from $326 million in 2009. For the quarter, affiliate fees rose 61% to $138 million from $85.7 million in the prior year.

Scripps signed several carriage agreements for its flagship Food and HGTV networks in 2010, signing multi-year deals with Time Warner Cable, AT&T U-Verse, Cablevision Systems and the National Cable Television Cooperative. While only one of those negotiations resulted in a service outage - Scripps went dark on Cablevision systems for three weeks in January 2010 - for the most part, the networks achieved their goal of extracting what they believed was fair value for their content.

While that resulted in a big spike in affiliate fees -- many of the original carriage deals for Food and HGTV were for 10 years or more at low rates -- Scripps cautioned that many of its new deals were front-loaded, meaning that increases will level off in subsequent years.

On a conference call with analysts to discuss fourth quarter results, Scripps chief financial officer Joe NeCastro said that affiliate fees will "moderate considerably" in 2011. He estimated affiliate fee growth this year to be in the mid-single digit percentages.

Affiliate fees weren't the only segment on the rise at Scripps. Advertising revenue at its Lifestyle Networks (Food, HGTV, Cooking, GAC and DIY) was up 22.8% in the quarter to $352 million and up nearly 28% to $1.3 billion for the full year.

Overall 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. At the individual networks, revenue rose 12.8% in the quarter and 11.2% for the year at HGTV; up 23.3% for the quarter and 30.7% for the year at Food.

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 between 6% and 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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