Scripps Expects Softer Q4

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Scripps Networks Interactive executives told an audience at an industry conference Wednesday that ratings softness will likely impact its fourth quarter results, adding that affiliate fee growth, sparked by new deals reached in the past year, will moderate in 2011.
Scripps Networks CEO Ken Lowe, speaking at the Citigroup Entertainment, Media & Telecommunications conference in Scottsdale, Ariz., said that weaker than expected ratings in the fourth quarter could put a damper on performance compared to its third quarter gains.
"While ad revenue growth will be comfortably positive in the fourth quarter, the rate of growth will not rise to the 19% level which we achieved in Q3, which led the industry as you know," Lowe said, adding that looking ahead, both the upfront and scatter market are strong.
The CEO added that while affiliate fees rose sharply last year, he said that some deals - particularly new agreements for the Food Network - had the bulk of their increases in the first year of the agreement.
"Affiliate revenue growth in 2011 will moderate considerably from where we were in 2010. Affiliate fee growth will still be meaningful, just not at the outsized rate we saw in the year just completed," Lowe said.
Scripps was an aggressive negotiator last year - it quickly reached a deal with Time Warner Cable last January but had a more drawn out negotiation with Cablevision Systems -- a stance that resulted in strong fee increases for the networks. Lowe said at the conference that Food Network has one big carriage deal set to expire at the end of 2011 with an unnamed distributor that accounts for about 25% of its total carriage. The majority of agreements for the Travel Channel, which Scripps purchased in 2009, don't roll off until 2012, Lowe said.
He added that attracting fair value for its networks is a top priority.
"The affiliate fees at our flagship networks HGTV and Food Network are truly in our opinion undervalued a bit." Lowe said, adding that he was "very, very pleased" with the recent fee resets at Food and HGTV.
Lowe said that growing rates "won't be a cake walk," but added that in the long-term, quality programming wins out.
Lowe added that SNI's newest channel - the Cooking Channel, formerly Fine Living - has enjoyed success over the year. He said the network is attracting advertising rates that are 75% to 80% that of Food Network. Available in about 58 million homes, Lowe said that Cooking Channel is attracting ratings that are 30% to 100% above its predecessor.
SNI stock was down 80 cents each (1.6%) in afternoon trading Wednesday to $50.94 per share.

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