Scripps: Fair Value for Channels a Priority

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Affiliate-fee increases could level off at
Scripps Networks Interactive this year, but CEO Ken Lowe
said at an industry conference last week that extracting fair
value for its cable channels will continue to be a top priority.

SNI, which had a high-profi le carriage battle with Cablevision
Systems in January of 2010 — which resulted in
its HGTV and Food Network
going dark on the New
York-area MSO for three
weeks — said affiliate-fee
growth won’t be as robust
in 2011 as it was in 2010.

At the Citigroup Entertainment,
Media &
Telecommunications conference
in Scottsdale, Ariz.,
last Wednesday, Lowe said
that was mainly because the
bulk of the programmer’s
fee increases came in the
first year of its agreements.
That should impact the percentage
growth this year.

“Affiliate-revenue growth in 2011 will moderate considerably
from where we were in 2010,” said Lowe. “Affiliate-fee
growth will still be meaningful, just not at the outsized rate
we saw in the year just completed.”


According to some analysts, Scripps likely raised its rates for
the combined Food and HGTV from about 25 cents per month
per subscriber to as much as 50 cents over the multiyear life of
the deal. According to SNL Kagan, HGTV will receive an average
rate of 17 cents per subscriber per month and Food an
average of 15 cents per subscriber per month in 2011.

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.

SNL Kagan estimates
that Travel Channel will
receive about 9 cents per
subscriber per month in

Lowe added that he
still believes HGTV and
Food are undervalued
and said attracting fair
value for ithe company’s
networks is a top priority.

Growing rates “won’t
be a cake walk,” he said, adding that over the long term, quality
programming wins out.


At Discovery Communications, chief financial officer Brad
Singer declined to talk specifically about affiliate fees, but
hinted that obtaining appropriate value for its content is at
the top of the list.

Recently, Discovery has squeezed more value out of fledgling
channels like Discovery Health and Discovery Kids by
forming partnerships to rebrand the channels. The process
started last
year with
which was
as The Hub
through a
joint venture
On Jan. 1,
the latest JV — OWN: The Oprah Winfrey Network — was
launched with more than 1 million viewers tuning in on the
first day, roughly five times the audience of Discovery Health.

OWN should turn a profit this year, but investors shouldn’t
think that similar partnerships with its other existing networks
will be the norm going forward, Singer said.

“Our goal is to enhance value,” Singer said. “With OWN and
Hasbro and The Hub, each partner brought something to enhance
the value of those networks. But that is not a path we
traditionally pursue.”

In a research report last week, Miller Tabak media analyst
David Joyce estimated that OWN was receiving fees of about
10 cents per subscriber per month initially. Other reports have
the network attracting as much as 20 cents in later years