UNLIKE PEERS, SCRIPPS SEES STOCK RISE

By: Lucia Moses

Company Benefits From Cable Network Division


The E.W. Scripps Co. must be doing something right. In contrast
with most of its peers in the newspaper industry, Scripps’ stock
price has steadily climbed more than 32% in the past year.

What does Scripps have that many of its newspaper peers don’t?
The answer is Scripps Networks, its fast-growing cable network
division.

Conceived by now-CEO Kenneth W. Lowe in the early 1990s, the
division has grown to represent 18.3% of the company, with more
than 127 million cable subscribers having access to its three
networks: Food Network, created in 1993 and purchased by Scripps
in 1997; Home & Garden Television, established in 1994; and Do It
Yourself, founded in 1999. Revenue at Scripps Networks advanced
36.4% to $314 million last year. This year, the company expects
to grow revenue 25% to 30% as it rolls out its fourth network,
Fine Living, which is aimed at upscale viewers.

Scripps’ newspapers aren’t doing badly, either. Despite the
softening economy, ad revenue rose 6% in the fourth quarter,
higher than at many other newspaper companies.

With the new joint operating agreement between Scripps’ Rocky
Mountain News and MediaNews Group Inc.’s The Denver
Post winning the approval of the U.S. Justice Department
early last month, Scripps’ newspaper division, which supplies
more than 55% of the company’s revenue, could significantly boost
its profits this year. Once the most ferocious newspaper war in
the United States, the battle with MediaNews Group in Colorado
has long been a drain on Scripps’ earnings, costing $9.6 million
in operating-cash-flow losses last year alone.

By combining business operations of the Rocky Mountain
News with The Denver Post, Scripps expects to stem
those losses this year. After a period of heavy discounting,
Scripps could raise ad rates at the Rocky Mountain News,
unleashing easy new revenue.

Elsewhere in the newspaper division – parent of The
Albuquerque (N.M.) Tribune, the Birmingham
(Ala.) Post-Herald, The Cincinnati Post, The Commercial
Appeal in Memphis, Tenn., the Corpus Christi (Texas)
Caller-Times, the Daily Camera in Boulder, Colo.,
among other dailies – the company is starting new sales
initiatives aimed at increasing retail ad revenue.

The outlook is more bleak for Scripps’ TV stations because
they’ll miss last year’s political and Olympics-related
advertising. Scripps’ success with its cable networks has made it
a darling of Wall Street, but that wasn’t always the case,
recalls Lowe’s predecessor, retired CEO William Burleigh. In the
early days, Scripps used the steady cash flow from its newspapers
and TV stations to build the networks, and some analysts doubted
the wisdom of the strategy.

Burleigh says his then-investor-relations contact, Richard A.
Boehne, now an executive vice president, helped convince analysts
that Scripps wasn’t throwing money down a rabbit hole. The
lesson, according to Burleigh: “You need a very good IR person
who understands all sides and is available all the time.”

Now that Scripps has won over investors, keeping the momentum may
be easier. Having built the infrastructure for the networks,
sustaining that growth will be relatively inexpensive, says
Merrill Lynch analyst Lauren Rich Fine.



Lucia Moses (lmoses@editorandpublisher.com) is an associate editor covering business for E&P.



Copyright 2001, Editor & Publisher.

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