Scripps Networks' Profits Rise in Fourth Quarter
Strong affiliate, advertising revenue boosted growth
By Jon Lafayette -- Broadcasting & Cable, 2/10/2011 8:59:36 AM
Net income was $131 million, or 77 cents per share, in the fourth quarter, compared with $94.4 million, or 57 cents per share, a year ago. Revenues rose 33% to $573 million. The company said that excluding the 2009 acquisition of Travel Channel revenues were up 20%.
"The power of our lifestyle television networks and related content businesses is evident in the company's superior operating results," said Kenneth W. Lowe, chairman, president and CEO for Scripps Networks Interactive, in a statement.
"Food Network and HGTV are consistent fan favorites and valuable marketing platforms for an ever-expanding list of prestigious advertisers." Lowe said. "And at Travel Channel, just a year now under our direction, we're attracting a bigger and younger audience than ever before. Looking ahead, we'll be unveiling a wealth of exciting new programming ideas and concepts across all of our networks that we believe will further define and secure our competitive advantage as leader in lifestyle programming."
Lowe added that improved performance in the company's online comparison-shopping businesses also contributed to fourth quarter growth. At the company's Lifestyle Media segment, comprised of its cable channels and affiliated Web sites, profits were up 48% to $248 million.
Profit margins rose to 49% from 44% a year ago. Revenues rose 32% to $501 million. Affiliate fee revenue rose 61% to $138 million thanks to new, front loaded deals that provided especially large increases for Food Network. Advertising revenues rose 23% to $138 million. Excluding Travel Channel, affiliate revenue rose 39%, while ad revenues were up 10%, a smaller increase than in recent quarters.
The company had said that because of weaker ratings at its big networks, it had to provide make-goods, giving it less inventory to sell.
But Scripps Network President John Lansing said that " the good news is that going into the first quarter, we are seeing Food Network and HGTV now hitting their estimates. I have very little concern now that there will be any liability to speak of."
Scripps' networks have invested in new programming and HGTV, Food Network and Travel Channel will be rolling out new shows over the next three quarters. Travel Channel alone has 20 new series set to debut in 2011, including Man-cations and Dare You To Go There.
The company is expecting ad sales growth to accelerated in the first quarter. CFO Joe Nicastro said that first quarter scatter pricing continues to be strong, up mid-to-high teens over 2010 and up mid 20s over the most recent upfront.
He added that sales were strong in the calendar upfront market, in which marketer buy ad time on a January to December basis.
The acquisition of Travel Channel resulted in $2.3 million in costs related to integrating the channel in Scripps and an $8.6 million write down of programming that had been in development at the time of the acquisition.
Scripps said it expected total revenue to be up 10% to 12% in 2011, with affiliate revenue up by single digits and ad revenues up double digits. Revenue at HGTV was up 13% to $176 million.
Revenue at Food Network was up 23% to $178 million. Revenue at Travel Channel was up 5.4% to $68.1 million. DIY Network revenue was up 23% to 22.8 million. Revenue at Cooking Channel was up 28% to $15.7 million. Revenue at Great American Country rose 1.9% to $7.7 million.
Scripps Networks said that when its Fine Living Network was converted into the Cooking Channel, it became part of the Food Network Partnership with Tribune Co. Because Tribune did not make a contribution to the partnership, its interest in the partnership was diluted from 31% to 25%. Scripps said it expects Tribune to make a cash contribution to the partnership at some point in the future.
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