The E.W. Scripps Co. is going to kick home shopping up a notch. Scripps ponied up $49.5 million last week for a 70% stake in the shopping channel Shop at Home Television.
Scripps, which owns 10 broadcast stations and the HGTV, Food Network, DIY and Fine Living cable networks, also is floating Shop at Home a $47.5 million loan (to be repaid within three years) to pay down existing debt.
The shopping channel tallied $142 million in sales for the first nine months (ended March 31) of fiscal year 2002.
Since Scripps launched its first cable net, HGTV, eight years ago, "we've envisioned building some type of commerce-based biz around lifestyle, our programming base," said President and CEO Kenneth W. Lowe. "This gets Scripps in the game with very little financial risk."
The deal gives Scripps control of Shop at Home's TV network but not its five broadcast stations (though Lowe said they were offered). Shop at Home Inc. stations in San Francisco; Boston; Cleveland; Bridgeport, Conn.; and Raleigh-Durham, N.C., account for 4 million to 5 million of its 42 million full-time homes. Under the new structure, Scripps will pay them an affiliate fee of $1.25 per sub.
"We're very confident we can get distribution the good old-fashioned way," via MSOs, he said.
Scripps can buy out the remaining 30% from Shop at Home within five years. The channel's management would stay on to run it.
"The similarities and the synergies, from carriage to merchandise to a cleaner balance sheet, all are positive," said Memphis, Tenn.-based Morgan Keegan analyst John R. Lawrence.
Scripps execs envision multiple synergies between their cable nets and new retail arm. Its niche lifestyle nets have eschewed product placements, but the Shop at Home relationship may give advertisers new opportunities to hawk their wares on different platforms. HGTV and Food Network consumer products could be sold on Shop at Home, and their talent could pitch their products there.