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Executives

Carolyn Pione Micheli - Vice President of Corporate Communications and Investor Relations

Timothy M. Wesolowski - Chief Financial Officer, Senior Vice President and Treasurer

Richard A. Boehne - Chairman, Chief Executive Officer, President and Member of Executive Committee

Timothy E. Stautberg - Senior Vice President of Newspaper Division

Brian G. Lawlor - Senior Vice President of Television

Adam Symson - Chief Digital Officer and Senior Vice President

Analysts

Craig Huber

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

Barry L. Lucas - Gabelli & Company, Inc.

Westcott Rochette - S&P Capital IQ Equity Research

Michael Kass

The E. W. Scripps (SSP) Q2 2013 Earnings Call August 5, 2013 9:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the second quarter earnings call. [Operator Instructions] As a reminder, today's conference is being recorded. And I would now like to turn the conference over to your host, Ms. Carolyn Micheli, Vice President of Corporate Communications and Investor Relations. Please go ahead.

Carolyn Pione Micheli

Thank you, Rochelle. Good morning, everyone, and thank you for joining us for this recap of The E.W. Scripps Company's Second Quarter Results.

We're going to start this morning with Scripps' CFO and Treasurer, Tim Wesolowski; then Rich Boehne, our Chairman, President and CEO, will provide additional details about the quarter. Then we'll open up the lines for your questions.

Also in the room are Tim Stautberg, who runs the Newspaper division; Brian Lawlor, Head of the TV division; Adam Symson who's our Chief Digital Officer; and Doug Lyons, our Corporate Controller.

The commentary you'll hear from our executives this morning may contain certain forward-looking statements. Actual results for future periods may differ from those predicted. You can read more about some of the factors that may cause results to differ from what you're about to hear by referring to the Form 10-K and other regulatory filings.

You can visit scripps.com for more information, such as today's release and financial tables. You also can sign up to receive e-mails anytime we disclose financial information, and you can listen to an audio replay of this call. The link to the replay will be up there this afternoon and will be available for a week.

Now, here is Tim Wesolowski with a summary of the second quarter.

Timothy M. Wesolowski

Good morning. The second quarter unfolded pretty much as we expected. We increased television advertising revenues in the local and national categories, nearly finished the rollout of our subscription bundles in our newspaper markets and continued hiring aggressively in our digital sales group. Of course, our reported results in the TV group were impacted by the lack of political advertising versus the prior year, but we did see some nice growth in a couple of categories. We also benefited from strong management of expenses and had continued success with our TV programming strategy.

I'll hit on each of these factors as we go through our results.

Let's begin with the consolidated results. Revenues for the second quarter declined 4% from second quarter 2012 to $208 million. Essentially, all that decline, about $10 million, was due to the absence of political advertising in the TV division following our record performance in 2012. Our core television ad growth of 2.1% appears to compare pretty well with a broader TV marketplace.

Our costs and expenses for segments, corporate and shared services, were $184 million despite our aggressive investments to build out our digital products and revenue streams. That's about a 1% decline over last year. If you take out the incremental expense to invest in our digital operations, costs and expenses declined at nearly 3%.

The company reported a pretax income of $3.9 million in the second quarter. Net income for the quarter was $3.2 million or $0.05 per share, compared to $5.4 million or $0.09 per share in the second quarter of 2012.

Turning now to the broadcast division. Our revenues, excluding political, were up 4.5%. Core local and national advertising revenues were up 2.1%. And as you saw in the release, total revenue on a reported basis from our TV stations was $111 million, down $5.7 million from the second quarter of 2012. We saw gains in retransmission fees and local and national advertising, but they were not enough to offset the expected declines in political. Last year, we booked $11 million of political and we had about $1 million this year.

The automotive sector was strong as was our communications category, but we saw some medical and insurance advertisers sitting on the sidelines, perhaps waiting to see the details of the Affordable Care Act get worked out this fall.

Overall, we were pleased with steady growth in national advertising, up 3.3% for the quarter, and local up 1.5%.

And just to dive a little deeper there, auto was up 8%, making it our largest category for the first time since 2008.

Our food stores category was up 10% and the communication category was up about 80% due to some heavy competition among some of the cable companies.

Digital revenue for the TV division rose 14% to just over $4 million.

Another bright spot in TV revenues is retransmission. Revenue grew by about a 1/3, and we expect to see double-digit growth in retrans over the next several years.

At the same time, expenses were down, in part due to new Scripps' owned programs, Let's Ask America and The List. These shows launched last September and are quickly building audiences and helping us become more independent from shows we have to buy in syndication. Our shows mean our revenue.

Right This Minute, a show that launched 2 years ago as a partnership between Scripps, Cox and Raycom, has now been cleared in 109 markets, representing 81% distribution across the country. That's up from 60% at our last earnings call. The program is cleared in all of the top 30 markets and 46 of the top 50. Our syndication partner, MGM, has done a great job of selling the show over the past 7 months.

The List is also seeing strong growth. Our research shows the program continues to grow in audience affinity and in key demographics as well. Our best success to date is in the Tampa market where The List finished as the #3 show in the access hour, beating Wheel of Fortune, Two and a Half Men and 2 local newscasts in key demographics. The List also provided strong ratings success in key demos in Cleveland and Cincinnati.

Finally, season 2 production has begun on Let's Ask America. Once again, this show will be produced by Warner Bros. Telepictures. We've got a new set, graphics and music and have tweaked the game a bit to make it even more fun.

We'll also be adding 2 clearances on Scripps stations this September, WPTV in West Palm Beach, and WXYZ in Detroit. These launches will add even more scale to our investment.

You know this well by now, but I'll remind you again that taking control of our programming and driving ratings growth are fundamental to our longer-term margin improvement plan.

Our Segment profit in the quarter has seen terrific growth over a 2-year cycle. Segment profit for TV more than doubled over the same quarter in our last nonpolitical year, 2011, from $14 million to $31 million. Of course, this isn't exactly an apples-to-apples basis as this year includes the former McGraw-Hill stations. On a same-station basis, segment profit increased more than 70%, and our segment profit margin grew by more than 9 percentage points in this 2-year period. As we've said many times, growing our segment profit margins remains a top priority for us.

And now turning to the newspaper division. We again moderated the year-over-year percentage decline in revenue. Total revenues from newspapers was $93.5 million, down 3.8% from the second quarter of 2012. That performance is better than the first quarter when we saw a 4.7% decline. And second quarter segment profit in the newspaper division increased about 30% to $5.9 million. That's due to good expense management in this challenging print advertising climate. Total segment expenses decreased 5.4% to $88 million.

Advertising and marketing services revenue were $60.5 million, down to 4.5%. And the biggest decline was in classifieds, down 11%. Employment was the weakest category there.

Local advertising was down about 5%. National advertising represents less than 5% of total advertising revenue and was down about 9% to $2 million. Preprint and related products were about flat at $16 million. Digital revenue rose a healthy 6.6% to nearly $7 million with pure-play digital increasing 11%. Subscription revenue decreased 2% to $28 million.

We're optimistic about our subscription revenue now that we've rolled out our subscription bundles in 11 of our 13 newspaper markets. We said in the release that about 20% of our subscribers have activated their digital accounts with us. We'd be disappointed if we didn't more than double that number by the end of this year. The rollouts happened late in the quarter so we didn't see a lot of impact yet in the financial results, but we do expect to begin reaping the benefits to our subscription line in the second half of the year. We have only 2 markets to go, Knoxville and Evansville. They're launching this month and next. Rich will talk more about our subscription packages in a couple of minutes.

And I'd like to finish with a look at our cash position, share repurchase program, and finally, our guidance. We continue to hold onto our rock-solid financial position. Our cash on hand is $218 million and we had $188 million of debt, meaning we have a net cash position of $30 million.

The board approved a share repurchase program in November that allowed us to buy back as much as $100 million of our shares. We repurchased 1.7 million shares for $24.3 million in the second quarter and have so far this year purchased 2.7 million shares for $35 million.

And before I turn things over to Rich, I'd like to address our guidance. You can read all the details in our release. For the full year, we're now saying television revenues will be down low teens and television expenses will be down low single digits. That's a bit more cautious on the revenue side from 90 days ago. Services and retail remains somewhat softer than expected, and there's been a lack of robust ballot initiatives. And we now expect television expenses to be down low single digits, which is better than our prior guidance. These 2 tweaks offset each other for the year from a segment profit perspective.

Also in February, we said full year shared services and corporate expense would be in the $65 million range. We revised that in May because the hiring of digital salespeople has gone a bit more slowly than we expected. Now we're revising it again to $55 million. Again, see the release for details on Q3 guidance.

And now let's hear from Rich.

Richard A. Boehne

Thanks, Tim, and good morning, everybody. On the first quarter call, we talked about our priorities for 2013. So before we take questions, let me give you an update on each of those priorities.

These are the 3 areas where we expect to make substantial progress this year, setting us up to reap benefits during the top of the political ads cycle in 2014. The first is focusing on local news ratings in all of our TV markets, which has direct benefit now and even more so in the upcoming election year. The second is the rapid rollout of our digital advertising sales force and digital tools -- digital sales tools. And the third, which is unrelated to the political cycle but just as key to 2014, is the rollout of the print and digital subscription bundles and our newspaper markets.

So starting with local news ratings. As planned, we're seeing strong improvement, in particular, in Denver, Indianapolis and San Diego, the former McGraw-Hill markets, and also strong growth in the Scripps legacy markets of Tampa, Cincinnati and Phoenix. In addition to those strong markets, we're seeing nice growth across-the-board. Thirteen of our 14 stations improved their shares of local news viewers in the major time periods in May, and 10 of them finished #1 or 2 in the targeted adult demographics. Cincinnati, Tampa and Tulsa even expanded audiences in every major newscast.

Why do we focus so much on it? Just a reminder, nothing moves the needle at Scripps like expanding audiences for local TV news. That was the attraction to the former McGraw-Hill markets and remains our #1 goal and our #1 margin opportunity. Local news, built upon high-quality enterprise reporting, is our core product and our core competency at Scripps. It reaps benefits as well across other platforms, the digital platforms, in addition to on-air TV.

And just to go back and put a finer point on Tim's review of our other programming ventures, The List, Let's Ask America and Right This Minute. We are very confident in our ability to leverage creativity for financial gain. Whether it's local news, game shows or magazine shows, we're comfortable with the creative risks that can attract premium audiences and drive cash flow.

Our second priority has been execution of our plan to build out digital products and services and tap a larger base of digital advertising revenue in all of our cities. And just a reminder, if you look at the map, that includes some of the most attractive digital markets in the nation.

The bad news is through the second quarter, we've only spent about a third of the $22 million that we had committed to expanding our digital operations in 2013. The bulk of that has been spent on improving our advertising systems and adding veteran sales reps across the country who know how to sell digital advertising, and like I said, and have a proven track record of doing it.

The good news is the ones we have hired are producing beyond expectations. But we're only hiring proven talent, which has slowed the process and some of the spending. We're making progress, though, and we should be on track to add 100 of these digital sellers by the end of the year.

Bottom line. Expenses for the digital -- the rollout of the digital operations could trail our initial projections for the year. But believe me, that's not my intention.

We're also rolling out the next generation of news apps, Internet news brands that are designed to set us apart in our markets with high-quality enterprise reporting, storytelling and advertising on every platform. And this fall, we'll begin an overhaul of all of our TV market sites and mobile products to better highlight the quality journalism content that we produce. These product upgrades are crucial and they're going to continue across our markets.

Our third priority is the rollout of the digital and print bundled subscriptions in our newspaper markets. As Tim told you, 20% of home delivery subscribers in 11 markets already have activated their digital accounts. We've also added 12,000 new digital-only subscribers, well ahead of what we projected.

We're bringing down overall newspaper expenses while at the same time securing our valuable audiences through bundled subscriptions and building an all-new revenue stream in the form of digital-only subscriptions. Together, these are the catalysts of a repositioning of the newspaper business model, one much more dependent upon revenue direct from consumers.

There's still much more ground to cover, but combined with the moderating declines in print advertising, these are more optimistic days for newspapers.

Across-the-board, whether on TV and print, on a mobile device or a desktop, we build value by delivering value to local communities. Our mission-focused culture, anchored by a commitment to enterprise journalism, provides the energy that drives outsized returns for our owners. Year in and year out, that's always our priority.

Thank you for entrusting us with some of your precious capital. That's a look at the quarterly results and our current priorities.

And now, Rochelle, I think we'll take questions.

Question-and-Answer Session

Operator

[Operator Instructions] You have a question from the line of Craig Huber of Huber Research Partners.

Craig Huber

My first question is on the newspaper side, newspaper costs, Tim. If you just look out for the next couple of years, do you think you have much more runway here to take out costs? And if so, what areas are you focused on here to try and help stabilize the margins or actually potentially even grow them.

Richard A. Boehne

Just to remind you, we've got Tims here, Tim Wesolowski, the CFO, and Tim Stautberg, who runs the newspapers. We'll let Tim Stautberg take the question.

Timothy E. Stautberg

Thanks, Craig. As we look out over the next several years, the current allocation of resources against our activities doesn't provide a lot of room to take additional costs out because we're really focused on making sure that our consumer-facing business has the best opportunity to provide real value to subscribers in our local markets. I'm sure that over time, there will be an evolution of the business and there will be opportunities to align resources based on revenue opportunities. But as we sit here today, I don't see a sizable change in resource allocation unless the company were to decide to do something along the lines of other markets where they produce frequency of distribution. We're not at that point at this moment.

Craig Huber

And also a housekeeping question. On the newsprint front, your press release says newsprint costs were down 13.7%. How much was volume down versus average price, please.

Timothy E. Stautberg

Sure, Craig. They were split evenly, 7%-ish per both.

Craig Huber

Okay. And then we could just jump over to the TV side, if we could. Could you remind us, on the retrans side, how many subs do you have up for renewal at the end of this year? And same question for next year, please.

Brian G. Lawlor

Craig, it's Brian. We don't have a ton up at the end of this year. We have a much bigger opportunity next year. We have a major deal up in the middle of next year for 1.2 million subs. And then at the end of next year, one of our biggest deals is up, that's just under 3 million subs. We also have another couple of hundred thousand and another one at the end of next year. And then a lot of our small deals are up at the end of next year. So we've got 1 or 2 moderate-sized deals at the end of this year and a couple of more significant ones at the end of next year, one in the middle of next year and then the big ones at the end of next year.

Craig Huber

And my last question here on the TV front. You guys talked briefly about lowering your guidance in the TV revenue outlook here for the remaining part of the year. You hit on retail in the service area, which I believe was 2 ad categories that were soft 90 days ago. And so if you could just talk a little bit further on what's changed now versus back then?

Brian G. Lawlor

Yes, I think services and retail through last quarter were a little bit softer than we expected. The services, as Tim had mentioned, was kind of driven by a softness in the doctors, hospitals, insurance, everything kind of around that health care. And while we are optimistic that we're going to see some of the Affordable Care dollars in the back half, we're not sure it's going to make up what we've been short as people kind of sat on the sidelines on that. We're also seeing a little bit of a softening of telecom. I think our release said that we were up plus over 80 in second, which was very strong. I don't expect that trend to continue at that rate. And then just overall, as we're looking at the political landscape for the back half of the year, the odd years are hard to predict. You hope that there'll be some big ballot initiatives in a couple of states and maybe even some mission money that pops up. And that really hasn't been the case, it's been a relatively quiet year. And while I think the health care provides the biggest opportunity for us in the back half, we're not seeing anything big in California, which is usually known for a good ballot initiative or two, it's really going to drive kind of where our thinking on the political had been as we modeled out this year.

Craig Huber

What is your outlook for TV auto advertising for the back half of the year, please.

Brian G. Lawlor

I think that the trend that we saw in the second quarter is what we're looking at for third. We're seeing that same kind of very strong growth and it's early for fourth, but we have no reason to believe it will be anything but the continued high single growth that we've seen through the year.

Operator

Next question from the line of Michael Kupinski of Noble Financial.

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

I'm just wondering if you -- just following up on the political dollars. Obviously, in the second quarter, it was actually a little better than I was expecting. But you kind of indicated that you didn't think that, that might continue. Was just wondering if you can give us your thoughts on the level of political advertising for this year.

Brian G. Lawlor

Mike, it's Brian. Yes, look, second quarter was kind of like -- it really wasn't a lot. We're seeing a little bit of mayoral races as we look at the back half of the year. Again, we'll see some smaller ballot issues, but not anything huge. I mean, I think really the back half of the year political is going to be made by the Affordable Health Care Act and that's going to come in 3 buckets. There's the federal exchange that about 1/2 of our states have opted for. There's the state exchange, so about the other 1/2 are kind of going down that model. I think one of our states has done a hybrid, in Michigan, doing some of the state and some of the federal. And then there's also some opportunity in Enroll America, which is some PAC money around that. And so I think that's where we find the most level of volatility or opportunity around the Enroll America, so we're kind of watching that closely. And all of those will then have an impact, kind of bringing it full circle back to that services category to see how much of the insurance and medical and hospital money that's kind of been sitting, waiting to see how this plays out. We're curious to see how much of that gets unlocked now in the back half.

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

Brian, do you still anticipate that you can do about $5 billion in political this year?

Brian G. Lawlor

I think that's in the range of what we're thinking.

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

Okay. And then on the acquisition market front, can you just kind of give a little bit of the landscape? Obviously, you weren't successful in looking at a couple of potential acquisitions that were out on the marketplace, including Tribune and maybe Alberton [ph] and so forth. Can you just describe the multiples as well as the landscape? And then also, can you anticipate that there would be any benefit from the FCC possibly changing the UHF rules and its TV ownership caps and kind of restricting some that kind of pushing against those limits already?

Richard A. Boehne

Mike, it's Rich. We continue to be interested, and probably first priority is going deeper in the markets where we already do business. We'd love to add some additional stations in those markets, but that's been difficult to do with a lot of owners waiting to see what happens with the spectrum auction at the same time. And the affiliate marketplace, we're interested in other affiliates in new markets. But we kind of have -- we have a target in mind for the kind of returns we expect. And obviously, we've not been successful since we did the McGraw-Hill deal about a year and a half ago. But in general, beauty and value are in the eyes of the beholder. So it's pretty hard for us to say how other people value stations. Obviously, we just haven't been able to hit any of them recently. But we remain interested. And I'll let Brian talk about the issue around the use.

Brian G. Lawlor

Yes, obviously, there's in recent weeks now been a little bit of more interest relative to some of the FCC rules around ownership and the UHF rule and so forth. Look, I think it's an interesting discussion relative to the industry. It's not something that we really have a lot of stake in. We're not bucking up against the ownership cap. We don't have a lot of the kinds of stations that are impacted by the UHF. So I think we'll continue to watch that. And if there's any changes or discussion on that, we'll make decisions on opportunity relative to what we're trying to accomplish as a company. But it probably has impact on a lot of other companies much more than us.

Richard A. Boehne

Mike, we're probably -- it's Rich again. We're probably more focused and we would like to see some relaxation, it would be in the rules that would allow more end-market consolidation. We just think it would make a lot of sense for -- especially in smaller and midsized markets for somebody to be able to own a few more brands and signals.

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

In terms of -- I'm sorry, but in terms of looking at UHF stations versus VHF stations, I mean, from your standpoint, do you see any particular difference given the level of cable satellite and cable penetration in the markets?

Richard A. Boehne

No, we don't. It just depends on the dynamics in each individual market. But just in general, we would favor rules that would allow for much more end-market consolidation than what we see today.

Operator

The next question comes from the line of Barry Lucas of Gabelli & Company.

Barry L. Lucas - Gabelli & Company, Inc.

I have several this morning, actually, Rich, and maybe I can start with Mr. Stautberg there. Since you've got kind of a late push on rolling out the digital alternatives in your market and looking at kind of where circulation revenue trends have been, any way to put to frame what circ revenues might do in the back half of the year, Tim?

Timothy E. Stautberg

Sure, Barry. Our hope is that they would be growing, quite simply. And we're looking -- we're probably 9 months to 1 year behind Gannett, for instance, in terms of their rollout and maybe a couple behind McClatchy. So you can kind of look at some of the trends in their circulation line for what we'd expect. I think we want to be cautious about becoming too exuberant on what that could be. But Rich mentioned in his remarks the opportunity here from a consumer-facing business, a direct revenue relationship with consumers and especially across our different products in our portfolio that we're offering as a bundle. We think this is a true -- a pivot point for our business and we're geared towards making sure we take full advantage of it. So the back half of this year, we would expect that line to be up.

Barry L. Lucas - Gabelli & Company, Inc.

Great. And a couple for Brian here, if I may. And just maybe a little bit more color, Brian, on geographic variances in the television division on the revenue front, who's doing well, what areas are doing well, what aren't -- what areas aren't doing well?

Brian G. Lawlor

It's Brian. Yes, we've got a couple of markets that are pretty hot. We've got some others that are a little bit softer. As I look at the second quarter, the strongest spot markets were Kansas City and San Diego and West

Palm. All 3 of them were up high singles to even bucking against double-digit growth, just straight up on spot. Now obviously, a couple of those markets a year ago had some political in it. But even despite that, a market like Kansas City total year political and all-in was up 5% in the second quarter, so I thought certainly that was positive. The Midwest, for the most part, looks pretty good. Detroit market is up in spot business year-to-year. Cleveland is up, almost 9%, Cincinnati is up. So I think the Midwest seems to be trending well, as I mentioned. No consistency in Florida, West Palm, really strong, Tampa kind of flat. On the West Coast, Denver is up a little, Phoenix is just off a touch but San Diego's on fire. So I don't know that there's really a pattern to the geography. It really is a market-by-market basis.

Barry L. Lucas - Gabelli & Company, Inc.

Okay. And just to come back to this -- to the M&A issue. And as you look at what's out there, most of the bigger groups are now off the table. And I'm just wondering how you get to where you want to be whether it's in market or market expansion in the -- as we go forward from here. And just thinking about -- how do you leverage what you've got? And part of the question, I don't want to extend this, but your discussion about both revenues in, let's say, Denver and San Diego, and news ratings, which obviously go together in the way you've made real progress in those McGraw-Hill markets, suggest to me that you guys either should or would really like to be a little bit more aggressive, having had your hypothesis essentially proved out.

Brian G. Lawlor

Yes, look, I think -- it's Brian again, Barry. I think we're a good operator. I think we know how to run good television stations. We know the kinds of television stations that we're good at running. Obviously, we like network affiliates. We like to build strong news brands. We don't have to go out and buy the largest news brand in the market. We have a lot of confidence that we can grow products and improve them. And I think that's surely playing itself out with the stations of the acquisition that we did in December 2011. I think our balance sheet says that we're in a position to be able to acquire. And so I think we strategically look every day. Rich talked about the fact that end market is important to us, I agree. But also there's a lot of other markets we'd like to be in. And trying to use our leverage in terms of our size, and I still think at 13% of the country we're a significant player. I know others have rolled up a little bit bigger now and that provides, A, opportunity, but B, competitive situation that we have to be aware of. But I think that we continue to look for those opportunities. And while big groups may be going, we'd still think there's a lot of television stations that are the right fit for us that we'll spend time assessing and see if there's ways that we can fit them into our portfolio.

Richard A. Boehne

Barry, just to add onto what Brian said. If you look at a pie chart, the industry is far less consolidated than the headlines would suggest and there'll be an awful lot of opportunity in consolidation probably in the future. Also you and I have worked together through probably 3 or 4 cycles, and with the last deal we did was when stations were largely out of favor and there was not much action. And there'll be opportunities in the future and you have to be patient and focused and know what you expect and know what markets you're looking for and there'll be good opportunities. But there's not necessarily -- I think, as you have probably told me several times, there's not necessarily a benefit to winning an auction. So we'll pick our spots and we'll find our opportunities.

Barry L. Lucas - Gabelli & Company, Inc.

Great, that's a terrific segue to my final question, Rich. And so as I think net cash is actually up a smidge from 1Q to 2Q, and this is not to minimize the share repurchase effort, but how do you characterize the balance sheet and the manner in which you've been buying back stock? Is this in your mind more a function of caution about the economy, about the newspaper business and various other uncertainties? Or is it more a function of just waiting or hoping or keep kicking the tires and looking for that next decent opportunity on the M&A front?

Richard A. Boehne

Well, let -- I'll let Tim Wesolowski talk about share repurchase in just a second. But we sort of balance several cash priorities and one we've talked about, we'd like to be deeper and broader in markets where we do business. We wouldn't mind adding some additional markets if we can get the returns that we expect buying back stock, but also not much talked about because of the frenzy that's going on in the broadcast TV business is the opportunity on the digital side. And we continue to aggressively build out our digital products and services. And if you go back, one of the attractions, strong attractions, to the former McGraw-Hill markets in Denver and San Diego is that they're more terrific digital markets. So we're looking to add some markets, go deeper, buy back stock, but also we just intend to be among the most aggressive digital players in our markets and believe that is -- that's a clear opportunity, but it's been, like I said, much lost in much of the consolidation talk that's going on in TV. So we, as I said, we didn't -- haven't had an opportunity to spend as much as I would have liked to on the digital side just because we're trying to be smart about it and hire the right people and put the right tools in place, but that'll also consume a little bit of cash, but obviously, it's not going to run us dry just investing in digital. But we have been buying back. We have an authorization of up to -- I'll let Tim Wesolowski jump in.

Timothy M. Wesolowski

So the board authorized $100 million last fall. We were -- through the first half of the year, we purchased $35 million worth of shares, 2.7 million shares. And in second quarter, I would characterize us as pretty active, picked up 1.7 million shares.

Richard A. Boehne

So is your question, Barry, why don't we just buy far more aggressively than we have been?

Barry L. Lucas - Gabelli & Company, Inc.

I don't think so, Rich. As I said I'm not at all trying to belittle it. I'm just trying to sort of gauge what the strategy here. Is it husbanding cash and making sure that you have either the availability on the balance sheet or the opportunity to come to the market to borrow money in the event that something really attractive were to come on the market? Or is it just that native caution that you and Tim and Tim have exhibited over the years that would prevent you from being a little bit more aggressive on the buyback and that kind of thing?

Richard A. Boehne

No, I would think if you, to really characterize it, it's -- you know us well. We like to be opportunistic and oftentimes counterintuitive like we were when we picked up the McGraw-Hill stations. So yes, we would like to make sure that we have financial flexibility to grab really good opportunities as they come along and not necessarily be forced into just doing deals inside of a larger frenzy or a trend.

Operator

And the next question is from the line of Wescott Rochette of S&P Capital.

Westcott Rochette - S&P Capital IQ Equity Research

Two quick questions. One, on ABC and their rollout of TV Everywhere and to some other stations, I think Hearst is working with them. How does that work into your digital plans? Is that complementary -- how do you look at that?

Brian G. Lawlor

Wescott, it's Brian. I think we do look at it as complementary. And the ability for us to bring live programming, which is what the TV Everywhere is, the WATCH ABC app is, the live ABC programming as well as the live programming from our local affiliates to consumers wherever they are and whatever they're doing in their lives inside of a local market is pretty exciting for us. And so I think we see a dual revenue stream opportunity there, one from being paid to sell the digital rights to the MVPDs; and the other one is ultimately to be able to charge advertisers for a new revenue stream that we're creating. And so I think we're very optimistic about the possibility of strong revenue streams there. And I think it really complements the products and services that Adam and his team have been rolling out on the digital side to support our local news brands.

Westcott Rochette - S&P Capital IQ Equity Research

Okay. And so would there be a more formal kind of agreement like Hearst has kind of put out there or just kind of wait and see as it rolls out and you guys work on those capabilities?

Brian G. Lawlor

No, we're not waiting and seeing. We're in conversations with the network now.

Westcott Rochette - S&P Capital IQ Equity Research

Okay, perfect. And second, just kind of a big picture with retrans and the consolidation that is happening across the industry. Did you believe that, that impacts, I would guess, favorably your ability to negotiate retrans as you have stronger combined entities that are going to the cable providers? Does that help your kind of leverage as you come to market or are they just completely separate one-off conversations that happened with their agreement?

Richard A. Boehne

This is Rich. Sure, that marketplace continues to develop. And every time we come to the table, the stronger the marketplace is, the better we do on each of those negotiations. You can see the strong growth numbers that we've been putting up and we think that's going to continue.

Operator

[Operator Instructions] Next question from the line of Michael Kass of BlueMountain Capital.

Michael Kass

With respect to the digital bundling rollout, I was wondering if you could put some math behind the conversion rates that you're talking about, the 20% this year so far in the markets that you've rolled out. What does that actually translate to in terms of incremental revenue?

Timothy E. Stautberg

Sure, Michael, it's Tim Stautberg. And there's not a direct relationship between the activation of digital accounts and revenue. To be clear, we have about 550,000 home delivery subscribers across our footprint. And our first priority is to get as many of those subscribers who today have a relationship with us in print form to go ahead and sign up and activate a digital account so that they can begin to access our content on the different digital platforms, whether it's web, tablet or phone. And upon activation then and upon usage and engagement, over time, as we get our consumers to move beyond a print relationship, that's where we have the opportunity to exchange value, consumers getting value from the content that we're delivering and hopefully we're able to convert that into revenue.

Michael Kass

So there isn't a price increase that's being marketed along with the offer of a bundle like there would be at, for example, Gannett or McClatchy?

Timothy E. Stautberg

There is, there is. But again, our first priority is to make sure that our consumers -- our subscribers in local markets are setting up accounts and being able to get the full value of their subscription as renewals for their subscriptions come in their mail to the extent that they have engaged with us on digital platforms and are getting value there. And that gives us a much better chance of being able to generate more revenue from our consumers. That's the key length there, is activation of digital accounts with our current subscribers.

Michael Kass

So should I take that 20% as meaning that -- I mean, I assume that as you've -- what percentage of the base has come up for renewal where you've either offered them a bundle or the opportunity to stay print only?

Timothy E. Stautberg

So again, we're still early in the rollout here. We're -- most of our markets rolled out in the April and May time frame. The average duration of our subscriber base is probably 3 months. So there's a mix of subscriptions there. Some folks are monthly, a lot are 3 months, but we have some 6 and 12 months as well. So folks are getting renewal notices today. And we're very encouraged by the early results, but it is early.

Michael Kass

Okay. And what's the price increase if [ph] you have a lot to go with the bundle, on average, across your papers?

Timothy E. Stautberg

I'd prefer not to disclose that other than we believe that it's a fair exchange of value for the content that we're providing and the functionality that we're providing on our digital platforms.

Michael Kass

Okay. And then lastly, I mean, I feel like I'd be remiss if I didn't talk about M&A from the sell side as well here. You've had an unprecedented boom in broadcast TV acquisitions at multiples that haven't been seen in many, many years, a lot of them over 9.5x on a seller's multiple basis. I recall last time you guys had been asked this, you thought that, and I assume you still think that you can deliver more shareholder value by remaining independent. Could you give any context to that in the sense of you guys are by far the cheapest broadcast TV station in the public markets from everything I can see. Why you think that and speak a little bit to how you and the company and the family look at the prospect of monetizing this business given the M&A frenzy that's going on?

Richard A. Boehne

It's Rich. Remember, you're not looking at a pure broadcast TV company. Also you're looking at a company that owns some substantial newspaper assets at the same time. So it's a little different than looking at a pure-play company. But yes, we do think that if you look at particularly the margin opportunities we have over time in the markets we're in, we can deliver value by operating the stations that we have today. And yes, we have a retransmission fee lag behind some of the -- some of our peers in the industry, but that catches up over time and gives us the opportunity to take advantage of current market rates each time we go to the table. So no, we don't have any plans to be a seller at this point. We see very good opportunity in our markets and believe we can deliver the value.

Operator

And the next question is from the line of Michael Kupinski of Noble Financial.

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

I just had a quick follow-up for Tim Stautberg. Tim, obviously you had, had the benefit of seeing some of the strategies that some of the larger players in the industry have had and picking and choosing which ones of those are working and which ones are not. I was just wondering one of the strategies that the industry seems to deploy or being deployed is the scaling impact of daily print editions in lieu of digital-only daily publications. I was just wondering where does the company stand on that strategy, and is that something that you're taking a look at as you look forward with your digital subscription strategies?

Timothy E. Stautberg

Yes, I don't know that, that's a subscription strategy as much as it's more of an expense savings strategy today. Our focus is on providing valuable content on the digital platforms with the functionality that's best in class and the opportunity for us to actually begin to engage in the marketplace where today we have a financial relationship with the 550,000 subscribers that represent roughly 30%, maybe 35% of the households in our markets. That means we have 65% of the households that don't have a relationship. We think that's a huge opportunity. That's our primary area of focus today and going forward over the next months and years is to really fill that out. And it would be not our preference to diminish our relationship anytime soon by reducing the amount of home delivery frequency in markets.

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

And of those 13 [ph] papers, are they all 7-day a week print editions?

Timothy E. Stautberg

They are today, yes, that's right.

Michael A. Kupinski - Noble Financial Group, Inc., Research Division

And so -- and you're saying that in terms of the future cost-cutting opportunities, you wouldn't foresee, for instance, just doing a digital edition on Monday or Tuesday and not doing a print edition. Your strategy, at least for now, is to continue with the daily print editions?

Timothy E. Stautberg

Mike, I'd say our current strategy is to continue to operate the way we are operating today with the offerings that we have. That's not to say that it's not something that we study and look at, but it would not be our preferred path at this moment.

Operator

And you have a question from the line of Craig Huber of Huber Research Partners.

Craig Huber

As a follow-up, the extra spending you guys are doing here, the corporate shared service area, particularly you're hiring more digital-only sales people and stuff, can you just pull a bit more numbers around that, where you guys are expecting going forward here in terms of the hiring rate that you're doing versus what potential digital revenues you hope to get from that? And is it sort of split in your mind roughly 50/50, your newspaper markets, digital market versus the TV station markets?

Richard A. Boehne

Craig, it's Rich. Let me -- no. Just mathematically the opportunity is bigger in the TV markets because they happen to be much bigger markets. There's good opportunity in some of our newspaper markets that are of decent size, but our TV markets are much, much larger. Adam Symson is here. I'll let him talk about the revenue opportunity and then we'll come back to Tim Wesolowski to talk about the expenses.

Adam Symson

So we look at every market individually and try to assess what the opportunity is in the market and sort of work out a math program, a math equation around what we think a digital seller, an experienced digital seller, is worth. And so we're on track at this point to add about a little over 100 digital sales staff executives and support in each of -- across the enterprise, across all of our markets. And as Rich said, not necessarily split evenly. I'd say we probably have more opportunity in our larger markets, the television markets, where we have fewer sales account executives in a television station today, although we do anticipate adding staff and sales management in those newspaper markets where we think we can achieve additional scale. From a revenue opportunity perspective, it's essentially determined by looking at what the market can bear. In each of our markets, we think there's significant opportunity in the outlying years in the millions that we think we can add on into our local markets relative to digital advertising that today we're not necessarily taking share.

Richard A. Boehne

Tim, talk about the expense this year.

Timothy M. Wesolowski

Yes, so when we talked going into the year, we gave an amount of about $60 million, which was costs in that really kind of fell into 3 different buckets: feet on the street, building out a system to streamline the process and really make the business more leverage-able across our different properties and also the third bucket being on the content side. And we're making terrific progress on the second 2 areas for sure. On the systems implementation, we're going to be rolling that out here and actually going live in properties in the next couple of months, the content side is going well. And the spend on the sales force is a bit slower, but we're being very, very picky. And we're not going out and hiring inexperienced people and handing them the phone book and tell them to knock on doors. So we're hiring experienced people that have got a book of business. And to scale this a little bit differently as well, I think we said on the last call our combined digital revenues in our newspaper and TV group was about $40 million in 2012. And this effort that we've been doing through the different areas we're spending on, we'd be disappointed if that number didn't about double in 2015. So that's sort of the numbers that we're looking at.

Operator

And the next question is from the line of Michael Kass of BlueMountain Capital.

Michael Kass

Just following up on the digital opportunity for a second. Just was looking to understand a little bit more, the product that the salespeople will be selling, is this primarily real estate on the respective TV and newspaper websites? I assume it also includes some mobile and new products being developed. I'm wondering how you guys think about -- when you say that you're under monetized, what are you comparing yourselves to? And how are you coming up to the view that more salespeople and better systems equals more revenue?

Richard A. Boehne

Go ahead, Adam.

Adam Symson

It's Adam again. Well, actually, I think it's that, it's real estate, obviously, on the products that we own, our websites in our TV and newspaper markets along with our digital -- other digital properties like mobile and tablet. But additionally, in each one of our markets, we're almost like a well-developed digital agency. We sell a number of different marketing services from the relationship we have with local advertisers around cost-per-click advertising like Facebook and search engine marketing and ad services like Google, Bing and Yahoo!. We also do a lot of SEO, search engine optimization and even e-mail and other marketing services. So the opportunity is not necessarily constrained to the size of our owned and operated audience. It's really constrained to the strength of sales force. And that's where we really see that leverage point, the ability to add experienced digital sellers in our market is not going to be held back by the size of our digital audience. Now that said, I think all publishers would admit that we've got plenty of opportunity within our own audiences, but we've got a series of different products, the likes of which you'd find in any well-developed, large digital agency that we sell to all of our local, small, medium and large business advertisers.

Michael Kass

If the problem is that you don't have enough experienced digital salespeople because you're hiring them, what's the competency that you're building around?

Adam Symson

Well, I mean, I think if you step back and take a look at the approach we're taking, first of all, we're looking for people who already have, in many, cases, a well-developed book of business that they're serving. We're putting all of them through very, very in-depth training, both on situational leaderships, sales management, sales, as well as product training. And then we're really working hard on developing a sales force that is very, very aggressive. There's a number of digital pure-play advertising -- digital pure-play agencies out there in our markets and we feel like we should be able to significantly increase the share we take because our brands have been around, in some cases, for 100-plus years and these advertisers have long-standing relationships with us and we want them to continue to do business with us on these digital platforms.

Michael Kass

So you're talking about primarily selling property that isn't necessarily Scripps property through a new sales force, but it will be leveraging the brand of Scripps, is that what you're building around?

Adam Symson

I'd say it's probably split somewhere between 70%, Scripps; and 30%. We think that our advertisers enjoy the effect of advertising on our owned and operated branded properties. But additionally, I think once you sort of recognize what fragmentation has done in the digital space, it's necessary, in order for us to actually achieve the results that our clients want, for us to offer them a number of different opportunities. And so it's not enough alone anymore to just sell advertising on a television station website or a newspaper website, you need to bring in audience extension products like our association with Yahoo! or association with Google and Facebook to help extend the reach of their advertising dollar and then essentially to help them achieve the goals that they have growing their local businesses.

Richard A. Boehne

Michael, just to step back, it's Rich again. We've, last year, stepped up our research pretty substantially to size the opportunity on the digital revenue in each of our markets and then market-by-market, building a sales force and building the tools against the opportunity that we see in each individual market. So there's no real magic to it. It's just looking and seeing a substantial opportunity that we think is untapped in our markets and then building against that through investments that flow through our P&L and then return revenue.

Operator

And there are no further questions in queue.

Carolyn Pione Micheli

Thank you very much for joining us for this earnings call today. Have a good day.

Operator

Okay, thank you. And ladies and gentlemen, this conference will be made available for replay after 11:00 a.m. today through August 12 at midnight. You may access AT&T Executive replay system at any time by dialing 1 (800) 475-6701, entering access code 296167. International participants dial (320) 365-3844 and again that access is 296167. And that does conclude our conference for today. Thank you for your participation and for using AT&T Executive TeleConference Service. You may now disconnect.

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