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Scripps Networks Interactive (NYSE:SNI)

Q4 2011 Earnings Call

February 09, 2012 10:00 am ET

Executives

Mark W. Kroeger - Senior Vice President of Corporate Communications and Investor Relations

Kenneth W. Lowe - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Joseph G. NeCastro - Chief Administrative Officer, Chief Financial Officer and Principal Accounting Officer

John Lansing - President of Scripps Networks LLC

Lori A. Hickok - Executive Vice President of Finance

Analysts

John Janedis - UBS Investment Bank, Research Division

Christopher Merwin - Barclays Capital, Research Division

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

Michael C. Morris - Davenport & Company, LLC, Research Division

David Bank - RBC Capital Markets, LLC, Research Division

Jason B. Bazinet - Citigroup Inc, Research Division

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

Eric O. Handler - MKM Partners LLC, Research Division

Tuna N. Amobi - S&P Equity Research

Thomas W. Eagan - Collins Stewart LLC, Research Division

David Carl Joyce - Miller Tabak + Co., LLC, Research Division

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter earnings report. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Mark Kroeger, Senior Vice President, Investor Relations. Please go ahead.

Mark W. Kroeger

Thank you, Collin, and good morning, all. Thanks for joining us. We'll start the conference call today with comments from Ken Lowe, our Chairman, President and CEO; and Joe NeCastro, Chief Financial and Administrative Officer. Our prepared remarks should take about 20 minutes, then we'll open it up for questions. Also on the call this morning is John Lansing, President of the Scripps Networks' Operating Division; and Lori Hickok, Executive Vice President of Finance.

Let me remind you, if you prefer to listen in via the Internet, go to our website, click on Investor Relations and find the microphone icon on the landing page. Additionally on the page, under the microphone icon, you'll find our fourth quarter earnings presentation materials that we'll be referring to during the prepared remarks portion of our call. An audio archive will be available on the site later today and we'll leave it there for 2 weeks so you can access it at your convenience.

Our discussion this morning will contain certain forward-looking statements. Actual results may differ from those predicted, and some of the factors that may cause results to differ are set forth in our publicly filed documents, including our Form 10-K. With that, I'll turn it over to Ken.

Kenneth W. Lowe

All right, Mark, thank you, and good morning, everyone. As always, we appreciate your interest in Scripps Networks Interactive. 2011 was a truly outstanding year for the company and we ended up with very strong fourth quarter results due to double-digit increases in revenues, segment profit and earnings growth, which you're going to hear more about on the call a little later. I have to say I was extremely proud of our business leaders across all our brands and various businesses.

Our focus on building world-class brands in the categories of home, food and travel is just one reason for Scripps Networks Interactive's solid performance in 2011. Our strong growth is also a direct result of our expertise in engaging audiences, particularly upscale female viewers that our advertisers value. Fans incorporate our brands into their everyday lives. We influence the foods they eat, the homes they live in and the places they want to travel. Now, this level of engagement is rare for television networks and advertisers know it. That's why our networks are must buys for advertisers and also must carries with our distributors. There's no doubt that Scripps Networks Interactive is a rapidly growing, multi-platform media company and we're doing all we can to perpetuate and sustain the company's success in 2012 and for years to come.

At the Food Network, we're building on the excellent momentum generated in the fourth quarter, which was its highest-rated quarter ever, solidifying its status as a top 10 network. The success of programs like Next Iron Chef America, Restaurant: Impossible and Rachael vs. Guy contributed to the network's outstanding results. Rachael vs. Guy debuted as the #1 show in the 9 p.m. time slot and #2 on cable for the night overall. In fact, Food Network was the highest-rated, most-watched cable network that evening.

With results like these, it's no surprise that the Daily Meal, which is a popular website about all things food, recently named Brooke Johnson, President of the Food Network, as the most powerful person in all of food. So congratulations to Brooke and the talented team at Food Network for this recognition and for their many achievements this past year. They have truly defined the food genre for television and they're on their way to claiming a unique competitive advantage in publishing and digital worlds as well.

Food Network Magazine maintained its rank as the #1 culinary magazine on newsstands. It's also the sixth-ranked magazine overall based on newsstand sales. Online, foodnetwork.com generated more than 120 million page views during Thanksgiving week alone. And on Facebook, Food Network can claim more than 2.3 million friends, more than double that at the end of 2010. We're also seeing consumer engagement in the mobile app space. To date, we had more than 450,000 paid downloads of Food Network's In The Kitchen app, making it the #1 paid culinary app in the iTunes Store.

The terrific brand equity extends to our branded products as well. We now have more than 1,000 Food Network licensed products at Kohl's Department Stores. And our branded wine collection, called Entwine, by the way, continued to exceed all expectations, ranking 34th in the premium wine category out of almost 400 labels.

For 2012, not only do we want to maintain our top 10 network ranking, but we hope to push this power brand even higher to a top 5 status within the next few years. Now, to support this goal, we're investing in more special events, more premieres and more new series. We're also exploring new programming formats and new ways to enhance the viewer experience. And we're also evolving existing successful franchises, like Food Network Star, Extreme Chef and Chopped, and finding new roles for existing talent and increasing convergence across platforms.

We have an ambitious strategy for success over at HGTV as well. We forged a strong bond at HGTV between the love media consumers have for their homes and the entertaining and informative quality of our programming. Being consistently faithful to that core concept is why nearly 1 million U.S. households tune in to HGTV during prime time every night and really why HGTV is the #1 network for upscale women. HGTV finished 2011 on a very high note, with the highest-rated December ever in total day for adults 25 to 54. HGTV also tied for the highest ever fourth quarter total day rating for the network. Fourth quarter success at HGTV was driven, in particular, by Selling Spelling Manor. For the night, more than 4.2 million people tuned in to watch Candy Spelling, wife of the late TV producer Aaron Spelling, give a tour of the 56,000 square foot Hollywood mansion. The special anchored a night during which HGTV ranked #3 in all of cable for that coveted audience of upscale women.

Now in 2012, we plan to adjust programming for more vertical stacking of successful shows on individual nights like Holmes on Homes, which worked very well for us in December. And we'll have more new premieres of popular franchises, like House Hunters and other fan favorites, and we'll have more spinoffs of HGTV hit titles.

Like Food Network, audience engagement with HGTV extends beyond the television. The new HGTV Magazine is already off to an amazing start. In just its second publishing, the magazine has surpassed our expectations and those of our partner, Hearst Publishing (sic) [Hearst Magazines], with newsstand sales of several hundred thousand copies. We have a lot to look forward to as we invest to grow HGTV into a top 10 network during the next few years.

Now turning to the Travel Channel, we're building momentum as we work to redefine and own the travel genre, just as we've done successfully with the food and home categories. The fourth quarter premiere of The Layover with Anthony Bourdain, along with continued strong performance from Ghost Adventures, helped Travel Channel close out 2011 as its second highest-rated year ever. We built a very solid foundation for the brand in 2011, which has enabled us to start this year with triple the number of returning series and more than double the number of talent on the network.

Plus there are more exciting shows and concepts in the pipeline. We developed a new series featuring the popular Adam Richman to replace Man v. Food, and we're leveraging successful formats from our other networks' franchise shows, with new Travel Channel titles like Vacation Hunters, Vacation Crashers and Hotel Impossible. We've also put our unique spin on popular programming formats with a new series called Baggage Battle that follows 3 very savvy auction specialists who travel the world, snatching up unclaimed and lost personal property in an attempt to turn huge profits. We think the series promises to be great fun and we hope you'll get a chance to check it out.

Travel Channel does remain our single biggest growth opportunity, and with the combination of successful returning series and new programming planned for 2012, we're very optimistic about developing Travel Channel into a leading multi-platform lifestyle brand like HGTV and Food Network. Of course, our optimism goes beyond our fully distributed networks. Our flanker brands, DIY Network and Cooking Channel, finished 2011 as the highest-rated year in their history. And they're off to great starts in 2012, I might add. At DIY, their record-breaking performance in the fourth quarter was bolstered by top performers like Rescue Renovation, I Hate My Bath and Bath Crashers. At Cooking Channel, Good Eats, hosted by Alton Brown, drove strong rating performance in 2011. And Bitchin' Kitchen, the exciting comedy cooking show, hosted by chef comedienne Nadia G, also pushed ratings and created great media buzz around the Cooking Channel brand.

For Great American Country, December proved to be a hugely successful month thanks in large part to the National Finals Rodeo, which aired live from December 1 through 10. All 10 telecasts ranked among the top 30 most watched prime time telecasts in GAC history, including top 5 slots. The final episode scored the highest rating in GAC's history and the really great news is, the national finals rodeo will be returning to GAC in 2012. We're enthusiastic about GAC's new direction as we shape its Living Country format and focus.

And turning to international, the highlight during the fourth quarter was the completion of the UKTV transaction. Now we think this is an outstanding opportunity to be part of a thriving, multichannel, dual revenue stream media business in one of the world's largest television markets. We look forward to a long and mutually beneficial partnership with BBC Worldwide on UKTV.

Now staying in the U.K., our other investment, Food Network U.K., maintained its enviable status as the country's leading food-themed channel. We've launched some new locally developed programs in the U.K. that have proven to be consistent contributors to the success story, with Andy Bates' Street Feast (sic) [Feasts] and Reza Mahammed's Spice Prince of India leading the way.

Elsewhere around the globe, we're exploring a number of opportunities with Eastern Europe, Asia, Latin America and Canada as the areas of highest focus. So in summary, 2011 was a great year for Scripps Networks Interactive. And we look forward to building and expanding on these very positive trends across all our networks in 2012 and continuing to create long-term value for our shareholders. With that, let me turn it over to Joe for the financial review. Joe?

Joseph G. NeCastro

Thanks, Ken. Good morning, everyone. I'm going to touch on some of the fourth quarter and full year highlights and provide some color on what drove our positive results. I'll then touch on guidance briefly and we'll open it up for questions.

Starting with a consolidated view, total revenue was up 10% on solid advertising growth, as well as continued increases in affiliate fee revenues. Segment profit was up a healthy 14%, reflecting our effective control of non-programming expenses, while we invested in what media consumers are seeing on the TV screen and on other digital platforms. For the fourth quarter, income from continuing operations attributable to SNI grew about 15% to $0.84 per share.

For the full year 2011, the highlights are revenue up 10%, total segment profit up 17%, and income from continuing operations attributable to SNI up 21% to $2.86 per share. So all in, a great quarter and a great year.

Looking at the key revenue drivers for the quarter, we finished with advertising sales growing around 11% versus last year. Affiliate fee revenues were up about 6%, which is where we paced throughout the year.

Our networks benefited from the strength of the ad marketplace with fourth quarter scatter versus scatter pricing up in the high-single to low-double digits year-over-year and up high teens to low 20s over the broadcast upfront.

In the first quarter of 2012, scatter versus scatter pricing is running up in the mid-single digits and scatter to 2011 broadcast is up in the mid-teens. The general tone among advertisers continues to be very positive.

Another positive sign for 2012 was the development of a calendar marketplace. Of course, because we sold a little bit more inventory into the broadcast upfront to take advantage of the strong pricing, we sold a little less in the calendar market. As for advertising categories, our top 5 were food, retail, consumer packaged goods, auto and financial, and they've been pretty consistent all year long. Based on these current trends, we're pretty optimistic about advertising in 2012.

Turning to the distribution side of our business, as expected, affiliate fee revenue grew about 6% in the fourth quarter. We renewed our remaining Food Network affiliate distribution agreement that expired at the end of 2011. This new agreement then moved that remaining distribution to the rate card that we established in the marketplace back in 2009. So looking ahead, the net impact of this agreement will be reflected in our 2012 results and will be incorporated into our full-year guidance.

Now let's take a more detailed look at our primary operating segment, Lifestyle Media. Total segment costs were up about 6% during the quarter and the segment profit was up 13% from the prior year period. Program amortization was up about 8%. As many of you have noted, our programming spend, as seen on the cash flow statement, was up about 33% for the full year. While there's a timing effect, eventually this increased cash spend flows through to the income statement in the form of higher amortization expense. We increased the number of new program launches starting in December 2011 and the premieres of these shows triggered the amortization expense. These new shows helped drive the higher programming expense in the third and fourth quarters of 2011. That accelerated level of program amortization will continue through the first half of 2012, reflecting the investment we made in order to maintain and build on our competitive advantage.

Moving to our international initiatives. Ken mentioned the big highlight, our UKTV investment. It's worth noting that because of the ownership structure, income from the UKTV partnership will be reported in "equity in earnings of affiliates" line. For the quarter, that line item was up significantly to $20 million, compared with about $9 million in the fourth quarter of 2010. As you'd expect, that increase is primarily related to the UKTV partnership.

Now turning to the balance sheet, we successfully issued $500 million of 5-year bonds at a very attractive interest rate during the fourth quarter. We also repurchased 2.4 million shares of our own stock for roughly $100 million. I'd add that we were out of the market for part of the fourth quarter while we were working on the bond offering. So that said, look for our repurchase rate to increase somewhat in the first quarter. As a reminder, as of the end of the year, we had $500 million remaining under the current authorization. We ended 2011 with $760 million in cash, including $184 million we generated from continuing operating activities in the fourth quarter.

Now looking at our 2012 guidance, we expect total revenue to increase 8% to 10%. This increase reflects expected advertising revenue growth in the mid- to high-single digits, coupled with affiliate fee revenue growth in the low-double digits. Based on current business assumptions, we expect some unevenness or lumpiness in the quarterly ad revenue growth trends, with the first quarter advertising revenue likely -- the growth rate there likely falling below our yearly average. We expect ad growth rates in the second and third quarters to trend above the average.

Now looking at expenses, as we work to drive viewership growth across all of our networks, we expect the programming cash spend to increase in the high-single digits. As a result of this spending, coupled with the increases we saw in 2011, we expect programming amortization expense to increase 13% to 15% this year. And due to the timing of our programming rollout, the first quarter 2012 programming expense should be in a similar range to what we realized in the latter half of 2011. Most of the growth will show up in the first half of 2012, with a dramatic deceleration in the second half of the year.

We think it's important to emphasize here our resolve to grow this business. Investing now in these powerful brands is clearly the right thing to do. It's an effective use of the company's free cash flow and will create value for our shareholders over the longer term by building on our competitive advantage. It's been our successful formula that's resulted in nearly 2 decades of year-over-year growth at this company.

As for non-programming expenses, we're expecting to be up 10% to 12% for the year. Marketing and promotion costs will likely be higher as we work to grow viewership. These expenditures will be focused during the first 6 months of the year to help promote the new program launches that we're planning for that time frame. The growth in non-programming costs also reflects the investments we're making in new business initiatives, with a focus on leveraging our extensive programming archives and expertise on digital media platforms. We're also exploring other interactive opportunities close in to our lifestyle content categories as we continue to build out that growing -- our growing international business as well.

Past experience tells us that organic development of new business holds the most promise for outsized returns. We believe this is a good time to be making some measured and deliberate investments to create new revenue streams and to build value over the long term on promising new platforms and in new geographies. Naturally, as we build these new businesses, the investments will flow through the P&L.

Now looking at some other items, we expect depreciation and amortization of $100 million to $110 million, interest expense of between $45 million and $50 million, and effective tax rate of 30% to 32% and net income attributable to non-controlling interests of $170 million to $180 million, and capital expenditures somewhere between $60 million and $70 million. So operator, that's it for our prepared remarks. We're ready to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of John Janedis with UBS.

John Janedis - UBS Investment Bank, Research Division

A couple of questions here. Maybe first, on the non-programming costs, can you talk a little bit more there, meaning are you moving towards a period where maybe there's a multi-year upward trend there? Or do you think it's stabilized to maybe a trend here, going forward, looking into the out years?

Joseph G. NeCastro

John, this is Joe. I'll start off, but John can talk a little bit about marketing as well. That category includes marketing expenses, employee costs, all others. Next year -- or sorry, the year we're in now includes a pretty significant increase in expenses or spending on some development initiatives in new businesses, both internationally and domestically. I'd say, to put a range that number, you're probably around in the $30 million range of that spending increases related to that. I would not expect that, that would be a multi-year kind of increase. We're not starting on a venture to spend that kind of money every year, but we do have some money in there to launch a couple of new businesses. John, do you want to talk about marketing...

John Lansing

Briefly, we're launching several new series across all of our major brands in the first and second quarters, and we're putting some commensurate marketing investment behind that. On the one hand, to continue to strengthen the position of Food Network, which finished up January as the 8th-ranked network in all of cable. And also, to boost and grow Travel Channel so it can aspire to turn in the kind of results that both HDTV and Food are turning in. So it's really about a boost in the first half of the year and I don't anticipate that being a year-in and year-out run rate.

John Janedis - UBS Investment Bank, Research Division

Okay, great. And maybe one on the Food renewal. Joe, I think the last deal you did, you had the gap up in year 1, if you will, and that stepped down in the, I think, it's in the low to mid singles maybe in year 2, going forward. Is that kind of a similar deal, the one you just did, to the prior ones?

Joseph G. NeCastro

Yes, that's the same pattern, John.

John Janedis - UBS Investment Bank, Research Division

Okay. And then one other quickie is, can you give us an update on your appetite towards SVOD deals?

Kenneth W. Lowe

Sure, I can touch on that, John. We are in the process of evaluating a number of those deals right now, including some deals that are in partnership with our affiliate partners. We see the value of our library and we think the window is still open for us to do some significant deals over the next -- this year and beyond.

Operator

Next question is from the line of Anthony DiClemente with Barclays.

Christopher Merwin - Barclays Capital, Research Division

This is actually Chris Merwin for Anthony. On 2012 guidance, I think the programming expenses of 13% to 15% sort of jumped off the page for a lot of people. Is it fair to say that the bulk of those increases are related to programming for the Travel Channel as you look to boost ratings ahead of the affiliate fee negotiations? And could you also help give us some color on how programming expenses will trend throughout the year?

John Lansing

I'll jump on that, Chris. It's really 3 buckets, if you will, of the programming investment. You're absolutely correct. Number one priority for us is to invest in Travel, because the payoff for improved ratings in Travel are significant. The second is Food Network and HGTV collectively, extremely strong brands. We just -- we wanted to make sure we were investing enough to maintain the growth pattern in Food and to move HGTV up even closer where Food is towards a top 10 network. And then GAC, we've been really looking forward to a programming solution, if you will, for GAC. And a small amount of our investment is going towards developing the lifestyle country programming genre that Ken mentioned in his opening remarks.

Kenneth W. Lowe

And, Anthony, as far as the pattern throughout the year, I think -- I'm sorry, it's not Anthony, is it? It's Chris. What I mentioned in the remarks was that it will fall off dramatically in the back half of the year. What you're seeing through the first half is sort of the continuation of 4 quarters that started in the back half of 2011 and will continue through mid-2012. And then you'll see a significant deceleration on the growth rate on the back half.

Christopher Merwin - Barclays Capital, Research Division

Okay, great. And then just on capital allocation, I was wondering if you could help us think about your current priorities. I know incremental return on capital might be possible potentially through a higher dividend, international expansion you mentioned earlier. And then I know that the Food buy-in is still on the table. If you could just help us think about the order of priorities, that would be helpful.

John Lansing

Well, you did a pretty good job right there, yourself. I'd say our priorities are growth oriented. So to the extent you could acquire the Food Network stake at a reasonable price, absolutely that's a value creator and I think an immediate value creator. But it's dependent on price. So that is always in the back of our minds. It's hard to call it a priority because we can't manage the timeline on that. We just are continuing to let everyone know that we are an interested buyer and we are sort of anxiously awaiting their emergence from bankruptcy. With respect to the other priorities, you're hearing from John some of our most important priorities, which are to make sure that ratings of the big networks continue to grow, but beyond that, international is a huge priority for us, as you know. We're going to continue to invest there. Although as we've said repeatedly, that's not going to be in bet the farm sized chunks. It will be likely operating losses for a while as we ramp up in certain countries. And there could be smaller strategic acquisitions that make sense for us. So you'll see some of that on the international front. And then the digital front is probably the second most important in terms of things that we think will improve growth. We have a couple of new business ideas, things that we're launching. Unfortunately, we can't go into too much depth on both of those at the moment but you should stay tuned for those. And then with respect to return of capital, we don't think that any of those, any of the above will impinge on our ability to continue to return capital to shareholders. We are -- obviously, we evaluate the dividend every year. Both the dividend and the completion of and potential renewal of share repurchase program will be before the board this year. So we're going to continue to be aggressive in returning capital as well.

Operator

Our next question is from the line of Doug Mitchelson with Deutsche Bank.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

So a couple of questions. What are the losses this year associated with the new digital business launches?

Kenneth W. Lowe

Well, I don't want to get specific to that extent. I threw out a number of about $30 million that would include those, as well as the international losses we're going to generate this year, in excess of the prior year. So growth in expenses year-on-year is in that area.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

And that's part of the non-programming cost guidance, right?

Kenneth W. Lowe

Yes, it is.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

The new digital businesses part is, but the international is not.

Kenneth W. Lowe

No, they're both -- that's all in there.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

They're both in there, okay. So that was the total company non-programming cost growth guidance.

Kenneth W. Lowe

Correct. That's correct.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Okay, that's helpful. Any color behind the seasonality in the advertising growth rates you sort of mentioned for 1Q and 2Q, 3Q? Why 1Q slower and 2Q, 3Q faster?

Kenneth W. Lowe

The seasonality on the growth rates for ad sales, there's really not a great deal of change as I look at this fourth quarter. Is Lori going to...

Lori A. Hickok

Yes, that's usually typical. Our second and fourth quarters are typically stronger, so you would expect your first quarter not to be not quite as strong as your second. So as you ramp in, so that's really just a typical seasonality pattern that you're seeing there.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

You're talking about growth rates though, right? Not absolute dollars?

Kenneth W. Lowe

Well, actually in absolute dollars. The second and the fourth are usually the largest for us.

Lori A. Hickok

Which again, your growth rates, too, can kind of follow that pattern, too.

Kenneth W. Lowe

I think what we're calling out is that the first quarter is a little bit -- we just didn't want to make people aware -- we wanted to make people aware that the second quarter is bigger than the first. And to -- so just as you're thinking about your modeling for the quarters, just to sort of get the pattern right.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Okay. And then sort of 2 esoteric ones. For equity and earnings for affiliates, is the $20 million for the fourth quarter a good run rate to start for 2012, now that your U.K. deal is in there? $20 million would be $80 million for 2012. Does that start to get in the ballpark for JV income?

Lori A. Hickok

I think you need to be a little careful because with JVs, they can be a little lumpy. But I think you would need to look at the impact because the UKTV will be impacting our year-over-year, and there's really not much new other than what you would expect normal growth out of those ventures. So that's really the new piece in there, so...

Kenneth W. Lowe

Right. That is how to think about it. The UKTV will be in there for a full year. It was only in for...

Lori A. Hickok

A quarter, yes.

Kenneth W. Lowe

A quarter this year.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Right. So I could -- so annualizing the fourth quarter, okay. So...

Lori A. Hickok

That means that's a good basis to use...

Kenneth W. Lowe

The increase was UKTV. So you're not going to annualize all $20 million, I assume.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Not as an increase, but if $20 million as a number for the quarter times 4 would be $80 million, that was the thought. And then the last esoteric one. It seems like the dividends you're paying out to minorities is less than what you're expensing on the income statement. Is that similar in 2012, when we think about the guidance towards $170 million to $180 million of minority interest? What should we think about it on the cash side for that?

Kenneth W. Lowe

Doug, over time those should track exactly. There is some lumpiness because of the way the timing and the distributions on some of these matters you have, especially with respect to Travel. There hasn't been much of a distribution pattern yet at Travel because of some tax issues. So that will be a little bit lumpy. We'll try to give you a little more guidance on that when we get to a point where we're starting to do the distribution side of the Travel partnership.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

All right. So it's fair to say that given the tax issues, it might be less than the expense again this year?

Kenneth W. Lowe

That's there.

Operator

Our next question is from the line of Alexia Quadrani with JPMorgan.

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

If I could just circle back I think on your answer to the last question, I want to make sure I understand it correctly. The relative weakness in, I guess -- or I guess it's not really weakness, but the ad growth not being as strong in Q1 as the rest of the year. It looks like your comps are actually going to be even a bit easier in Q1 than Q2. Is there something else I'm missing just between -- besides seasonality in terms of looking at year-over-year growth? I mean, is there a pullback? I think we heard from one of your competitors that the CPG segment has maybe pulled back a little bit in the first quarter. I guess, any more color you can give us on the ad market in Q1.

John Lansing

Sure, Alexia, I'll be happy to do that. This is John. I actually spoke to our ad-sales guys this morning in anticipation of the call and they tell me that the market remains strong. With scatter over scatter pricing, as Joe mentioned earlier, is in the high singles, low doubles and the scatter over upfront mid-teens. There's still demand in the marketplace. There's unusually good demand in the digital marketplace, particularly for online video, that we're seeing. And so there's -- our ratings are strong. Our pricing is good. The marketplace is there. We just anticipate that when we get to the second quarter, there may be 1 or 2 more points of growth just based on the improving economy. As we see the economy improving, particularly the housing economy, we think we'll benefit from that particularly in the second quarter and then moving on through the rest of the year.

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Okay, and then still following up on that topic, I mean, you guys have done such an impressive job on the Food Network rating. Is there, I guess, sort of a similar amount of scatter inventory available maybe in the March quarter that you can monetize that great run you've had? And then if you can also just touch on the cancellations. Have you seen how those trending for the June quarter?

Kenneth W. Lowe

Sure. The answer to the first part of your question is yes, we have plenty of scatter available to take advantage of the ratings and the demand. And in terms of cancellations, we're really at about a normal rate, 2% to 3% on the upfront from last summer. The normal rate for the calendar upfront is a little bit closer to 4% to 5% and we're right at about the 5% range for that, nothing unusual there. And so we're continuing to be optimistic about the ad market and seeing demand, particularly good demand in our categories and among our endemic advertisers. We're seeing some -- a great deal of optimism just based on the slowly improving housing economy.

Operator

Our next question is from the line of Ben Swinburne with Morgan Stanley.

Benjamin Swinburne - Morgan Stanley, Research Division

I guess 2 questions. One to follow-up to the last one. Are you seeing signs through your ad sales and your partners on the housing side that we've already started to see a pickup? I know some of the sort of macroeconomic statistics have seemed to have maybe bottomed, but it sounds like you guys have seen some actual turn in that area, which I know has been a headwind for you for a couple of years now, and certainly would be a big positive looking forward. And then my second question, maybe for Ken, you talked a lot about the digital opportunity for your programming, specifically lifestyle networks and how they fit into tablets and on-demand usage. Now that you've got Comcast on and I think you've done really all your deals on the big networks now behind you, it would seem like you have a better sense for what sort of those folks, your traditional distributors, want from you on the TV Everywhere front and also maybe what you might be able to do on your own. And I'm wondering how you think about those 2 options. Not that they're necessarily mutually exclusive, but do you think one path is better than the other? Or could you see Scripps taking a more direct-to-consumer approach than maybe other media companies have done so far on the digital front, either a streaming service on your own, outside of an authentication; or something using more video on an ad-supported base? Any comments there, I think, would be really insightful.

Kenneth W. Lowe

The answer, Ben, is yes. Look, I think, and I'll let John follow-up on the ad sales question. We're in a very enviable position, going forward, because, as you've heard us talk about both in our comments and our questions, we see this as a real opportunity for investment in the future of the content that we produce. And first and foremost, our distribution partners are providing us with ample opportunity and -- to look at not only the TV Everywhere model but additional models on multi-platforms. And just the opportunities that have developed over the past few months with some of the deals that have been signed, which really underscore the value of TV Everywhere, we think, long term, really bodes well for the kind of content we have. So we're going to be making investments. We'll be making investments with our partners and we'll continue to do what we've always done and that's take a very aggressive digital strategy. I think you heard me mention the number of page views that we had over Thanksgiving with the Food Network. And back to why second and fourth quarter, well, they're just our bellwether because if not only the Home Improvement category as spring opens up and people start working on their homes, but the entertainment and food aspects of the fourth quarter really bode well for us. And that's pretty much been the pattern since we created and launched these networks back in the '90s. So without getting into too many specifics, and you'll hear more as we go along about some of this money we're investing, we're extremely excited about the future and we see it more opportunistic than we do as challenging. It's just a great place for us to be in the 3 categories we're in: the home, food and travel categories. So as Joe said earlier, stay tuned.

Benjamin Swinburne - Morgan Stanley, Research Division

Ken, is there -- I didn't see anything, maybe I just missed it, but was there a reason there was not sort of broad TV Everywhere piece to the Comcast renewal? I think it was all fairly quiet, which is always good news anyway, but Comcast is obviously very focused on that, as you can see with their Disney extension. It was just a little surprising to see more from your renewal about expanding rights to different devices and windows. Should we read anything into that? Or is it just...

Kenneth W. Lowe

Let me let John take that because he was front and center with Henry Ahn on the negotiations.

John Lansing

Yes, sure. Listen, we're still fine-tuning some aspects of the deal, including TV Everywhere and other opportunities for us to work jointly to create a digital future, both for our business and the current distribution business. So I'd say, without getting into too much detail as we're discussing it, that it's fair to say that our company is interested in working with our incumbent distributors to build a digital TV Everywhere strategy, and we just want to do so in a manner that is mutually beneficial, and those are the details we're working on today.

Operator

Our next question is from the line of Michael Morris with Davenport.

Michael C. Morris - Davenport & Company, LLC, Research Division

My questions are on the programming cost side, not just for the coming year, which you gave us some really good insight to, but for the longer term as well. And I guess the questions are, first, when I look at the level of cash programming spend that you had in 2011, how close is that getting you to the number of hours that you ultimately want on your networks? I know that moving from let's say like 400 to maybe like the 700- to 800-hour level's important for Travel. So that level, that 500-plus, how close are we there? And then, when we think about how that spending may increase going forward, what's the importance of the ratings success? And how should we be thinking about, if there is incremental cost coming on, when that will be coming on over the next couple of years?

Joseph G. NeCastro

Let me start and then -- Mike, this is Joe. I'll start and then turn it over to John for the sort of longer-term view of that. We are below the normal level, I'd say, in terms of introducing new hours at Travel Channel relative to the others. And that's a combination of things. One is, since you're introducing a lot of new things, you sort of have to keep other things constant to know the effect of the new stuff you're putting on, otherwise you're not really sure what's moving the needle there. And secondly, the real ramp-up comes later down the road when you actually are -- you have successful series and you have that high-class problem of so many people watching that you have to introduce new hours to make sure that it's always fresh. So we would be delighted if we were able to introduce that many new hours on the Travel Channel. It will mean -- at that point, it will mean we have been successful in sort of cracking the code in terms of series that have a longer life and a following that's large enough to notice that we're -- that the repeat factor is too high. So lots to come on that and lots of work. There's some good early signs, some traction we're finally getting that we feel good about. From a longer-term pattern, we'll talk to -- we'll turn it over to John and he can talk to you about the importance of ratings.

John Lansing

Yes, thanks, Joe. So when you think about when we acquired Travel Channel, it was really reliant on 1 or 2 series. In fact, Man v. Food, one series alone, represented 42% of all of the prime time impressions when we acquired it. And as we thought about building this business, we thought about what we did with Travel -- pardon me, with Food and HGTV, and that is to build a brand, a sturdy brand platform, if you will, for programming to be nurtured and grow and find hits within that context. I'm really optimistic about the slate that the team in Travel is putting together right now. We have a really strong group of programmers there under Laureen Ong that have, I think, found a suitable set of series and specials that I think will manifest the Travel brand in a way that will really resonate with the kind of brand Food and HGTV has become on cable television and in digital. And so you're asking the timeline for that, and so that will first begin to unfold in the second and third quarter, into the fourth quarter of this year and then, when we hit our full stride, by the beginning of 2013, we'll be in that position that Joe is describing to really look at the results of '12 and then make some, hopefully, good decisions on what to double down on and move on from there. So call it an 18-month to 2-year process, going forward, and I'm very optimistic from where we are today looking ahead to do that.

Michael C. Morris - Davenport & Company, LLC, Research Division

That's great. That's helpful. One other quick thing, then. When we look at the amortization of the programming costs in the coming year, is there any implicit assumption of, perhaps, some higher programming cost write-offs just due to the fact that you have more new programs? Or is it -- does it just imply sort of that normal level that you've seen in the past? I think you've spoken to about maybe a $5 million a quarter level?

Lori A. Hickok

We don't really expect it to increase. In fact, I'd say it'd moderate downward but it does -- there is a level of assumption there that there will be, as there always is, some shows that you need to write off, so...

Operator

Our next question is from the line of David Bank of RBC Capital.

David Bank - RBC Capital Markets, LLC, Research Division

Two questions. The first one on the guidance in terms of revenue growth. What kind of -- if you look at what you're expecting in terms of ratings versus pricing and even nontraditional monetization, right -- so you've got pricing on your traditional inventory sales and then you guys are sort of better than almost anyone at integrated marketing and sort of in-programming dollars. How do you kind of think about what the drivers are between those 3 categories in terms of your growth guidance on the ad side, is the first question, for next year. And the second question is, I'm a little bit confused about your commentary around the digital strategy and kind of expense growth there. It sounds like you're kind of saying you're maybe pursuing your own kind of OTT strategy here and I want to make sure I'm understanding that correctly. Is it a subscription strategy? Does it preclude you from doing deals with third-party providers ultimately? Is it kind of an either/or, if I'm understanding correctly? And lastly, it sounds like we have expenses built in for it. Do we have any revenues associated with this business or these initiatives in 2012? And when are we likely to see incremental revenues?

Kenneth W. Lowe

That's a long path. I'll start off. John and I will tag team some of this stuff. With respect to revenue growth guidance, it's sort of an all of the above answer. Ratings are supreme, right? That's the most important thing you can do in any discussion, in that it enables strong pricing and then it certainly enables these nontraditional deals. So first and foremost, the most important assumption in putting together your revenue model for the following year is ratings. And then secondly, pricing. But a lot of the pricing frankly is baked-in with the upfronts and the nature of the beast, and then we just sort of follow scatter. To the extent you can monetize short-term ratings growth in the scatter market, so much the better. But the revenue growth next year is a combination of all the above. And it's hard for me to parse out exactly right now which is which, which level of growth comes from which of those. With respect to...

David Bank - RBC Capital Markets, LLC, Research Division

Would your current run rate of ratings support this guidance?

Kenneth W. Lowe

Yes. With respect to the over-the-top questions, John and I both need to weigh in a little bit here. There's a very modest amount of revenue in some of these launches and, I'd say, to answer the end question there, we're not talking about things that are mutually exclusive. Our first priority is to work with our traditional distributors in a way that preserves the model of TV Everywhere. We're big believers. We're big supporters but beyond that, there are things, there are opportunities, we think, to do things on our own as well. And they can be complementary.

John Lansing

Yes. And this is John. We're currently doing that. That's part of our digital business today. We have upwards of $100 million today in digital advertising. The hottest corner of that, if you will, is the video that we serve off of our websites. But as we look to supercharge our digital businesses, we really believe we can do it in 3 dimensions by continuing to do what we do ourselves, to work with third-party distributors, but most importantly, to build a TV Everywhere strategy and take advantage of what we already have in terms of the ecosystem within the affiliate relationships and revenue that flows through there, which is -- which dwarfs the revenue that would come from a third-party deal.

Operator

Our next question is from the line of Jason Bazinet with Citi.

Jason B. Bazinet - Citigroup Inc, Research Division

I just have a high-level question. Maybe it's a little bit unfair because it talks about the industry, but most of the earnings beats for a lot of your competitors in the space have come from these SVOD sort of onetime payments. And I think while you guys all look at sort of the target demo where -- for the viewer you're trying to attract, if you just step back and you sort of look at the composite ratings for cable networks, all of them, across all demos, the trends have seemed to have gotten demonstrably worse over the last 8 or 9 months, sort of up low-single digits to sort of down mid-single digit. And I guess my question is, do you sense that we're -- that there's -- that the industry would sort of -- or you would agree with that, that there is some cannibalization going on? And is that just sort of a piece of calculus mathematics that you do that says, "Well, we're willing to take some hits for the non-demo and the non-prime time area because of the dollars we get from some of these other initiatives are greater"? Or would you disagree and say, "There really is no cannibalization. All of this viewing that's going on, on these SVOD deals is really incremental"?

Kenneth W. Lowe

Jason, let me just take a first stab at it. John might want to jump in as well. I do not want to speak for the industry. I can just relate to where we are. There's been a lot of lumpiness in the ratings but the last few months have been very unusual. The NBA strike has impacted quite a few cable networks for a lot of different reasons. There were some timing issues on some other sporting events and there's also, I think, been a very aggressive retooling on some of the broadcast networks. But we're also seeing some significant rating losses there. If you look at Idol and where it's trending down, a lot of the -- American Idol, a lot of those shows. So I think there's a lot of fluctuation going on. The bottom line though, when you look at it on a quarterly and ongoing basis, is cable networks have continued to eat into the ratings overall of broadcast networks. And I think we're going to continue to see growth in the cable network industry. Some of the hottest shows right now, up and down the dial, are on the cable side. So if you take the lumpiness's side of the past few months, I don't think it's anything more than just the up-and-down nature of ratings and some of the fluctuations. Fragmentation is never going to stop. It never has; it never will. And it'll be -- the best shows will continue to win. I mean if you look at some of the results we've had and we talked about this morning in the Food Network, with Rachael vs. Guy and best fourth quarter we've ever had in the history of the network, I mean you have to factor that into that kind of question. So whilst I think some cable networks have taken some hits, and we do that from time to time, overall the future's very bright. Cable network business is very strong and will continue to be so. John, is there anything you want to add to that?

Operator

Our next question is from the line of Michael Mathanson (sic) [Nathanson] with Nomura.

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

A couple on advertising trends. So can you just dig in to a bit about the calendar upfront versus the broadcaster front? Can you give us a sense of what the -- how the pricing turned out calendar-wise in the upfront versus the broadcast? Or was it similar types of inflation year versus year?

Kenneth W. Lowe

The calendar upfront was in high singles for the most part, with some churn in there that may have had some individual deals a little higher than that. But generally, mid-to-high singles on calendar.

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

Okay and then, the question that people seem to dancing around is volumes. So what were volumes like? And we heard volume -- comments about volumes in the fourth quarter. What are volumes like for you in the calendar upfront? And how are volumes looking in the current first quarter?

Kenneth W. Lowe

Sure. The volumes for us are weighted -- the growth is weighted towards our upfront from last summer, slightly -- a slight increase -- or no, a decent increase in volumes from that upfront deal. And that's taken direct response down as a result. Scatter volumes in the mid-to-high singles, upfront volumes in the mid-teens to high teens.

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

But the volume is -- I mean, do you see a drop-off in volume at all in the fourth quarter on -- in scatter markets versus last year's scatter markets?

Kenneth W. Lowe

No, we do not see a drop-off in volume in scatter in the fourth quarter.

Michael Nathanson - Nomura Securities Co. Ltd., Research Division

Okay, and then last one would be, as I look at our models, and I think you guys are saying that second quarter is historically a faster growing quarter. It may be a larger dollar quarter but I don't think second quarter has historically been faster growing. So we're assuming, I guess, in the acceleration, more scatter volume and better scatter pricing, I would think, to get acceleration from 1Q to 2Q. Is that a fair assumption?

Kenneth W. Lowe

Yes. No, that's a fair assumption and the acceleration is a couple of points, so I don't want to overstate that. But I think the factor that drives the growth rate versus the actual dollars is the improving economy around some of our endemics, particularly on the home side.

Operator

And our next question is from the line of Eric Handler with MKM Partners.

Eric O. Handler - MKM Partners LLC, Research Division

Just trying to dig into Travel Channel a little bit and some of the issues there. How much of the ratings decline is a function of Man v. Food versus -- you had a lot of new programming launched in the back half of the year. What type of reception did you get from some of those programs? And then secondly, just a housekeeping question. Your program and program license expense in the fourth quarter, how much was that up year-over-year versus fourth quarter of '10?

Kenneth W. Lowe

On the second part of your question, are you asking just about Travel?

Eric O. Handler - MKM Partners LLC, Research Division

No, no, no. Overall, for the company, for program licenses.

Kenneth W. Lowe

I'll let Lori look that up and I'll address your first question. The answer is, as I said earlier, the reliance that Travel Channel's prime time delivery had on Man v. Food at its peak was significant. In fact, it was over 40% of all of the prime time impressions at its peak, and then it fell off. Even after it fell off, it was still in the high 20% range. So you combine that with the success of Anthony Bourdain and Andrew Zimmern and then the Ghost Adventures, and we really had a network that was fairly reliant on a small number of hit series. We spent the year last year trying to strengthen those series. Unfortunately, Man v. Food as a format just was not sustainable beyond the 3-year arc. But we still are working with Adam Richman to develop new formats that you'll see coming out this year. So we're excited about that. But mostly, what we're doing today is building out some new formats -- some of those were mentioned in the prepared remarks earlier -- that help us create the brand, if you will, around Travel that both strengthened these existing series, these incumbent series, if you will, and build 2 or 3, perhaps 4 new series so that we can be sitting here at the third, fourth quarter and looking ahead and have as many as 6 to 8 series driving the brand versus 2 to 3 that are driving it today.

Eric O. Handler - MKM Partners LLC, Research Division

So the new programs that have launched thus far in the back half of 2011, how did that perform on a relative basis to some of the other programming launches from prior years, or historically what you've seen across some of your other networks?

Kenneth W. Lowe

Yes, so Tony Bourdain's new series, The Layover, was a breakout success for us and we're renewing that going into 2012. Bizarre Foods took a turn away from international towards American locations, and that's done very well. The Ghost Adventures guys, there was a counter series to that also did well. And then, so we've had some successes now. On the other hand, we had some -- we took some shots at some other series that did not do so well, unfortunately, and that's just the way it works when you're trying to build up, as Joe mentioned earlier, the first year, the first 1.5 years, first 2 years. You're going to try some things in order to center in and find the voice of the network, if you will, and we're beginning to find that voice now based on the successes that we've had coming out of 2011, but we learned from the ones that did not work as well.

Lori A. Hickok

This is Lori. Can you clarify your question on -- with programming cost licenses...

Eric O. Handler - MKM Partners LLC, Research Division

In your income statement, when you look at -- when you break out your costs within the Lifestyle Media segment, your program and program licenses costs versus -- in the fourth quarter versus last year's fourth quarter.

Kenneth W. Lowe

Why don't you let us dig that out and we'll come back on when we get the numbers? All right.

Operator

Our next question is from the line of Tuna Amobi with Standard & Poor's Equity Group.

Tuna N. Amobi - S&P Equity Research

So I've got a couple as well. Perhaps, first wanted to get an update on the international launches of Food Network. I know you talked about Europe, South Africa and Asia. Any updates on those? And perhaps other international markets you might be considering as well. That would be helpful.

Kenneth W. Lowe

Now look, we continue to roll out the network, and we had a launch in Ireland and one or 2 other countries in Western Europe in the past year. We continue to do well in the U.K. and especially in South Africa, believe it or not, on ratings. But that continues. These tend to be smaller launches. We're just sort of building out the footprint. So there's not a lot of news on any of them outside of the U.K. where we continue to enjoy great ratings strength, and it's a large ad market and we're doing very well there. But we do continue to launch the network, especially throughout Europe and the Middle East and Africa.

Tuna N. Amobi - S&P Equity Research

Okay. On the UKTV, do you see any path, perhaps, to kind of pulling in the digital rights, which is something you've alluded to in the past, that you would be interested in? Is there any kind of game plan there? Or is it just kind of wait and see? And are those discussions ongoing perhaps or not?

Kenneth W. Lowe

Yes, they are ongoing discussions. We continue to be very interested in pulling the digital rights into the UKTV. We think there's a great upside opportunity there. We're just working with our partners to try and size that.

Tuna N. Amobi - S&P Equity Research

Okay, and lastly, how do you feel about potentially -- I know you're doing your buybacks, right? So -- and you've talked about all of your priorities, international expansion, whatnot. But in terms of potentially initiating relatively modest dividends, just perhaps consistent with some of your peers -- as you've I'm sure noticed, a lot of the media companies moving in that direction. So would you -- was this something perhaps the board would be interested or perhaps reticent to consider?

Joseph G. NeCastro

Tuna, this is Joe. You used the word initiate. We've been paying dividends since we spun out. We did and we had sort of a material increase in that dividend last year. It's something the board will continue to look at, depending on cash flow generation of the business and other alternatives. So right now, we're paying a combination of a dividend and we're in the market buying shares back as well. So you can look for us to continue the dividend certainly and look for -- we continue to monitor whether or not it makes sense to increase the dividend as we...

Tuna N. Amobi - S&P Equity Research

I actually meant increase. I perhaps used the wrong word. I meant increase. Time Warner increasing theirs and a few others also on that path. So is this something on the radar? You're saying it's a possibility, it sounds like, right?

Joseph G. NeCastro

Certainly something under active consideration.

Operator

Our next question is from the line of Tom Eagan with Collins Stewart.

Thomas W. Eagan - Collins Stewart LLC, Research Division

I've a follow-up on a couple of questions. On digital rights, is there an opportunity to add digital rights from your pay TV operators outside of your typical renewals, like for example, outside of the Comcast renewal, outside of the -- any renewals that you have with Travel in '13? And then I have a follow-up.

Kenneth W. Lowe

In short, the answer is yes. We're interested in having those conversations and we're doing those or having those outside of the typical renewal discussions that would happen anyway. Yes.

Thomas W. Eagan - Collins Stewart LLC, Research Division

Okay, and then separately, following up on Ken's comments on the cable of -- on the programming and the viewers on cable versus broadcast, is there anything to the thesis that Scripps' channels may not be impacted as much by the competition of viewers to broadcast because the programming is just so different?

Kenneth W. Lowe

Well, look, in a general sense, entertainment-based programming tends to have more fluctuations than our type of programming, which is both informative and entertaining. And because of the targeting nature, upscale women, of what our networks do, there tends to be more stability. But having said that, at the end of the day, if the Super Bowl is on, ratings are going to suffer on everybody else besides NBC in the past weekend. So generally, I think we've had more stability over the years than probably the general entertainment broadcast networks and some of the cable networks. But it's still all ratings driven and we're all about how well we do. And as we documented earlier on this call, to have a network that's almost 18 years old, like the Food Network, have its best quarter ever and have Home & Garden put some big-time numbers on the scoreboard for some of the shows we had in the fourth quarter, I think this bodes well for the continuing interest in our categories that consumers have. And as I mentioned in my remarks, there's this passion that are attached to these brands. So many times, we're people's second punch, if you will. They may go up and down the dial and then come back and rest on Food Channel or HGTV because it's just good, consistent, solid programming that has family values and is watched many times by the entire family. So a long-winded way of saying yes, but at the end of the day, it's still all about ratings.

Thomas W. Eagan - Collins Stewart LLC, Research Division

Right, and then just lastly, in 2011, in terms of the program payments, they exceeded the program amortization, which kind of reversed the trend we saw in 2010. But following up on Joe's comments about how it remains a higher program amort in the first half of '12, for the full year of '12, should we still see program payments exceeded?

Joseph G. NeCastro

I'm sorry, are you saying -- are you asking whether payments will exceed amortization?

Thomas W. Eagan - Collins Stewart LLC, Research Division

Yes.

Joseph G. NeCastro

Yes, the answer is yes.

Operator

And our final question for this morning will be from the line of David Joyce with Miller Tabak + Co.

David Carl Joyce - Miller Tabak + Co., LLC, Research Division

If you could just provide some updates on what your path to profitability might be for your international plans. I know you did say that there'd be an increase of $30 million in the operating losses this year. I was just wondering what the mix of using programming that's already in the can or maybe can be easily modified versus new programming might be. And then finally, on the distribution of the smaller networks, at what point do you think you'll be as distributed as you think makes sense for those?

Joseph G. NeCastro

Let me take the international question and John can talk about the smaller networks. David, on international, there are -- it's sort of a mixed bag. The venture with UKTV is immediately profitable because we bought an interest in a profitable network, and that's less of an issue. We will be, we hope, working with them on the programming side on their lifestyle networks. But on a pure launch, I guess, probably the best example and certainly the most sizable was the U.K. launch of the Food Network. And it is a mix of programming there. Mostly it's U.S. and some originations from British-based chefs. So you have those 2 elements, and we launched with those 2 and only those 2. And Ken mentioned a couple of commissions we finally did this year when we thought we had enough momentum and enough eyeballs to justify spending a little money on commissions. We do continue to lose money there as we build the business, but we think the right thing to do is to continue to invest so that we build viewership and build an ad-based business there. We think we're on the path to profitability but we're not there yet. I think in other markets, you'll see us with a similar strategy. Some of the good news is that most of -- a lot of the fastest-growing markets in the world are also the cheapest places to produce programming. So we're not concerned about our ability to find programming because we can create it. One thing we do have is extensive experience with formats that we can export, regardless of the language. We might be able to actually produce them much more cheaply and they'll just be just as effective. So we're very optimistic about our ability to be profitable even in a greenfield launch. John, do you want to talk about the smaller numbers?

John Lansing

Just briefly, the -- it's interesting that you bring up the distribution for the smaller networks. All 3 of them had some growth, in fact, sizable growth in subs over the last month. DIY added 5%, GAC 4% and Cooking added 1%. So we're still seeing growth. So we're now upwards of over 62 million for GAC, almost to 60 million for Cooking and DIY. And as that continues to grow, it proves, again to Ken's point earlier, that the platform -- the digital cable platform is sturdy and growing and we have great positions and great brands on those platforms.

Mark W. Kroeger

Thanks, everybody. Appreciate it. This is Mark. Collin, you can read the playback instructions and Mike and I'll be here for your follow-ups for the rest of the day.

Operator

Thank you. And ladies and gentlemen, this conference will be available for replay after 12:30 p.m. Eastern today and will end February 23 at midnight. You may access the AT&T replay system at any time by dialing 1 (800) 475-6701 and entering the access code of 233451. International participants, please dial area code (320) 365-3844. That does conclude our teleconference call for this morning. Thank you very much for your participation and for using the AT&T Executive TeleConference Service. You may now disconnect.

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