E. W. Scripps Company: Seeking Success Online

 |  About: The E.W. Scripps Company (SSP)
by: Sramana Mitra

The E. W. Scripps Company (Scripps) (NYSE:SSP) is a $2.5 billion diverse media company engaged in the publishing of newspapers, broadcast television, interactive media, licensing and syndication. The Company has 5 business segments - Scripps Networks, Broadcast Television, Newspapers, Interactive Media and United Media. In this piece, we will take a look at Scripp’s shifting business dynamics.

Scripps Networks includes the company’s growing portfolio of popular lifestyle television networks like HGTV, Food Network, DIY Network, FINE LIVING, GAC and HGTVPro and their affiliated web sites. Scripps Television Station Group includes six ABC-affiliated stations, three NBC affiliates and one independent. Scripps operates broadcast television stations in Detroit, Cleveland, Cincinnati, Phoenix, Tampa, Baltimore, Kansas City, Mo., West Palm Beach, Fla., Tulsa, Okla., and Lawrence, Kan.

Scripps Newspapers include daily and community newspapers in 18 markets and the Washington-based Scripps Media Center, home to the Scripps Howard News Service. Scripps newspapers include the Rocky Mountain News in Denver, the Commercial Appeal in Memphis, the Knoxville (Tenn.) News Sentinel and the Ventura County (Calif.) Star.

Interactive Media includes search and comparison shopping services, Shopzilla, uSwitch and UpMyStreet. Shopzilla and uSwitch are the foundation of a newly created interactive media division for the company. United Media is a leading worldwide licensing and syndication company and is the home of Peanuts, Dilbert and about 150 other features and characters.

Scripps, like other media companies, has been witnessing a sharp fall in its newspaper business with newspaper revenues falling from $908 million in 2000 to $718 million in 2006 and profit margins have fallen from 34% in 2004 to 27% in 2006. Newspaper revenues, which constituted 60% of the Company’s revenues in 1996 today makes up only 29% of the total revenues of the Company. The Company’s newspaper revenue dipped 8.9% in 1Q 2007 and is expected to be down 4% to 6% in 2Q 2007. The Company’s strategy is to grow its Scripps Networks and Interactive Media business by expanding them and manage its local media franchises.

As a part of its corporate strategy Scripps has been shifting focus from the traditional media to the new age media – broadband channels, Internet and mobile. Scripps is plowing the cash generated by the “old media” businesses into its cable networks and Internet operations. Interactive media, which had revenues of $99 million in 2005, grew 174% to $271 million in 2006 and today constitutes almost 11% of the Company’s total revenues and 7% of the Company’s profits. The divestiture of Shop At Home television network and the voluntary separation plan to some of the employees at its newspaper division will enable the Company to improve margins.

Scripps has made a conscious effort of identifying niche opportunities and targeted high-end consumers with lifestyle offerings and rich, intense and innovative content and high quality programming, which has resulted in the Company’s Networks revenues growing from $724 million in 2004 to $1,052 million and profit margins moving up from 42% in 2004 to 49% in 2006.

The Company’s broadband channels have been driving up its Internet audience. The usage of affiliated websites around its lifestyle television channels have also facilitated the creation of a community around them and generating additional revenues. Scripps Network’s Internet revenues almost doubled to $61 million in 2006 from $31 million in 2004. Cable network-affiliated websites and broadband channels grew 40% to approximately $15 million in 1Q 2007.

The Company is aggressively pursuing its online businesses and its sites Shopzilla, uSwitch, FoodNetwork, UpMyStreet and other online properties have been growing rapidly. According to comScore, Scripps’ sites have witnessed a sharp increase in traffic to over 33.5 million unique visitors in January 2007 and is one of the web’s top 15 companies. Shopzilla, with 19.8 million unique visitors in January 2007 is among the leading online shopping comparison sites in America and also a top 10 shopping destination. Online revenues for the newspaper group increased 20% in 1Q 2007.

Scripps’ lifestyle sites are among the leading sites in their segments. According to Nielsen//Netratings, FoodNetwork is the number one site in cooking with approximately 8.8 million unique visitors in January 2007. According to Nielsen//Netratings, in January 2007, HGTV and DIY Network attracted 8.4 million and 2.5 million unique visitors respectively and were among the top ten sites for home and garden. The Company recently expanded its presence in the social media space with the launch of DIYnetwork.com’s ”My Projects” and FineLiving.com’s ”We Live Here”.

Interactive Media suffered a loss of $0.4 million in 1Q 2007 because of the increased competition in search engine marketing, lower energy costs resulting in a softer switching market in the UK, costs related to transition in leadership at Shopzilla and investments in brand building for its sites. Scripps expects the Interactive Media segment to report profits in the range of $30 - $40 million in 2007. The Company is positioning its Internet search businesses to derive the maximum benefit from larger industry trends and hopes to turn around in the next three to four quarters.

Scripps is moving from the so-called “old media” to the online media and the road is a bumpy ride. The success of the Company will depend on how it is able to innovate, build, manage and grow its Internet properties.