E.W. Scripps Company: A Raging Short?

Will someone please explain to me why Scripps (NYSE:SSP) is not a raging short? Much like my earlier call on some of the overpriced aspirational restaurants, i.e., P.F Chang's (PFCB), The Cheesecake Factory (CAKE), etc., that are concentrated in subprime-struck regions, Scripps strikes me as another company over-levered to subprime's toxic byproducts, and yet holding up past the point where it should be declining.

Consider: While the E.W. Scripps Company is a big, diversified media company, it does garner a very large share of its revenue -- and recent growth -- from lifestyle-related media products. Specifically, the Scripps-owned Scripps Network has Home & Garden Television [HGTV], Food Network, DIY Network [DIY], and Fine Living as television media properties. The Network, driven by these properties, contributed around 40% of E.W. Scripps's revenue last year, and much of its growth. Given that these bubble-channel properties must be seeing falling revenues -- and despite the car-crash fascination of unintentionally hilarious programming like "My House is Worth What?" -- it is baffling that the company's stock has held up.

How much longer can the disconnect persist? Am I missing something in my late-night puzzlement?

Comments

[gmoney]

How about proven growth, a focus on local markets less affected by declining print and on-air advertising, and evergreen content that makes sense for those who are now going to be making the most with what they can afford? Surely the DIY spirit benefits from the sub-prime fiasco. FoodNetwork should likely benefit from the same forces that are working against P F Changs and CF.

Lastly, consider your description from above: "diversified.&quo...

If you're looking for short opportunities, try high-end furniture and appliances. I imagine all those stainless refrigerators are less attractive now that they might not be seen as high return investments when flipping a house.

[Daniel Charpentier]

I agree with the post, but for a different reason.

I remember a few conference calls ago, the Scripps CFO said that he was very grateful to Emeril Lagasse for that quarter's strength.

Emeril was promoting a line of cookware on the show that was selling like crazy, with Scripps taking a share of the revenue.

You may have read that the network is now going to drop Emeril's studio audience and returning to its roots in the next season.

There are quite a few episodes in the can with the studio audience, for several of the shows, but as soon as these air, the content of the network will change significantly. Stay tuned.

[BTN]

Because HGTV can easily switch programming from "flip that house" type shows to "lets remodel and make our current house livable" type shows.
So they win in any housing environment,

[Paul Meisel]

It is amazing to me how many people watch that kind of stuff, and it has the benefit of being cheap to produce, along with (for some shows) a long rerun life. I know Scripps doesn't own this one, but "This Old House" reruns go on forever, and the HGTV and Food TV stuff has the same kind of life. Whether they can keep growing it is another question, but there is some cash cow there.

[Matt H]

In addition to the comments above, its worth noting that a good share of Scripps’s programs are produced in Canada and do not require large teams of writers to produce. Thus, the company is in a strong position vis-à-vis the concurrent writer’s strike. Scripps could see an increase in viewership as the quality of their competitors’ program slips, and this in turn could help offset slowing sales or falling ad costs.

[calvino]

Can we strike the word 'aspirational' from our vocabulary in 2008. Please?

[Rich Shinnick]

My wife is addicted. My neighbor's wife is addicted. My mother-in-law is addicted. My sister is addicted. And..I am pretty sure Oprah is addicted. It is a female thing so consider yourself unqualified to write on this topic.

[Drew Robertson]

The split with the newspaper and TV properties complicates this short. SSP has vastly outperformed the other local media companies; I guess entirely on the strength of their cable nets. When they split the fog will clear. I'd guess the debt-burdened cable net will face more challenges than anticipated now.

[NO DooDahs]

I'm amazed at the lack of logic and critical thinking applied in this post.

The author takes one show – "My House is Worth What?" – from all of the shows on four different television networks. He then slams it as "bubble-channel&q... and "car-crash fascination" based on the current home-price hysteria, and by association smears EVERY show on ALL FOUR networks with that image. From that, he conjectures falling revenues and an obvious "disconnect" from the stock price.

Has he looked at the cash flow statements, or any financials, for this company? Or does he make this judgment based on ONE SHOW that is about home prices?

Has he done any stringent examination of the networks' actual programming? There's a lot of material about living on a budget in those networks; in flyover country, some of us have housewives that cook, and the kitchen is a center of activity; the food shows are aimed at families preparing meals, not at gourmands eating at restaurants; even in the event of an economic downturn, wouldn't there be a marginal INCREASE in demand for "do it yourself" programming – which these networks are full up with?

Has he looked at the chart he provided? Down 10% YTD, in a market that is up 3-4%, may not be a "raging short" but it certainly wasn't bad, especially if somebody took advantage of the rampant fear mid-August to cover partially.

This is probably the worst Kedrosky I've read. Which is a shame, because while I expect this of most authors, I didn't expect it from Paul.

[rolex]

The price might be pushed down with this article..................