TVN Executive Session | Scripps: Don’t Overconsolidate In One Business
E.W. Scripps has been an active station buyer this year, acquiring the 15 stations of Cordillera Communications and scooping up eight stations spun off from the Nexstar-Tribune merger.
The deals have lifted Scripps to the top rank of groups with 60 stations in 42 markets covering 31% of U.S. TV homes.
But what has distinguished Scripps from its peers over the past several years has been its willingness to diversify into new businesses and media through acquisitions outside the station-trading marketplace.
Most notably, there were the purchases of Newsy in 2013 (OTT); Midroll Media and Stitcher in 2015 and 2016, respectively (podcasting); and Katz Broadcasting in 2017 (multicasting).
Overseeing these forays into the non-core realm has been Adam Symson, first as chief digital officer, then as COO and, as of August 2017, president and CEO.
In this interview with TVNewsCheck Editor Harry A. Jessell, Symson is not so much interested in entering new businesses as he is solidifying or expanding his positions in the ones he is already in. He talks about his latest moves to do just that.
An edited transcript.
Of all the TV groups, Scripps is among the few that has made sustained efforts to diversify out of the basic station business with forays into OTT, podcasting and multicasting. Do you have further diversification ambitions?
I don’t think you can be around for 140-plus years if you allow yourself to be too over-consolidated in one business without being aware of marketplace trends.
So, do we have further ambitions? We have said that we expect our national [non-broadcast] business to generate more than $500 million in revenue by 2021. We expect continued margin expansion, lumpy as it will be, because these businesses are growing. We will continue to support them through investments and efforts through that period of high growth.
You just hired Kerry Oslund from Tribune with the title of VP of strategy and business development. That suggests that you are looking at more new businesses.
Let me separate the question of Kerry from your question. I see diversification as a numerical opportunity as well as a business issue. So, when I reference our desire to invest with a P&L, to see those businesses continue to grow as quickly as they are, to me that is diversification.
Today the company generates the vast majority of its cash flow through local broadcasting and through our local businesses, and we expect to continue to do so for a while, but we also see the opportunity to profit from disruption. The work we are doing on the national side is about all of that.
Kerry is about something else. Kerry has been brought on board to focus primarily on the opportunity with spectrum and ATSC 3.0. I think that there is going to be an opportunity for value creation with spectrum and ATSC 3.0 and we have been very aggressive as a partner in Pearl.
That is really a long-term play, isn’t it? I mean, realistically, we don’t know what the business is, let alone when it might contribute to your top line.
That’s true. When I meet with investors, unlike some of our peers, I don’t try to build ATSC 3.0 into today’s investable story. But the way we lead this company isn’t quarter-to-quarter or even year-to-year. I am really thinking about decades, and this company sits atop a very significant amount of spectrum, which will be made even more efficient as we transition to ATSC 3.0.
Let’s talk about the podcasting business. You sort of doubled down on that with your purchase last year of Triton for $150 million. In terms of your diversification plays, do you think podcasting has the most potential right now?
I would not characterize Triton as doubling down on podcasting. There is some synergy that Triton brings to our podcasting business with respect to dynamic ad insertion, posting and the ability for us to monetize better our full catalogue of podcasts.
But Triton, in and of itself, is a leader in the digital audio business, and podcasting is just one component of digital audio. So, today, Triton counts as its clients either on the infrastructure side or the currency side of the business, almost all of the major digital audio streaming companies.
We are very bullish on the opportunity for this company in digital audio streaming. We were very early in with respect to digital audio when we bought Midroll, and most people sort of furrowed their brow. They could not understand the play and just now you are starting to see both the radio groups as well as digital pure plays recognizing that podcasting is going to be one of the most important platforms for the spoken word, journalism and entertainment. We have been there since 2015 and we have a leadership position as a result of our aggressive play.
Scripps plunged deeply into multicasting with its purchase of Katz two years ago [the Bounce, Grit, Escape and Laff diginets]. Katz, now a Scripps subsidiary, recently revived Court TV as its fifth diginet. Does Katz have any more networks up its sleeve?
We have told Jonathan [Katz], who runs the business, that we are always open to the opportunity to expand the portfolio. It is why after owning Katz for a year, we were willing to put some of the profits of that business back into Court. We are excited to see that Court is hitting its milestones and we expect it to continue to grow right along the same path that the other Katz networks did.
This was another one of those moments where when we acquired the Katz networks, industry watchers and investors didn’t understand why we would have done it. We love local broadcasting; we think it is a great business.
Over the air has gone from, let’s call it 7%, when it was mostly a product depended on by people who could not afford pay television, to now around 17%. In some markets, as many as 25% of homes are OTA homes. Now those OTA homes also often have broadband, but what we are seeing is the resurgence of over the air as an important platform for the distribution of entertainment, journalism and news.
Well isn’t that concerning? You don’t get any money for over-the-air subscribers as you do for pay TV subscribers. Don’t you want to keep them wedded to a local cable operator?
I am not a believer that Scripps alone is going to be able to change consumers’ habits. People are going to make a decision about how to cobble together their own bundles and I, as a leader, have a choice. I can hunker down and be defensive about it, pretend it’s not happening and try to hold on for dear life or I can identify other areas where this company can look to the future and profit from that disruption.
So, the multicasting is sort of a hedge.
Absolutely. I think retransmission has significant growth ahead, particularly for this company as a result of two things: the Comcast step ups and our broader reach as a company. But I am also aware that consumers have more choices than ever with respect to virtual MVPDs and even a move toward subscription video on demand. If that is where the consumer is going, then my responsibility is to make sure that this company is well represented in the space where we can profit.
One of the things I have always been curious about is what is an OTA home worth? You know, when you are talking retransmission you can put a number on it. It is worth three bucks or whatever. What is that home worth as an OTA home without cable and what is it worth without cable, but with a streaming service or two?
Just this morning I had a conversation with [EVP and CFO] Lisa Knutson about that subject and so we are actually thinking about doing some work in that space. When I have the answer, I will circle back with you because I think it is knowable. It might not be knowable to the level of detail that a retransmission home is because that is a contractual and negotiated number, but it is knowable.
Remember that when somebody is plugging in a digital antenna and depending on over the air, they are faced with fewer choices, which from our perspective means they are spending more time with our networks, both our local broadcast networks, as well as the Katz networks. What we have seen at the Katz networks is that value growth has come as the marketplace has expanded.
Your big OTT play has been Newsy. Do you have another idea of the OTT space?
Oh, a significant one. For quite a long time, we were selling our local advertisers campaigns that included over the top video impressions.
Now as we see greater adoption of these platforms, we have moved all of our local brands into that space and we recently announced sort of a rebrand and launch of one of our sales products for the local marketplace called Octane. [It] is essentially our ability to bring together the kind of OTT inventory that our local advertisers are seeking, to mesh it well with their broadcast and cable television campaigns and deliver on a consumer proposition that meets people everywhere they are consuming television.
In August, you announced that Scripps journalists would be working with the news literacy project to teach middle school kids and high school kids on media literacy. You also committed $100,000 to the work of the Reporters Committee for the Freedom of the Press. Is this a reaction to President Trump and his continuing attacks on news media that is critical of him?
No. I think it is a reaction to the company’s mission. This is a journalism company. We are at a moment right now where newspapers are under incredible pressure, financial players that are not mission-oriented are moving into the broadcast business and more Americans than ever depend on local news brands like ours for their news and information.
The Scripps Access Project sets aside some money in our legal department to ensure that we fight aggressively for access to public records and for the ability to publish stories that will make a difference in our communities.
News literacy is good for our business as well as our democracy. We need to make sure that young people are graduating from high school and college with the basic skills to differentiate between fact and fiction, to differentiate between commentary and reporting and to differentiate between journalism and advertising.