The huge benefits that the E.W. Scripps Co. has received from sports licensing deals were on full display during the company’s third quarter earnings call with analysts Friday morning. And the leadership expressed its intention to shop for more sports agreements as well as launch new networks aimed at the CTV marketplace.
The expected expansion, in a very complex and challenging environment, put a bright shine on numbers for the third quarter that were mostly down — largely due to advertising headwinds.
Scripps reported a 7.4% decrease in total revenue for the quarter, compared with same quarter last year, to $567 million.
Within its local media group, revenue was down 6.7%, to $353 million. That number reflected a 3.1% decrease in revenue from core advertising categories (excluding political). Naturally, political was way below results for same time last year, as this is an off-year in the election cycle. But distribution revenue was up substantially, by 20%, to $198 million.
The Scripps networks group — which includes channels like CourtTV, Bounce and Ion — was down 8.5% to $215 million.
For both the local and national units, there will be no immediate upward trajectory in the percentage numbers — at least not during the fourth quarter. Scripps is expecting local media to be down low to mid-double digits and the network group revenue is likely to dip in the 10% range, versus last year’s fourth quarter. Although that 10% figure drops to 8% if the programmatic product that Scripps has shut down is backed out.
Adam Symson, the company’s president-CEO, told analysts that his company is “leading the broadcast renaissance in live sports” as he discussed how some deals have impacted results with both advertisers and MVPD distributors.
Scripps struck agreements with two National Hockey League teams: the Vegas Golden Knights and the Arizona Coyotes, and broadcasts of their games began on local stations in their fan-base regions this fall.
Symson said: “We’re creating new value by expanding the number of our stations that receive retrans. In Las Vegas, we flipped an Ion station to an independent, carrying the Vegas Golden Knights as its anchor programming. The new station, Vegas 34, joined our ABC affiliate there expanding our advertising opportunity and distribution fees significantly. So, despite erosion in the nation’s pay TV landscape, Scripps is now getting higher rates and getting paid on more stations than before.”
He said that the Golden Knights have more than doubled their local ratings so far this season, compared with last season. And the Coyotes ratings have increased a “whopping 900%” from what they drew on a regional sports network last year. Baked into the company’s expectations for the fourth quarter is an estimated 4% lift to local media core that can be attributed to the two teams’ games. And for the full year 2023, the games will increase core results by 3%, Symson said.
On the national front, Scripps just completed airing its first season of WNBA games on Ion. It helped the team increase its TV reach by nearly 30%. Symson said that 65% of the revenue from sponsorships tied to the games were generated from new advertiser accounts. He pointed out that live sports commands a hefty premium over Ion’s average rates.
Symson differentiated Scripps from other media companies that have built streaming platforms and are banking on them for future growth. “I encourage investors not to paint us with the same broad brush as companies that are irrationally expanding into streaming, grappling with constant subscriber churn and all the while bleeding off their valuable businesses with no clear path to profitability.”
There are other markets where Scripps sees “significant opportunity” for more sports-rights deals, and where it could transform a local Ion station into an independent without negatively impacting the Ion reach, because it would move the programing stream to a different spectrum.
With a team’s games as the anchor of the independent station, Scripps could then “disrupt” the local marketplace — “significantly taking local market share and increasing our take of local retrans in that market,” Symson said.
“With each new local rights agreement we sign, core advertising and distribution fees will grow, adding profit and generating new cash flow,” he added.
Expansion will also come in the form of new channels aimed at the CTV market, according to Lisa Knudson, Scripps’ COO. She referenced two recent FAST channel launches, Laff More! and CourtTV Legendary Trials. “We’ll continue to see some launches over this quarter and into next year,” she said.
Jason Combs, Scripps’ CFO, said that the company met or exceeded its expectations for the third quarter set in August. Its revenue overshot the guidance largely due to better-than-expected CTV and direct response revenue. He noted that the local media group’s distribution revenue was up 20% fueled by renewals with MVPDs.
The company completed cable and satellite carriage agreements covering about 75% of Scripps’ local media subscriber households. And Scripps expanded the number of stations that garner a distribution fee.
“The fourth quarter is being impacted by the industry-wide weak upfront season and ongoing softness in direct response spending,” Combs said.
“We’ve had stronger than expected 2023 political spending, especially from a contentious ballot issue in Ohio. And we now expect full-year political ad revenue to reach at least $30 million,” Combs said, adding that net distribution dollars will increase by more than 40% over 2022.
Knutson noted some positive trends coming out of October that will impact core advertising in the full fourth quarter. “Services was up 9%, auto was up 10%. And if Q4 ends in positive territory, it would be the sixth consecutive positive quarter of auto growth. Home improvement, our third largest category, was up 13% in October, and retail was up 2%.
The fourth quarter also marks the beginning of revenue that can be attributed to the weak upfront season, Knutson noted.
That said, Bounce made significant gains during the upfront, and CTV revenue was up nearly 60% compared with the previous year. “Connected TV continues to be a big growth area for us outside the upfront as well,” Knudson said. She noted the scatter market is very strong. Scripps expects to end 2023 with about $100 million in total CTV revenue.
“For 2024 we are projecting a mid-teens percentage year over year increase in total dollars and more than a 30% increase, if you back out the impact of the legacy programmatic product we’re sunsetting,” Knudson said.
16 May 2024
23 May 2024
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