Scripps Sees Big Opportunities In Sports

Having created Scripps Sports in January and shifting veteran broadcaster Brian Lawler to be president of the new unit, E.W. Scripps President-CEO Adam Symson told Wall Street analysts Friday morning that there is a big opportunity in sports for the company.

“As we sit here today witnessing the implosion of the RSN business model, it’s also why Scripps Sports has been getting a very warm reception in that marketplace. Our ubiquitous over-the-air, pay TV and connected TV reach through Ion and the Scripps Networks has immense appeal for leagues looking for both new and consistent franchise viewing events across a national footprint. For us, we see the right live sports as an unparalleled opportunity to drive the value of our linear television streams even higher. Locally, live sports will draw young new audiences to our brands as fervent fans employ digital antennas to watch their favorite local teams for free again,” the CEO said.

While potential league deals would likely focus on the Ion Network’s national footprint, Scripps Sports is also pitching potential deals for teams to partner with local Scripps stations. In answer to one analyst’s question, Symson said that is not necessarily limited to markets where Scripps has duopoly stations, since it also has Ion OTA stations in so many markets.

Scripps is projecting that the reorganization it announced in January will reduce annual costs by $40 million. Asked for more detail on where the savings would come from, Symson declined to say yet what cuts are in the offing.

Having reported financial results this morning for the fourth quarter and full-year 2022, CFO Jason Combs provided some guidance for the current quarter.

“We expect total Local Media revenue to decrease in the mid-single-digit percents. We expect local core ad revenue to be down in a high-single-digit percent range. And excluding the impact of the Olympics and Super Bowl, we expect it to be down only mid-single-digits year-over-year,” he told analysts on the quarterly conference call.

“In the Scripps Networks division we expect revenue to be down high single-digits,” Combs said.

Newly-named COO Lisa Knutson, who now oversees both the local stations and networks, provided more color on the current situation.

“The current macro-economic climate continues to put pressure on TV advertising — and you’ll see that reflected in our outlook. The first quarter already tends to be the lowest revenue quarter of the year and the pressure on the ad market didn’t start until the end of the first quarter last year. In addition, in the Local Media segment we have a tougher comp in core advertising because our first quarter of last year included nearly $9 million in Winter Olympics advertising, as well as the Super Bowl on our 11 NBC stations. This year, with no Olympics and the Super Bowl on four Fox stations, we missed out on about $7 million. Excluding the Olympics and the Super Bowl, Q1 core advertising is expected to be down mid-single-digits year-over year,” she said.

“Our top Local Media core advertising categories by total dollars for the first quarter look to be services, automotive, retail, home improvement, and gambling. Only two of the five, automotive and home improvement, were up in January,” said Knutson.

With approximately 70% of pay TV households up for renewal this year, gross distribution revenue is expected to grow in a low-teens percent and net up more than 30%, according to the COO.

Expect political advertising to be on par with the last two off-cycle election years. “Special elections in the Wisconsin State Supreme Court race are driving the first quarter activity, and the back half will pick up with what we expect to be competitive statewide elections in Kentucky, Louisiana and Virginia,” Knutson said.

On the networks side, she said direct response is sensitive to inflation and is soft for Scripps Networks. “The scatter market also has been soft and we’re seeing advertisers buy ads closer and closer to air date. However, we are confident that our strong portfolio of network brands, our broad distribution on every viewing platform and our full nationwide audience reach positions us well to capitalize when the national ad market rebounds,” she told analysts.

Connected TV remains a bright spot, she added.

In the Q&A she was asked about the impact of the economic climate.

“I do think the national ad climate is more under pressure than our local markets. Certainly, our local businesses on our Local Media side — we have about two-thirds of our core advertising — and they’ve held up better than our national advertising spend,” the COO replied.

“Automotive was up in fourth quarter by 24%. We also had home improvement services up in the 10% range. And those two trends continued into January. So we were really pleased to see the resilience there on the local side. I would say some of the other categories that are more impacted by inflationary pressures are things like services and retail sales that have lagged a bit, both in fourth quarter and what we’re seeing trending in first quarter,” Knutson concluded.