Scripps Sees Improvement In Current Quarter

After reporting this morning that first quarter Local Media revenues were down 4.5%, E.W. Scripps Co. is anticipating better news in its next quarterly report. “Looking ahead to the second quarter of 2023, we expect Local Media revenue to be flat to up in the low single digits percent range. We expect Q2 local core ad revenue to be down mid-single-digits,” CFO Jason Combs told analysts in this morning’s conference call.

“The country’s economic malaise continues to put pressure on our businesses. Local advertising remains relatively stronger than national, largely due to the return of automotive spending. But we do feel pressure across the whole advertising marketplace,” said COO Lisa Knutson.

“In Local Media we continue to see softness in our largest core advertising category, services,” she said. “Services was down 14% in the quarter, with banks and insurance companies showing the largest declines. Our two strongest performing categories were home improvement and automotive. Auto had its third consecutive quarter of year-over-year growth, driven by local dealers and domestic dealer groups, who finally need to move inventory off their lots. We see local dealers as the best opportunity for continued growth within auto this year. In addition, the chip shortage is about half of what it was at this time last year, which is another good sign of spending to come.”

She added: “Another highlight of the quarter was the NCAA Basketball Tournament, which brought in nearly $2 million to local core, up 13% from 2022. Now we are looking ahead enthusiastically to the NBA Finals in June and the promotional dollars we expect ahead of that big linear television event. These two examples highlight the power and value of live sports.”

The new Scripps Sports division recently announced its first deals: A national league deal to broadcast WNBA games Friday nights on the Ion stations and a local deal for the NHL’s Vegas Golden Knights to air on KMCC, with marketing support from ABC affiliate KTNV.

When one analyst asked whether it would take time to build the new sports broadcasts to profitability, Scripps execs tamped down that sort of thinking.

“We model these deals to be gross profit positive in year one,” insisted Combs. Noting that Ion already carries profitable programming on Friday nights, the WNBA deal had to meet that target.

“Each deal needs to make sense from a financial perspective,” said the CFO, noting that Scripps had already walked away from a sports deal because it didn’t make sense economically.

“Just to reiterate what we’ve always said. We’re focused on improving the near-term operating profile and economics of the company and long-term value creation. So we’re not feeling like we need to sacrifice one for the other. We bring something very significant to these sports deals — and that’s the reach that these leagues and teams really want,” added Symson.

In the Scripps conference call three months age, Symson was complaining about the company’s CBS stations being dropped from the Fubo streaming network because Scripps and other major groups rejected the terms negotiated by CBS-owner Paramount. The dispute was resolved and the affiliate groups returned their signals to Fubo. Symson said that proved that local station broadcasts have tremendous value and are wanted by the virtual MVPDs.

“Sitting in Cincinnati and watching WCBS is not a good experience for that virtual MVPD,” said the Scripps CEO.

Looking ahead, Knutson noted mixed signals about the U.S. economy. She said volatility in the financial markets is putting pressure on the advertising marketplace. On the bright side, connected TV continues to grow and she said growth in automotive shows the resilience of the ad marketplace.

“However, inflation and worries about a recession will continue to put some pressure on our advertising,” said the COO.

Focusing on auto, she said the category was up 4% in the first quarter. “Looking at Q2, automotive is continuing to improve. For April it was up 16%,” Knutson said. And while bookings are coming in later, she said she expects the auto rebound to continue.