Scripps Likes Spectrum, Post-Auction Outlook

Like its broadcast peers, E.W. Scripps is sticking with circumspection regarding its plans for the FCC spectrum auction.

Read between the lines a little, though, and it sounds like Scripps intends to hang onto its spectrum and exploit post-auction opportunities.

During Friday’s conference call on second-quarter financial results, Michael Kupinsky of Noble Financial asked if Scripps had plans for the spectrum auction. Here’s how CEO Rich Boehne responded: “If we do, we’re certainly not going to tell you. This is a real chess game. It’s going to affect many, many markets. From where I sit today, the auction is going to create a lot of opportunities to restructure the industry and build out the industry for the future.”

Brian Lawlor, the company’s SVP, TV, fleshed that out a bit: “We are spending a lot of time on this, looking at it on a market-by-market basis. Our thinking isn’t just what’s our opportunity for … things like channel sharing. There may be affiliations where others may be getting out that we could pick up. It’s a great long term opportunity for us.”

Scripps still has an appetite for M&A and the auction may offer opportunities there as broadcasters who figured on selling spectrum discover it isn’t worth as much as they hoped. They may decide to cash out by selling stations instead, Lawlor said.

“There may be an opportunity for us to double down in particular markets where people who had been holding out for the auction may be available for acquisition,” he said. “The actual auction is only part of the opportunity for broadcasters.”

The auction has put the brakes on broadcast M&A, Boehne said. “But now, as the auction is coming into focus, it will be focused in a few places and that may encourage a few owners to come back … and say, well, the auction isn’t going to be the payday we envisioned. We think the market will heat back up.”

Scripps is bullish on the new broadcast standard, ATSC 3.0, and is working with others on developing the technical specifications.

“There’s a ton of positive momentum” on 3.0, Lawlor said, noting that there are still a number of milestones to be reached before the next-gen standard translates into significant business opportunities. That’s likely to take two to three years, he said.

On the results side, investors shrugged off a 5.4% drop in local ad revenues largely driven by a big drop in auto advertising, essentially flat national revenues and expense increases to focus on a healthy increases in retrans and digital revenues.

That pushed Scripps shares up a little more than 4% around midday as broadcast stocks that had taken a pounding earlier in the week rebounded.

Analysts have pointed to cable cord-cutting, which hits at retrans revenues, as a key reason for the decline in stock prices.

Ultimately, cord-cutting could be an advantage for broadcast, Boehne said.

“If anyone is concerned with cord-cutting — and I think the mass of that is overblown — broadcasting is a haven, a place to go,” he said. “Any cord-cutting will be lost and overwhelmed in the next couple years. If there’s really any concern, we’re the place to move some money.”