Scripps: New Life for Old Media

11/14/2013 8:00 am EST

Focus: STOCKS

 

Our latest recommendation is an object lesson in how a legacy media company can reinvent itself, suggests John Persinos in Personal Finance.

Since Scripps Networks Interactive (SNI) was spun-off from old line E. W. Scripps Co. (SSP) in 1994, Scripps Networks has forged several distinct brand names under the general rubric of lifestyle media.

Its bevy of popular channels include the Do-it-Yourself (DIY) Network, Food Network, Cooking Channel, Travel Channel, and Great American Country (GAC).

Scripps Networks' platforms include television, digital, mobile, Internet satellite radio, magazines, and books. The company is now unveiling its Food Network in emerging Asian markets, to tap the region's growing infatuation with all things Western.

In addition to the US, the Food Network already operates in the United Kingdom, Europe, the Middle East, and Africa.

Financially struggling media companies have been spinning off their print legacy businesses, to isolate low-growth segments from more volatile entertainment divisions.

The strategy looks good on paper, but not all spin-offs have succeeded, as many of these newly independent entities consistently post disappointing operating results.

One reason is that jettisoned publishing divisions once provided reliable—albeit unspectacular—revenues from subscriptions, advertising, and classifieds.

This stream of steady revenue provided a buffer against the more unpredictable performance of entertainment divisions. A single big-budget movie flop can sink a company's quarter—or entire year.

However, Scripps Networks has successfully emphasized media niches for a public that no longer exhibits monolithic taste. The company reported that second-quarter earnings rose 12.2% year-over-year to $160 million, for $1.08 in EPS.

Second-quarter revenue increased 11% to $655 million, driven by growing advertising and affiliate fee revenue.

Scripps has been riding robust overall advertising expenditures, a trend that's expected to continue into next year.

Management raised its full-year revenue guidance to 9% to 10% growth, from its prior forecast of 7% to 9%.

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