Scripps Ad Outlook Casts Shadow Over TV Business

Scripps Networks Interactive isn’t’ the biggest programmer in the industry, but when earnings season comes around, it is often the most transparent about what’s happening in the TV ad market.

Because its networks air special-interest programming that usually draws high-income, engaged viewers, and because they have developed cadres of endemic advertisers who cater to those special interests, Scripps Networks often outperforms the general advertising business.

So when Scripps Networks executives say they expect 2015 ad growth to be in the low- to mid-single digit range, what does that mean for the rest of the industry?

“The read across is not good. If Scripps can only grow low singles (with audiences down negative low singles), then most other cable networks are certainly in negative ad revenue territory (with audiences down double-digits),” said Sanford C. Bernstein senior analyst Todd Juenger.

Unlike most companies, which talk about ad prices in the scatter market compared to upfront pricing, Scripps provides comparisons of this year’s scatter price compared to last year’s scatter price. Looking at the market that way, some ad prices in the fourth quarter scatter market were down from a year ago.

“Scatter versus scatter CPM pricing across the network was flat to down low-single-digits year-over-year and up high single-digits to low double-digits over the broadcast upfront,” said Scripps Networks executive VP of finance Lori Hickok during the company’s earnings call.

For the first quarter, she said “year-over-year scatter versus scatter pricing growth is flat to up low-single-digits and the high-single to low-double-digits for the 2014 broadcast upfront.”

To get to the full year forecast, Scripps expects the ad market to strengthen as the year goes on, but it is not wildly optimistic.

Juenger notes that the advertising outlook is more pessimistic than the Wall Street consensus.

“Scripps saw the advertising deceleration coming and, like most media companies, has embarked on a restructuring initiative to preserve margins,” Juenger said.

Here’s how Scripps described its cutbacks.

“We’ve reduced our workforce by approximately 5% through a combination of early retirement and position eliminations, said chief financial and administrative officer Joe NeCastro

“In the fourth quarter, we recorded restructuring charge of $14 million. We expect to record another $25 million of expense in 2015 under this initiative,” he said. “ As a result of these actions, the business is now better structured to produce and support lifestyle video regardless of platform, device or geography.”