How Scripps Turned Into a Digital Darling

Owning Content and Blazing Interactive Pays Off for Cincinnati Newspaper Chain

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NEW YORK ( -- Meet E.W. Scripps: the new media empire.

How did a Cincinnati-based, mid-tier newspaper chain end up having the 16th-largest online audience in the country, ahead of media giants such as Viacom, CBS, General Electric, Comcast and Advance? By doing a lot of little things right along the way.
John Lansing, president of Scripps Networks, believes not shying away from business opportunities that may cannibalize bits of audience is at the heart of the company's success
John Lansing, president of Scripps Networks, believes not shying away from business opportunities that may cannibalize bits of audience is at the heart of the company's success

An expensive decision
Twelve years ago, when E.W. Scripps CEO Ken Lowe launched Scripps Networks, the company made the expensive decision to own all of its content. Owning content and controlling its distribution was a business Scripps knew well, thanks to its licensing agency and syndication arm, United Media.

It embraced interactivity early, installing a call center at a time when the only cable channels that had them were home-shopping networks. Scripps was also ahead of Wired Editor Chris Anderson's Long Tail theory, recognizing that it could slice its food, garden and home programming to appeal to niche audiences. But most importantly, Scripps encouraged a culture that was not afraid to embrace new media that were likely to cannibalize the lucrative properties it already owned.

Scripps' print business, like many other family-owned newspaper chains, has dwindled. Luckily, Scripps early on embraced a multimedia approach, buying radio stations in the '30s, TV stations in the '40s and '50s, and cable systems in the '80s before becoming a cable programmer in the '90s. Today, Scripps' newspaper division represents just a fraction of the company's total revenue. Should it shed its papers -- an idea floated two weeks ago at an analyst conference -- its cable TV channels and web properties could account for 82% of earnings, a research note from Goldman Sachs estimates.

Catching Wall Street's attention
It's a shocking stat, one that's won the attention of Wall Street. Scripps' stock is at a 52-week high, and many analysts think it will climb. (Scripps has since backed off the suggestion it may part with its newspapers. "Scripps is committed to the newspaper business," Mr. Lowe wrote in a Jan. 12 memo to employees.)

John Lansing, president of Scripps Networks, believes not shying away from business opportunities that may cannibalize bits of audience is at the heart of the company's success. What looks like a small business today may soon be big. And if you don't out-innovate yourself, other up-and-coming entrepreneurs will.

"The hardest thing to do when you're a successful media business is, in effect, disrupt your core business by creating potentially competing businesses," Mr. Lansing said. (It's why Sports Illustrated, for example, never became ESPN.)

Mr. Lowe recently outlined the company's shift at the Credit Suisse investor conference, noting Scripps has shifted from broad-based, high-reach media such as newspapers and TV to more niche-targeted cable programming and more one-to-one relationships with its shopping sites, Shopzilla and uSwitch.

Hours of content
Owning its content has allowed Scripps to move quickly in the digital-distribution space, while its broadcast and cable rivals have been bogged down with rights issues. In the past year, Scripps has used its 27,000 hours of archived content to launch broadband vertical sites focused on key HGTV areas such as kitchen and bath and a woodworking channel born out of DIY. Scripps plans to at least double its broadband verticals in 2007.

"Scripps is a great property," said Jeff Marshall, senior VP-managing director, Starcom. "These guys really have thought about how people are using the content. ... We talk about the content that needs to be liquid. It exists at a content level but is liquid enough to sit in all those different containers. That's how you break through the clutter."

But Scripps Networks isn't just banking on advertising, although it's done well so far with that model: 2006 revenues were $1.05 billion in advertising and affiliate fees. As part of a plan to diversify, it's added a marketplace section to, charging product manufacturers what is essentially a slotting fee and expanding more heavily into licensing and retail. The company also has a booming database, which it intends to begin to offer as a tool to advertisers this year, having sent out 55 million e-mail newsletters last month.

Deals with other online players
The cable networks are also working on syndication deals with major online players such as MSN, Yahoo and because "we're not arrogant to think everyone comes to us. But if we can push it out to the edge, it's like a fishing rod. We throw out the line and reel them back in," said Ron Feinbaum, who was recently upped from helming the interactive business at Scripps to exec VP of all business development-online and offline.

To be clear, interactive revenue is still a small part of Scripps Networks' profits -- about 6% last year. But it grew 50%, while the networks' linear revenue grew about 13%. Mr. Lansing said he expects interactive revenue to at least triple in the next four years.

The comparison-shopping sites have yet to contribute substantially to the bottom line. Some analysts remain skeptical that Scripps can import the U.K.-based uSwitch to the U.S., and it's worth noting that Scripps' acquisition record isn't without blemishes. Last year it sold the Shop at Home cable shopping network for essentially $17 million, a steep loss from the $285 million it paid for the network.

Still, the company appears to have the recipe to keep it in Wall Street's favor, even as other newspaper companies run for the private sector. "Long term," writes Goldman Sachs analyst Peter Appert, "we believe the ongoing evolution will drive one of the best growth stories in the media sector."
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