Friday, November 06, 2009

Scripps Interactive -- How Will Travel Channel Contribute?

Scripps Interactive (SNI) released earnings and left a few issues unresolved. Delayed one day because of the deal to acquire Travel Channel you have to look at the product mix and wonder if they are just too schizophrenic.

The Food Network is doing well and is now rated in the top ten cable networks list. That’s good but why did it happen. The economy is having difficulty. Many people are staying at home and have more time to watch TV. Instead of going out why not have a nice gourmet meal at home. So going forward as the economy recovers will the Food Network continue its relevancy?

HGTV was touted to be increasing. HGTV is doing better in the worst housing market in memory. How are these viewers engaged? But read the sentence carefully. “Lifestyle Media advertising revenue grew slightly while affiliate fee revenue was up 16 percent on higher rates for HGTV and expanding distribution of all of the company’s television networks.Italics and bold are mine.

Somewhere there is a lawyer who understands disclosure and is now sweating this one out. This will not win the award for transparency. It sounds like we rolled a few concept categories together and created a frothy phrase or two. Will the nations housing woes discourage the traditionally engaged HGTV viewer and cause advertisers to curtail their spend.

They just bought the Travel Channel and are injecting $181million. The cash injection pretty well drains their cash reserves. $878 million of debt goes into the joint venture and there is no information about debt service and if it’s accretive to shareholders. Cox did OK on the deal. The other question becomes how to finance the ongoing production of new Travel content. Travel production is expensive. You do not want to watch the same episode over and over again. Travel plans seem to be curtailed will the viewers be engaged consumers or will they just be frustrated and jealous of the idle rich.