The best media company in America?

The best media company in America?

The best media company in America?

Moneybox
Commentary about business and finance.
Sept. 15 2004 2:31 PM

Super Scripps

Is this invisible giant the best media company in America?

When media soothsayers forecast the future of the industry, they mutter about News Corp. and Disney, compare the New York Times Co. and Dow Jones, and squint at Time Warner and Condé Nast. But they hardly ever say a word about a company that could teach all of them a few lessons: E.W. Scripps. With its antique Penny Press name and relatively low profile, Scripps sounds like the kind of company that was gobbled up by William Randolph Hearst in the 1920s. But it's alive and well. Based in Cincinnati, it operates below the media-buzz-detecting radar. You'll never see a Scripps executive mentioned in Vanity Fair, for example, or swapping bons mots with Donny Deutsch on CNBC. But its empire of 21 newspapers, the Scripps-Howard News Service, 15 TV stations, and four cable networks is thriving amid a difficult climate. On Monday, it reported that August revenues were up 13 percent compared with last year. (Annual revenues totaled $1.88 billion in 2003.) As this chart shows, its stock this year has outpaced the New York Times, Dow Jones, News Corp., Time Warner, and the S&P 500 by healthy margins.

At first blush, Scripps seems to resemble other big, old, family-controlled media companies like Knight Ridder and Dow Jones. But Scripps has done some things right that the others haven't.

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First, it has professional nonfamily managers. A Scripps family trust controls the company: It owns 35 percent of the Class A common shares and 87.3 percent of the 18.4 million common voting shares. But the firm isn't an employment agency for family members. Edward Scripps and Paul Scripps, both great-grandsons of founder E.W. Scripps, serve on the board. But neither currently has an operating post at the company. CEO Kenneth Lowe didn't inherit his post, as have, say, New York Times Chairman * Arthur Sulzberger Jr. or Knight Ridder CEO P. Anthony Ridder. And while some media scions have proved to be fine CEOs—Katharine Graham of the Washington Post Co. and Brian Roberts of Comcast to name two—there's no evidence that genes are the best way to select a modern CEO. If you get stuck with a bad family member as boss, investors have little recourse.

Second, Scripps has managed to diversify successfully away from slow-growing print, a task that other newspaper companies such as Dow Jones have failed to do. In 1878, according to the brief corporate history, starting in Cleveland, E.W. Scripps built one of the nation's first newspaper chains. The company got into radio in the 1930s, television in the 1950s, and cable in the 1990s. As recently as 2001, newspapers accounted for about half of the company's revenues. But in the most recent quarter, its portfolio of 21 newspapers, which include Denver's Rocky Mountain News and the Memphis, Tenn., Commercial Appeal, accounted for only about 30 percent of its revenues.

Third, Scripps has generally avoided the greatest curse in Medialand: the ego-driven acquisition. (See: AOL-Time Warner, Primedia-About.com, etc.) In May 1997, Scripps agreed to buy six newspapers, a radio station, and a TV station from Harte-Hanks Communications * for $775 million. In 2002, it paid about $50 million for a 70 percent stake in the Shop at Home television network. And earlier this year, it spent $185 million to acquire five TV stations and the 30 percent chunk of Shop at Home television that it didn't already own. But that's essentially it. No multibillion deals with online companies, no transformative acquisitions, no New Economy reinvention.

Fourth, Scripps has made some shrewd investments in cable. It's no secret that viewers, programming, and advertising dollars are migrating from broadcast channels to cable networks. But not all the cable investments made by big media companies have panned out well. Disney's multibillion-dollar purchase of the Family Channel turned out to be a bust, for example.

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But Scripps' cable investments have shrewdly surfed the zeitgeist, catching the American wave of food and home design obsession. Scripps launched Home & Garden Television, now in 85 million homes, and it owns most of the highly popular Food Network, now in 84 million homes. Both are among the top 20 cable networks. And in the past few years it has rolled out more home-related programming: the Do It Yourself Network in September 1999 and Fine Living in March 2002. Shop at Home, though a tiny player compared to QVC, allows viewers to buy the gadgets they see on HGTV and the Food Network.

Networks like HGTV and Food Network have relatively low costs compared with network programming. So when they connect with audiences and advertisers, they gush money. The cable unit is the key to Scripps' recent impressive string of earnings results. In the second quarter, the unit's revenues rose 36 percent, and its operating profit rose a whopping 56 percent.

Each summer, media big shots convene in Sun Valley, Idaho, to orate, schmooze, and scrounge for insight and deals. Next summer, they might be better served trekking to Cincinnati.

Correction, Sept. 15, 2004: This piece originally said that in 1997 Scripps made a media purchase from Hart-Hank Communications. The company's correct name is "Harte-Hanks Communications." (Return to corrected sentence.)

Correction, Sept. 17, 2004: The article originally suggested that Arthur Sulzberger Jr. is the CEO of the New York Times Company. In fact, he is the chairman of the New York Times Co. The CEO of the New York Times Co. is Russell Lewis. (Return to corrected sentence.)