CINCINNATI - In 2008, when the E.W. Scripps Co. spun its highly profitable cable division into a separate public company, newspapers accounted for 57 percent of the Cincinnati-based media company's total revenue. The newspaper division was nearly twice the size of Scripps’ $326 million television unit.
But TV will rule the roost for Scripps after 2015, thanks to a deal announced late Wednesday with Milwaukee, Wisc. –based Journal Communications Inc. The companies plan to merge their combined newspaper assets into a new Milwaukee-based company, Journal Media Group. Scripps will get the combined television and radio assets of both companies, with 4,000 employees and more than $800 million in annual revenue.
As Scripps executives prepared for the questions of Wall Street analysts Thursday, influential analyst Edward Atorino proclaimed the deal a winner.
“It’s a good deal for Journal Communications,” said Atorino, managing director of The Benchmark Company. “They get a lot of money. They become part of a much bigger company and their stock goes up, which has not been doing well lately. And for Scripps it answers the question, 'Can they break up the company?' The answer is yes.”
Atorino predicted that Scripps would divest newspapers in 2012, when the last surviving heir of a 1922 family trust died. That lifted a generational requirement that E.W. Scripps must remain in the newspaper business. Scripps said at the time that it had no plans to unload newspapers.
“I thought sooner or later, the Scripps family would wise up to the fact that they’re leaving a ton of money on the table by keeping these two pieces together,” Atorino said. “The value of newspaper stocks is five to seven times cash flow. The value of TV stocks is 12-plus. So, there is a lot of value on the table if you keep those two together. The newspaper business is in a long-term downtrend and television isn’t.”
So Scripps, the parent company of WCPO, will confront the future as the nation's fifth-largest independent TV group.
It will own 34 TV stations in 24 markets, reaching 18 percent of U.S. households. In addition, Scripps will own 35 radio stations in eight cities, with TV and radio combinations in five. That provides plenty of opportunities to grow digital properties like its video-based news analysis platform, Newsy, and DecodeDC, a political coverage platform.
But Atorino said broadcast TV will be the main driver for the new Scripps.
“TV is still in great shape,” he said. “Look at the viewing on the World Cup. Look at the viewing on special events. TV, despite what people think, is still healthy. It’s still fine. If you want to launch a new product you go on television. If you want to launch a new car brand, you go on television. Magazines are declining. Newspapers are declining. The internet’s great but statistics say people don’t buy from the internet. They look at stuff. They surf. But when you put a new hand cream or a new car on television it moves boxes. TV is doing fine.”
Scripps Senior Vice President Brian Lawlor is the man in charge of Scripps’ TV business. He joined the company as an account executive in the early 1990s for WPTV, the Scripps NBC affiliate in West Palm Beach, Fla.
At Scripps' corporate headquarters in Cincinnati, Lawlor has overseen the launch of three national programs to replace syndicated content on Scripps stations, including RightThisMinute, Let’s Ask America and The List. He was named “Broadcaster of the Year” in 2012 by Broadcasting and Cable magazine.
WCPO spoke with Lawlor about the opportunities that the Journal Communications deal creates for Scripps TV stations. Here are excerpts:
What Journal Communications markets are you happiest to add?
There are a couple of markets that really stand out as you look at this portfolio. Nashville is one. They own the CBS station in Nashville. It’s one of the best in the country, one of the highest-rated stations in the country. It just recently won a Peabody Award. It’s kind of the voice of Tennessee. Beyond that, you know, being in Milwaukee, WTMJ is a legacy television station that’s meant a lot to that community. Las Vegas remains a rebound city.
We’re also excited, as we look at some of those markets, about the political opportunity. We believe we have an expertise in the way we cover elections and the way we provide opportunities for advertisers there. So, being in Nevada and Wisconsin for the first time are good opportunities. It allows us to extend our footprint in Michigan, Arizona and Florida, which are obviously big political swing states.
I took this job in 2009 and we were 10 stations in nine markets. This is our third acquisition in five years and we’ve gone from being one of the smallest broadcast companies to one of the biggest broadcast companies. We’ve done it strategically. I continue to like our footprint. The fact that we’re able to cover almost one of every five households in America but doing it in only 24 markets, means that we’re in big markets, meaningful cities. They are cities where there is a need for a lot of discourse. That continues to inspire us to be the voice for those markets.
As media platforms like mobile and tablet evolve, how will Scripps TV stations adapt?
Rich (Boehne) and I talk often about that. While we’re investing in television stations, what we’re really investing in is local media brands. The future of television remains to be written. There may be great evolution. But what I do know is that people are consuming more information than they ever have and video is a key element by which people are consuming that information. So, I think it’s an entrée through established brands that we’re getting into these markets and I expect television will only be part of what we do in the years to come.
Will Scripps be a journalism company, an entertainment company or something else?
E.W. Scripps Co. will always be a journalism company, first and foremost. That’s what we stand for. But what we are also is a content company. Outside of our news commitments we’ve been able to create shows like "The List" and "Let’s Ask America," "Right This Minute." So, I think there’s an opportunity for us to create unique programs that serve markets and look different than the traditional stuff you get from syndicators. We’ll continue to take creative risks to fill holes that haven’t been satisfied before.
Do you see any downside to not having newspapers as part of the company?
We really weren’t in the same markets in terms of television and newspapers, but the standards were established. The newspapers and their journalists and their leaders held our company to a higher standard. That’s the thing we’ll have to continue to maintain, the same standards for journalistic excellence even without that strong newspaper voice within the company. The reality is, we’re adding more and more newspaper journalists into our company as a result of our digital investments. That culture is now permeating through the company deeper than it has.
Does this deal mean you will roll out products like WCPO Insider in other markets?
What this does is get us into 13 additional markets where we have expectations of ourselves being that leading voice of news and information. For some of these markets, we look at the competitive landscape and we don’t see anybody owning the digital space. We think the mobile, the social space remains open and it’s something we’ll look to establish. In some cases, we may try to establish a brand on the digital side even before we try to reinforce the television side.