On My Mind: Where we are headed and why

Colleagues:

I’m sure you know – not just because of your job but your own TV viewing habits – how complicated it is to simply watch TV today. This fragmented environment is making it complicated for Scripps and other media companies of all sizes to navigate their paths to future growth. As a Scripps employee, I imagine you want to understand the challenges and opportunities Scripps is facing, so that you can contribute to our successes and add value to the company’s pursuits. To that end, company leaders are rededicating ourselves to more frequent, detailed and, I hope, clearer communication about our strategic direction. I’d like to start with this column. 

In our industry:

We are in the midst of a shift in the media industry in which many companies are pursuing business models that have yet to be proven and may never pan out. As consumers shift to an on-demand approach to television viewing driven mostly by digital delivery of video, many of the biggest media companies, far bigger than Scripps and our peer-group broadcasters, have taken steps to break their content out of the exclusivity of existing bundles that have served the industry so well for the last 50 years. In order to compete with tech giants, companies like Disney, NBCU, Paramount and Warner Bros. Discovery have accelerated their own shifts to streaming. The dilemma they face, and the one Wall Street is concerned about, is that their new streaming offerings (Hulu/Disney+, Peacock, Paramount+ and Max) won’t be profitable on their own. They’re using the revenues from their older linear platforms to underwrite the content creation they need to capture subscribers and users on the new platforms. But of course, those linear platforms are losing viewers and advertising dollars.

These companies are being forced to think in new ways because, given the option, consumers are choosing to go a la carte. Many have stepped away from the buffet of the pay TV bundle in favor of myriad services that are likely costing them more money than they ever paid for cable. The traditional pay TV ecosystem (cable and satellite), which not so long ago served more than 90% of U.S. TV households, is now well under 50%. With declines in subscribers, those cable and satellite business models are being disrupted. Broadcasters like us that have traditionally relied on distribution revenue from the pay TV operators are downstream of the disruption – impacting our important retransmission revenue stream. That, and the continued fragmentation of audience and ad dollars, is challenging the economics of local broadcast news too.

I believe that linear television isn’t going away but instead is being transformed. While traditional TV used to be our daily destination for everything, today it is most appealing for live sports, news and channel-surfing "comfort food" viewing that on-demand doesn’t seem to serve up as well. Consumers are increasingly using over-the-air (OTA) broadcast as a free platform for live news and sports. Broadcast’s digital cousin, Free Ad-Supported Television (FAST) platforms, are growing quickly too. Platforms like Pluto, the Roku Channel and Tubi are popular because they offer a cable-like lineup for free. While cable is in decline, FAST and OTA are growing, though it’s fair to say that the days of one platform’s dominance over television are long gone.

At Scripps:

Over the last several years, we have been transforming this company in service to our commitment to all of our stakeholders — employees, shareholders and the communities we serve, our audiences and advertisers. Our strategy of serving the media consumer is what led us to more than triple the size of our local media portfolio and to acquire ION and create the Scripps Networks. These moves have made us a more economically durable company, opened up new areas of growth and moved us somewhat away from reliance on the traditional pay TV revenue stream. ION and the other Scripps networks have made us a leader in both areas of linear TV that are in growth mode: free OTA broadcast and connected TV’s FAST.

Our unparalleled free distribution platform also has opened up the opportunity for us to acquire live sports rights, both for ION and in our local markets. We’re leaning into the content genres that consumers crave most from linear television. Our focus on women’s sports has made ION a must-buy for national brands that previously didn’t advertise with us. Today, our company is generating about 180% more revenue and 400% more profit than it was just 10 years ago — and serving more American audiences and advertisers. 

These moves have been critical to the ability of our company to thrive going forward. Just like each of us has to pay off accumulated school loans, car payments, mortgages and credit cards, so does Scripps have to focus on paying down our debt. Our company is on firm financial footing, but our current debt is putting pressure on our stock price, especially following two years of lower U.S. advertising spending and interest rate hikes. We’ve used 98% of our discretionary cash flow since acquiring ION to pay down debt, and we’ll continue to make debt pay down a top priority.

We’ll also continue to focus on strategies that evolve us, always in the direction of what our audiences and advertisers need and want. We must do so to ensure we’ll be there with the objective news and information that keep them connected to their communities. Though it is not our exclusive focus, journalism has always been the North Star for this company, and every employee can take pride in the company’s commitment to giving light.

At home:

As we grapple with change in the media environment, I’m getting ready to experience some pretty significant upheaval at home too. My oldest daughter will graduate high school next month and then leave the nest for college. I’m sure many of you have walked this path before me, some may be doing so now, and for others it's still down the road. Maybe you can relate to the emotions I'm feeling with the realization that 90% of the in-person time I’ll spend with my daughter is now in the rearview mirror, making each moment more precious. It’s another reminder for me that, at work and at home, nothing stays the same forever.