The E.W. Scripps Co., which acquired Ion Media in part for the broadcast spectrum controlled by Ion, said it plans to take its digital multicast networks over-the-top to cash in on the streaming gold rush.
“We don’t really see it as being an either-or sort of proposition for consumers,” Adam Symson, CEO of Scripps, during an investor day presentation to analysts Wednesday.
Scripps acquired Katz Networks for $302 million in 2017. Katz manages a group of networks in the growing over-the-air digital multicast market, where cord-cutters can watch if they connect with a digital antenna. Scripps acquired Ion Media in January for $2.65 billion. Scripps created a new national networks business composed of Katz, Ion and Newsy, the streaming news service.
Analysts noted that while Scripps was focusing on over the air, most media companies were placing their bets on streaming. Scripps execs said they would be taking advantage of streaming as well.
“We will continue to expand distribution everywhere the consumer wants us to be, OTA [over the air], OTT, FAST services and pay TV,” said Lisa Knutson, president, Scripps’ national networks business. “We have plans for each of our networks to build on Newsy’s success, as they have been a leader with ubiquitous OTT distribution.” FAST is an acronym for free ad-supported TV, also called AVOD streaming services.
“We’ve also taken Court TV, for example, and taken that stream into the FAST [free ad-supported streaming television] ecosystem and also used it in the AVOD [ad supported video on demand] world,” Symson added. “So I would expect that we will continue to run plays from that playbook, moving more of our free network programming into the free ad-supported streaming marketplace.”
Benefits Of Free Broadcasts
That said, Scripps likes the over-the-air business. “There are significant barriers to entry. Obviously in order to reach the over-the-air consumer, you have to have a broadcast license and the government isn’t really handing more of those out,” Symson said. “We already have a commanding share of the audience and we don’t expect to do anything other than expand upon that.”
Scripps’ local TV stations also eyeing ways to put their new content and other programming over the top.
“We've been in a digital space for a long time but OTT is the most meaningful revenue we've seen off of our main channel of any of these other platforms,” said Brian Lawlor, president of local media at Scripps.
“Our focus and the last 18 months is really been about building out and establishing an OTT presence in our markets. I think we've been aggressive really making them local and local news focused,” Lawlor said. “I think that great dividends last year when so much of the country wanted news and wanted that trusted source of information on local, and we were able to stay engaged with our customers when the networks were into regular programming.”
Earlier this week, Scripps announced plans to launch two new networks, Doozy and Defy TV, which will follow the Katz Networks design for creating networks aimed at specific demographics important to advertisers.
The networks will feature mainly acquired programming and the programming on the new network features shows that have never been available free over-the-air previously.
“We’ve dabbled in a bit of original programming and we’ll continue to do that where we really see the economic return, but by far our networks will be licensing programming,” Knutson said.
Because Scripps is taking advantage of Ion’s spectrum the networks will start out with distribution in at least 75% of the country. And unlike the Katz Networks, Doozy and Defy TV won’t have to pay other broadcasters for carriage in most of the country, including the biggest markets, making them profitable sooner.
Scripps expects revenue at its national networks unit to increase 10% annually for the next several years and generate profit margins of about 40%.
Knutson said Scripps has already begun making upfront presentations to media buyers for its expanded roster of national networks.
About half the division’s revenue is general market sold in the upfront and scatter market, with nearly 45% direct response and the rest OTT and programmatic advertising. Ion is a top five market in terms of ratings, but is only 25th in terms of revenues, a situation the company will work on. The strategy for growth is to maximize yield and maximize rates. Last year Ion sold about 55% of its inventory in the upfront and expects to do the same this year, Knutson said. “We’re not going to give too much of that inventory away early as we know this year [the economy] is going to build.”
Opportunities To Bundle
In some cases, Scripps will sell its networks as a bundle reaching a variety of demos that sometimes overlap. For example, Ion’s viewership skews a bit higher in terms of African Americans, and some advertisers have made cross-network buys that include Ion and Bounce, she said.
The networks offer the largest over the air source of national direct response inventory in the country, which Knutson said was a good thing. She said the over-the-air DR market in the U.S. was worth between $12 billion and $15 billion and growing.
“Many people wrongly dismiss DR as low rate, low quality ads,” Knutson said. In fact, Procter & Gamble and American Express have become big DR spenders. “Direct response is performance based advertising. It’s a flexible, efficient and measurable way for advertisers to reach their customers.”
In some cases on ION, the rates for DR were 50% higher than general market rates, Knutson said.
