Scripps Network (NYSE:SNI) grabs the viewer’s attention by making use of a simple business model of producing high quality programs to draw a viewer analytical TV advertisers covet. The network through its channels like HGTV as well as DIY Network brings about audiences which are more upscale than the audience of any other broadcast channels.
However, the business model leaves Scripps Network (NYSE:SNI) in the hands of the ever changing advertising industry and to the volatile TV-watching trends. The fourth quarter earnings results that the media giant revealed on Thursday were affected by those trends.
Decrease in the growth of advertisement:
Scripps (NYSE:SNI) had the most passive quarterly growth of the year with a revenue improvement of below 1%. This was also a 3rd consecutive quarter which went down in terms of revenue growth. During the 3 quarters of the year 2014 the advertising increased 10%, 8% and 5%. Although part of the fourth quarter decrease is just seasonal, however, the management confessed in November’s conference call that they were anticipating a softer growth in the advertising during the quarter.
On the other hand, Wall Street was expecting a smaller slowdown. The analysts have expected that the TV Network will reveal an increase of 5% instead of the 2% improvement that it actually showed. The media networks channels showed a mixture of performance. HGTV showed growth of 4% in its sales, while the sales of the Food Network as well as Travel Channel went slightly down.
The DIY network went up an impressive 7% in the fourth quarter while for the full year the channel showed an increase of 10%. Scripps (NYSE:SNI) saw a 6% rise in its other sources of income, however the profits that the media network generated did not meet the expectations. Scripps generated $0.96 per share while Wall Street had a per share target of $0.97.
However, the slightly weak results did not have an impact on the overall success of the Network. Scripps (NYSE:SNI) net income increased by 6% to $727 million. The CEO of Scripps said that the strength of the media network is in its relationship with its viewers as well as the advertisers which enable the company to retain its momentum of growth as well as create shareholder value for not just the quarter but for the whole year as well.
Expectations:
For the year 2015, Lowe and its team have similar expectations from the media giant as they did in 2014. The company is expected to gain a 4% increase in its revenues. The company’s cost is expected to increase by 10% due to the rise in the programming expenses. However, the management is trying to cut costs in various areas of the business other than programming.
Wall Street set the target price for 2015 at $2.84 billion. Although the analysts might have to lower their expectations due to the soft advertising scenario, however the company is still positive about its lifestyle channels and their popularity. Scripps (NYSE:SNI) is positive that its lifestyle channels will generate higher profits as well as sales in this year as well.
