24/7 Wall St.'s Take on Scripps & Media Break-Ups (SSP, BLC, TRB, JRC)

EW Scripps Co. (NYSE:SSP) is following the media trend of separating its operations into more pure play media sectors.  The good news here is that the valuable interactive unit will no longer have to be tied to newspapers.  The bad news is that the stations have to go with the paper unit, but arguably that might be construed well by some.  Scripps will split operations and become "Scripps Networks Interactive" and "The E.W. Scripps Company."

Scripps Networks Interactive will have an estimated $1.4 Billion in annual revenues with some 2,100 employees and will consist of:

• National lifestyle media brands and associated enterprises that operate collectively as Scripps Networks, including television’s HGTV, Food Network, DIY Network, the Fine Living Television Network and Great American Country and their category-leading Internet businesses.
• The new company also would include online comparison shopping services Shopzilla and uSwitch and their associated Web sites.

The E. W. Scripps Company will have combined annual revenues of $1.1 Billion and some 7,100 employees and will include:

• Daily and community newspapers in 17 U.S. markets;
• 10 broadcast television stations clustered among the nation’s largest 50 markets, including six ABC affiliates, three NBC affiliates and one independent station;
• The character licensing and feature syndication businesses operated by United Media;
• Scripps Media Center in Washington D.C., which includes the Scripps Howard News Service.

If you have seen 24/7 Wall St. for very long, or if you have read all the reports out there on what is happening with newspapers, you’ll know that the media sector is looking for ways to get away from newspaper revenues.  Unfortunately, old fashioned newspaper readers are dropping off at a faster clip than smokers.  The next wave of cuts the industry will feel is when newspapers get cut more from many hotel chains that leave them at the front door of each occupied room.

If you enjoy reading about break-ups and other special situations we produce our own "Special Situation Investing Newsletter" for subscribers.  We will be reviewing this for subscribers as the break-up gets closer.  Unfortunately, the company believes this tax-free spin-off will not be completed until the end of the second quarter of 2008.  There is a lot of calendar between now and then, and many more months of bad news out of newspaper companies.  One thing may help papers in 2008: the presidential election.  Depending upon how the valuations are laid out, it is even conceivable that the interactive content unit might have predators looking at it right out of the gate.

The market is reacting with enthusiasm to the Scripps plan.  Shares are up almost 8% at $45.50, back in the middle of its $37.89 to $53.39 trading range over the last 52-weeks.

• What will become of NBC?
• Life gets harder for newspaper companies.
• This follows Belo’s similar plan.
• Journal might not be able to fix itself.
• 24/7 Wall St. thinks Tribune won’t get the full $34 per share.

Jon C. Ogg
October 16, 2007