By Deborah Yao
Scripps Networks Interactive Inc. is cooking up new forms of digital and television collaborations as it seeks to boost growth in a mature U.S. cable TV market.
The company also has embarked on its most aggressive expansion abroad.
With the upfront season around the corner, Scripps hopes to make a strong case to advertisers that it remains the home of premier lifestyle brands in cable TV — and that nearly all of its viewers watch Scripps' shows live.
The company, parent of Food Network, HGTV and DIY Network, has experienced a mixed ratings performance in recent years. While HGTV and DIY saw ratings surge in 2013, helped by a recovering housing market, Travel Channel has stayed about flat and Food Network has continued to slide as other networks debuted their own cooking shows, according to Nielsen data. Travel Channel is being restructured to refine its focus under a new president, Shannon O'Neill.
But Scripps' websites are tracking well, and HGTV and Food Network magazines are going gangbusters. Scripps declined to comment on speculation that Discovery Communications Inc. was interested in acquiring the company.
Scripps is optimistic about this year's advertising prospects and TV ratings, noting that its shows performed better against the Sochi Olympics than they did against London in 2012, Vancouver in 2010 and Torino in 2006.
"It's an indication that we're going to have a good ratings year," Jon Steinlauf, executive vice president of ad sales, told SNL Kagan as part of a wide-ranging interview with Scripps executives at HGTV's headquarters in New York.
Scripps is going to position itself in the upfront marketplace as a destination for viewers who tend to watch shows live. Steinlauf said the company recently did a study on audience profiles after grouping 100 cable and broadcast networks into genres. What they found was that lifestyle viewers, such as those who watch Scripps channels, are more affluent, tend to spend more, show more loyalty and like to view programming live. Watching a show live is critical because 95% of viewers are going to see the commercials, which is good for advertisers, he said.
"As soon as they slip into any kind of a delay, whether it's 10 minutes … or six days, the ability to skip advertising on delayed view is much more likely because they have the fast-forward button," said Steinlauf, noting that there is a "real battle" among networks to try to get people to watch live.
Scripps CEO Ken Lowe told analysts at a March 11 investors' conference that 93% of its audience watches live.
Integrated digital strategy
Scripps also is stepping up its digital and international content strategies to spur growth. CFO Joseph NeCastro told analysts at the same investors' conference that Scripps continues to invest in "businesses for the future, most importantly in international, but also in the digital front."
In 2014, the network is rolling out 14 shows that will start out on cable TV, followed by digital episodes or other online content and activity.
"We are very engaged in our digital efforts with our linear platform," said Kathleen Finch, president of HGTV and DIY Network, in an interview.
In January, HGTV launched a channel on Google Inc.'s YouTube Inc. called HGTV Handmade to appeal to do-it-yourselfers among millennials. The network debuted five weekly shows — "WeekdayCrafternoon," "MeganAllanColeCrafts," Karen Kavett in "xperpetualmotion," "AnneorShine," and "SimpleDIYs" — to teach viewers how to make fashion accessories, jewelry and other crafting projects.
"It's going incredibly well," Finch said. "What we're doing is trying to speak directly to the millennials in our audience on a platform they know so well," especially young women interested in crafting.
Also in January, Scripps unveiled a slate of original digital series on its months-old content website, Ulive, which also carries full episodes of shows on Food Network and Cooking Channel. These include "Yoga Rebel with Tara Stiles"; "Do Better Daily" on healthy living tips; and "One Day One Change," a home improvement series. Other Ulive original web series are "Dime Traveler" and "Handy Ma'am," featuring a capable mother of three.
Ulive incorporates Scripps cable channel content and additional content on parenting, wellness and other topics that "we know our core audiences would love but are not reflected well on our linear channel," Finch said.
Scripps also will continue to develop what it calls a "custom content hub," which combines advertiser-generated content with its own. Last year, Travel Channel launched a project with Fiat to promote its new 4-door 500L vehicles in a series called "Hidden Gems."
He said wrapping the Travel Channel's brand around Fiat resulted in a favorability rating on the company of 78%.
"Travel Channel's umbrella of expertise and authority sets this vehicle up for its own advertising," Steinlauf said. "It's the TV version of an advertorial," he added.
Scripps also is restructuring its digital ad sales group. Steinlauf said sales are now structured along home, travel or food categories for a more streamlined approach. Before, all digital sales folks sold ad inventory on all sites.
"As a company, we're very category-focused and we want to build that expertise so we can fully serve the ad market across all channels," he said.
Scripps recently named a new executive vice president of digital, Tamara Franklin, to coordinate the company's overall digital strategy, focusing on an integrated approach to digital video production and distribution.
Finch said HGTV and DIY just wrapped up "one of our best years ever" for the two networks. One thing that worked was a slate of "destination" shows that trigger images of a relaxing life by the beach for viewers. "Something that our very upscale viewers seem to respond to is the idea of a fantasy life in a beautiful location," she said.
What worked well were shows such as "Hawaii Life" and "Beachfront Bargain Hunt," featuring properties that are within reach for the middle-class family.
On that vein, Scripps is coming out with a new show called "Caribbean Life" and a new season of "Island Hunters."
Finch said Nicole Curtis of DIY's "Rehab Addict" is turning out to be "just a firecracker of a superstar."
In general, Scripps' approach to shows has been to start with an expert in home, food or travel and then build a show around them instead of the other way around.
"That's what really separates Scripps from anybody else," Finch said. "We don't cast hosts for the shows. We find people who are experts and then we build a show around them. So a lot of the great ideas that were launched will be based on sitting around the table with this talent and just picking their brains a little bit and figuring out what they know best and how we can fashion an entertaining show around them."
For instance, "Vanilla Ice Goes Amish" starring the rapper garnered the highest ratings for an original series in DIY's history, she said. Coming up this year is a show featuring singer Daryl Hall from Hall & Oates. He will be renovating an antique farmhouse in Connecticut. Also on tap is actress Jennie Garth in "The Jennie Garth Project," where she renovates her dated Hollywood Hills, Calif. home.
"We find a category that resonates with viewers, and we make more of it," Finch said.
Steinlauf said networks constantly have to come up with new shows because the audience demands it.
"It takes new shows to keep the growth going," he said. "The audience demands new product, regardless of how successful you've been with your returning series."
Moreover, a network does not have to have mostly hits to thrive.
"One or two stars and one or two hit franchises can bring the whole enterprise up," Steinlauf said. "You wouldn't think that would be possible" with cable programming running around the clock.
He said two of Food Network's new hits are "Cutthroat Kitchen" with Alton Brown and "Guy's Grocery Games" with Guy Fieri. These shows insert a twist into the typical competition series, Steinlauf said. Coming in April is "Kitchen Casino" with Bill Rancic, featuring professional chefs competing in casino-style games. For example, a spin on the Kitchen Casino Slot Machine reveals the cuisine, ingredient and theme for a competing round.
"Building successful prime-time franchises is the single most important thing to grow the business," Steinlauf said.
While Scripps is putting more of its programming on the web, it remains a stalwart backer of TV Everywhere, in which only subscribers of pay TV operators get online access to most of its shows.
"Seventy percent of our distribution footprint now is in TV Everywhere-type agreements," said Mark Kroeger, chief communications officer, in an interview. "That's really been our focus and the primary reason is we obviously like the ecosystem. We like the dual revenue-stream model, and we think that's the most likely successful avenue for us."
As such, Scripps is not planning to expand its slate of subscription video-on-demand distribution deals, other than an existing partnership with Amazon.com Inc.
But a partnership that Scripps has expanded is with Hearst Corp. for Food Network and HGTV magazines.
"We think of them as very successful marketing platforms for us, great venues for our talent, lots of exposure there for them," Steinlauf said. "There are opportunities for converged advertising solutions that we can sell as well."
Added Finch: "Both of our magazines are doing extremely well, sort of defying all odds given the [weak] magazine industry as a whole. But HGTV Magazine has just gone gangbuster since it was launched a couple of years ago, and Food Network Magazine has been just a superstar from the very beginning. So we're really, really pleased."
In December, Adweek named HGTV Magazine its "Hottest Newcomer." According to Hearst, HGTV Magazine saw a 34% jump in circulation year over year to 1.25 million readers.
Finch said Scripps' viewers are folks who want information and not just entertainment.
To further boost growth, Scripps has made international expansion a key strategic priority. It already is in the U.K., Russia, Poland and the Philippines. It will soon unveil "Fine Living" in Italy in March. Last year, it bought the Asian Food Channel, which is based in Singapore and reaches about 8 million subscribers in 11 markets.
Lowe said at the investors' conference that international expansion is a "significant" priority for Scripps. The company has been distributing content abroad for about 15 years and it is time to own some of these networks globally, he added.
Revenue from international shows is "starting to become material for the company," Kroeger said.