E W Scripps Co (SSP) 2006 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the E.W. Scripps fourth-quarter earnings report. For today's conference, all the lines will be in a listen-only mode. However, there will be an opportunity for your questions. (OPERATOR INSTRUCTIONS). As a reminder, today's call is being recorded.

I would now like to turn the conference over to the Vice President, Investor Relations, Mr. Tim Stautberg. Please go ahead, sir.

Good morning, all, and thanks for joining us. We will start the conference call today with a few comments from Ken Lowe, our President and CEO, and Joe NeCastro, our Executive Vice President and Chief Financial Officer.

We have a lot of ground to cover today, so our prepared remarks will take a little longer than usual. We'll still make sure, though, that we're done by the top of the hour.

Before we begin, let me introduce the other members of our senior management team who are here with us on the call. Joining us are Rich Boehne, Chief Operating Officer; John Lansing, President of Scripps Networks; Mark Contreras, Senior Vice President of Newspapers; Bill Peterson, Senior Vice President of our TV station group; Tim Peterman, Senior Vice President of Scripps Interactive Media; and Lori Hickok, Vice President and Controller.

Let me remind you if you prefer to listen in on the Web, you can go to Scripps.com, click on the Shareholders link, and find a link at the top of the page to the webcast. An audio archive will be available on Scripps.com later today and we'll leave it there for a few weeks so you can access it at your convenience.

Our discussion this morning will contain certain forward-looking statements. Actual results may differ from those predicted. Some of the factors which may cause results to differ are set forth in our publicly filed documents, including our 2005 Form 10-K.

Now here's Ken.

Thank you, Tim, and good morning, everyone. As always, we truly appreciate your interest in The E.W. Scripps Company. Scripps ended 2006 on a high note, with exceptionally strong financial results in three of our operating divisions. On a consolidated basis, the Company's total revenue and income from continuing operations were up strongly, and earnings per share finished comfortably above the range we forecast when we last spoke.

There were plenty of highlights. At Scripps Networks, for example, operating revenue was up 13% during the fourth quarter, pushing total revenue for the year past the $1 billion mark for the first time in the division's 12-year history. Segment profit at Scripps Networks grew a solid 19% during the three-month period.

Over at our television station group, record political advertising pushed total fourth-quarter operating revenue for the division up a strong 25%, resulting in a whopping 64% improvement in the division's segment profit contribution. Political advertising revenue for the year totaled $44 million, which, remarkably, was $2 million a year more than our stations generated in political ad revenue during the 2004 presidential election.

Revenue for our newest businesses, Shopzilla and uSwitch, grew by about 20% on a pro forma basis. And the $28 million in segment profit they generated was far ahead of our expectations. Combined, the pro forma revenue growth from both businesses reached about 60% for the full year of 2006.

And at Scripps Newspapers, despite some of the most challenging secular issues the industry has ever seen, we were at the top of our peer group in total advertising and online revenue growth for the full year, and that's a real credit to the determination of our local publishers, and Mark Contreras, to grow advertising share even in today's challenging environment.

Without a doubt, the success of our long-term strategy to diversify and transform Scripps is evident in the Company's consistently strong financial and operating results. As I'm sure you know, much of the Company's success is attributable to the popularity of our national lifestyle television networks and the exciting new Internet businesses that we're building around them.

At HGTV, for example, prime-time impressions were up 14% during the fourth quarter, as viewers responded favorably to the network's popular lineup of programming. Great shows House Hunters and Design on a Dime are appealing to a growing number of viewers who tune in for our brand of entertaining and informative program.

Over at the Food Network, total-day viewership grew at a steady pace during the fourth quarter as we continue to focus our efforts on building audiences during the valuable afternoon dayparts and on weekdays and weekends. Prime-time viewership at Food is holding its own as well and we are seeing some solid impressions growth among younger viewers and women. Good Eats, Iron Chef America and Road Tasted are among the network's most popular prime-time offerings.

Our newer networks are also gaining plenty of traction. DIY Network and Fine Living have both topped the 40 million subscriber mark, and GAC is now well on its way to 50 million. Impressions at GAC showed marked improvement year over year, up 46% in prime-time, 65% increase in total day.

We are also making significant progress building the Internet side of Scripps Networks. HGTV.com and DIYNetwork.com are consistently among America's top 10 websites in the home and garden category. Video-rich broadband channels that drill down deeper into subcategories like kitchen design, bath design, woodworking, crafts, gardening, even automotive, are proving popular with advertisers and Internet media consumers alike.

In fact, at DIYNetwork.com, we have now launched seven video channels that we update at least once a month. As a result, video plays on DIY's website grew through the month of December, averaging about 24,000 a day. DIY's craft channel has emerged as the strongest performer, by the way, accounting for 50% of DIY's online video plays.

Of course, FoodNetwork.com continues to take on all comers. The network's website attracted an astonishing 10 million unique visitors during December, which was up 12% from the same month a year earlier and well ahead of its nearest competitor. In addition to being the holiday destination for recipes, FoodNetwork.com's 12 Days of Cookies newsletter was delivered to 2.3 million subscribers during the fourth quarter, up 33% over the same period in 2005. Needless to say, FoodNetwork.com still reigns as the Internet's most visited food website.

All in all, our network websites collectively generated about $21 million in revenue during the fourth quarter, which was up 90% -- that's nine-zero -- from the same period a year ago. For the full year, our network websites generated about $61 million in revenue, up from 36 million in 2005.

By just about every measure, Scripps Networks was hitting on all cylinders in the fourth quarter and, as we noted in our guidance in the press release, the prospects are good, really, for continued double-digit growth this year. These are valuable businesses that for the most part we built from the ground up, and we feel very fortunate to have them in our portfolio of media businesses.

As already indicated, our broadcast television station group also contributed significantly to consolidated growth during the fourth quarter, thanks to the record political advertising, but political truly was just part of the story. Revenue from nontraditional advertisers -- now, these are folks that have never used TV before -- was up almost 19% during the full year, demonstrating once again the resourcefulness of our TV ad sales staffs.

We also had some success capitalizing on the upside potential in Phoenix and Tampa, which are two of our station group's most promising growth markets. For example, just looking at Phoenix, revenue grew about 30% year over year and cash flow tripled. It's a great story. All told, our TV stations had a fantastic fourth quarter and a very, very solid 2006.

Now turning to Shopzilla and uSwitch, the solid revenue and segment profit growth during the first quarter and for the full year affirm our belief that these specialized online comparison shopping services will contribute to the long-term value of the Company. We saw plenty of evidence during the holiday season that Shopzilla is a very popular destination for shoppers.

On Cyber Monday and Black Friday, based on the number of unique visitors, ours was the only comparison shopping site to rank among the top 10 online retail sites in America. The others were retailers like eBay, Amazon, Wal-Mart, and Best Buy. That's pretty good company to be in.

Another great metric showed us just how effective our cost promotional efforts were during the fourth quarter. From November 25 to December 16, we were heavily cross-promoting the site on our cable networks and television stations and in our newspapers. The name Shopzilla was the highest search term among all other comparison shopping sites according to Hitwise. In fact, it was twice as popular as the nearest competitor and three times as popular as all of the others.

These are great indicators of the strength of our brand. They also reinforce the importance of brand building to drive free traffic. And I'm happy to report that for the fourth quarter, our free traffic grew by 60% over the same period a year earlier. About half of Shopzilla's traffic today is free, and that's up from about a third just two years ago.

Yet, we did, at the same time -- there's a very competitive bidding environment for keywords on the general search engines over the holidays, and at the point we felt appropriate, chose not to chase expensive traffic, which could have boosted revenue but really offered too little yield. What we saw were traditional retailer stepping up their SEM, or search engine marketing efforts, and really driving up prices.

That being said, with the start of the new year, we've been closely monitoring the situation to see if keyword prices settle back down. If they don't, we are prepared to accelerate our brand-building strategy to drive free traffic. In addition, we will also be making some great improvements at the website's consumer interface and its overall look and feel.

Similarly, at uSwitch, we did a complete relaunch of the website in October. There were lots of improvements in functionality and features, and we're already getting great responses from our customers and our service providers.

Also in late December, we initiated our most ambitious offline marketing effort to date, introducing several new personal finance and communication products throughout the UK. Now, this campaign will continue throughout the first quarter. Our biggest plan for uSwitch in 2007, which is built into our financial forecast for the year, is the anticipated launch of uSwitch in the United States, with a focus on personal finance and communications. Shopzilla and uSwitch are off to a good start, but it's important to remember that we are still very much in the investing and building stages with these businesses. Stay tuned.

Finally, at our newspapers managed solely by Scripps, total advertising revenue during the quarter was about even with the same period last year, which, in the current environment, puts us near the top of our peer group. We also led our newspaper peers in online revenue growth for the full year. Internet revenue at Scripps newspapers topped $30 million in 2006, up 51% over the previous year. Online revenue for the fourth quarter was up 28%.

Our newspaper website in Naples, Florida, by the way, was just named the best overall new site in the NAA's 2007 Digital Edge Awards competition. Really proud to say that Scripps' newspaper websites snagged six of the top Edgie awards this year.

Another bright spot is the newspaper collaboration that we're participating in with Yahoo!. And while it's still really too early to declare success, we're seeing some initial signs that it is working. Yahoo! HotJobs is clearly making inroads on CareerBuilder and Monster in selected Scripps newspaper markets. And where that's happening, we are seeing a corresponding increase in help wanted revenue. Like I said, it's still early in the game, but we truly like what we're seeing.

Now, as for the future of newspapers at Scripps, let me be as clear as I can be. There is no plan to spin off, separate or sell the Scripps newspaper division. As we said during the Citigroup conference in Las Vegas earlier this month, management has had wide-ranging discussions exploring different options for our newspapers.

That said, it's important to note that we routinely weigh strategic options for all of our media assets in response to changes in the markets where we compete. Recent developments in the newspaper industry, for example, the auction process by Tribune, the sale by Knight Ridder and recent sale of Minneapolis by McClatchy, require that we give this issue special attention, but as I said, we have no plan to spin off, separate or sell our newspapers.

As we have said many times, Scripps management takes a long-term view toward creating value for the Company's shareholders. We are well aware of the secular changes that newspapers are contending with, but for now, we are intent on taking a bigger share of the local advertising markets in which we compete.

Now, before I turn it over to Joe, let me reflect just a little on the successful transformation of this venerable old Company. Scripps has evolved from its origins as a newspaper publisher to become one of the country's most admired diversified media companies. The Company and it shareholders are enjoying solid consolidated growth today because it's really in our DNA to adapt to a media marketplace that truly is forever changing. Going forward, we will continue to invest time and resources in our growth businesses, efficiently manage our legacy enterprises and keep our eyes on the horizon for new opportunities. Underlying that strategy is our commitment to build real value for our shareholders.

With that, here's Joe, who will provide a little more color for the fourth quarter and the year and to review the guidance that we issued this morning. Joe?

Thanks, Ken. Good morning, everyone. We've already hit on most of the operating highlights for the fourth quarter, so I'm going to focus my attention this morning on some of the nonoperating items and the guidance we've issued for the first three months of 2007.

Let's start by looking at where we are on debt. Debt stood at $766 million at the end of the year compared with $826 million at the end of 2005. Of course, that was before we acquired uSwitch, so it's clear the Company continues to generate more than enough cash to meet its obligations.

Interest expense for the fourth quarter was $14 million, up 17% from the same period a year ago. Interest expense for the full year was $57 million versus $39 million in 2005. Interest expense for 2007 will be back down to around $37 million.

One thing Ken didn't mention was the favorable effect that our tax planning had on fourth-quarter earnings. As we described in our footnotes, we implemented strategies that will allow us to utilize operating loss carryforwards in certain states. That effectively reduced the Company's tax provision by about $9 million, which increased net income by about $0.05 per share and reduced our effective income tax rate from 35% to 31%.

For 2007, we expected the tax rate to be around 33%.

Turning to other items, the Company continued to repurchase shares during the fourth quarter. We spent about $14 million for 287,000 shares at an average price of just over $49 per share. For the year, we repurchased 1.4 million shares at an average $46.57 per share, total cost of about $65 million.

Dividend and distribution payments on the year totaled about $117 million, including $77 million of the Company's Class A and common voting stockholders and $40 million to minority shareholders, primarily the Tribune Company for its 30% share of the Food Network.

Capital spending for 2006 ended up at about $106 million. We're forecasting CapEx for 2007 in the $110 to $125 million range.

Now, let's take a minute and review guidance for the first quarter. Keep in mind that as we indicated in December, we're expecting much of the Company's growth in 2007 to come in the back half of the year.

In the first quarter at Scripps Networks, we're expecting revenue growth to be in the 10% to 12% range, driven by continued growth in both advertising and affiliate fees. We are continuing to benefit from business we wrote during last summer's up-fronts and a fairly solid scatter market. Financial performance at our networks will likely lead the industry again during the first three months of the year.

Expenses at Scripps Networks are expected to be up about 9% in the quarter as we continue to support the brands and invest in programming.

Revenue in our newspapers is expected to be down between 5% and 7% due primarily to weak classified advertising. Newspaper expenses for the quarter are expected to be up 1% to 3%, but we will be taking a close look at costs through the balance of the year as we work to align our costs with our current revenue outlook.

Based on the slowness we're seeing at the beginning of the year, we're now anticipating full-year newspaper revenue to be down in the low single digits.

At our broadcast television stations, first-quarter revenue could be down from 7% to 10% as we go up against strong results during the same period last year that were driven by the Super Bowl broadcast on our six ABC stations and by 17 days of Olympics on our NBC affiliates. We also had $1 million in political during the first quarter of 2005 that won't be there this year. Expenses at our stations are expected to be flat during the quarter.

Over at Shopzilla and uSwitch, which make up our interactive media segment, we're expecting segment profit for the quarter to be about $9 million. As we've indicated in previous calls, these businesses are still in investment mode as we work to secure their competitive position in their respective marketplaces. We've increased spending on marketing at uSwitch in order to support the rollout of new products there, and at Shopzilla, we're going to be concentrating on improving the customer experience, so there will be an attendant increase in employee costs to accomplish some of our product objectives there.

Corporate expenses are expected to be about $19 million in the first quarter. The first quarter is the heaviest for corporate expenses because of the timing of expense recognition for equity awards. Full-year corporate expense is expected to come in around $60 to $65 million.

Earnings per share from continuing operations are expected to be between $0.39 and $0.43 compared with $0.49 during the first quarter of 2006.

Finally, a couple housekeeping items. First, a reminder that we've discontinued our practice of releasing monthly revenue and statistics, so you won't be seeing a release from us after the January results are in. And also, because of the growing complexities of Scripps Networks' businesses, including the development of our related Internet Enterprises, the Company has discontinued its disclosure of expenses and contribution of segment profit attributed to individual networks.

With that, I'm going to turn it back over to Ken.

Thank you, Joe. You know, we don't unusually say much about United Media, but Met Life announced a new licensing deal with us this morning that truly bears mentioning. For the first time, Met Life is extending its use of the Charles Schulz PEANUTS characters to all of its international markets, in addition to here in the United States and Canada. The PEANUTS characters have represented Met Life now for more than 20 years. It's a partnership we're very proud of. Our congratulations to the entire United Media team.

Operator, with that said, we're now ready to take questions.

(OPERATOR INSTRUCTIONS). Brian Shipman, UBS.

Your guidance on the interactive profits being down year over year, I realize that you acquired uSwitch in March of '06, but I guess as a result, could you give us some color as to what your expectations are for the underlying growth of Shopzilla and how much possible uSwitch dilution might be affecting that guidance?

And then saying with interactive, I guess I would have expected the revenue growth to have been stronger in Q4, so can you provide some additional color on the Q4 environment for interactive? Thanks.

Brian, we'll let Tim Peterman take that.

In Q1, the slowdown in the profits is related to about a $10 million marketing launch for uSwitch. It's basically -- we're introducing new products in the communication and personal finance area. In Q4, we absolutely saw an increase in the SCM marketplace, but it was absolutely anticipated as well.

Brian, it's Rich. At the same time, we're trying to push up the free traffic side. So yes, there was no question that the SCM market was more competitive in the fourth quarter, but that's obviously not where we're trying to be over the long term anyway. The bottom line looked good, but the revenue obviously was a little slower due to the competition in the SCM market, pretty much as we anticipated.

If you think about it, Brian, we really did focus on driving free traffic, and the free traffic, we were very pleased with that.

John Janedis, Wachovia.

Just to briefly follow up on Brian's question, as it relates to the growth here, do you still think Shopzilla is taking share or can you give us some sort of sense of what the comparative shopping vertical saw in terms of growth during the quarter? Thanks.

We absolutely believe Shopzilla is holding share and even taking some share. When we look at the universe, we look at the universe as the big comparison shoppings of shopping in PriceGrabber and Yahoo! Shopping. We also look at all the other upstarts that have started. We look at some of the retailers that are trying to provide some of that similar functionality, and Shopzilla continues to outperform, in our view.

Okay. So you think the industry grew below 20, then, for the quarter?

Yes, I think -- in terms of revenue?

Yes.

Yes, it's hard to predict since we're -- the only real metric apples to apples out there is unique visitors, but what you don't see is the conversion rate. What you don't see is the scale of the merchants and revenue for redirect, so I think absolutely, we were at the top end of the performance.

Okay, thanks. And just quickly for Mark, as you look at classifieds, are you now seeing declines across the three major verticals? And I'm assuming you are, but can you talk about the magnitude and to what extent is that a broad cyclical slowdown versus the shift to online?

We are seeing it in all three, but in varying degrees. Auto, as you know, has been slow for a couple of years, but we started seeing help wanted in real estate, particularly in Q4, slow pretty substantially. Our anticipation for going into the first quarter is that particularly in Florida, real estate, which was up very, very healthy numbers last Q1 and Q2, we're going to be going up again that in an environment where real estate sales in Florida are slowing.

So, I don't see real estate, particularly in Florida, being unhealthy forever. I think it's a cycle that we're in when it comes to the real estate category. As Ken mention, we have had some good luck with Yahoo! online, and just the early returns -- and again, I'm really reluctant, John, to mention this to you -- but the early returns from four or five markets show revenue in those markets up between 32% and 143% just in one month, and those were in markets where we did have CareerBuilder one year ago. So, we're optimistic about that deal panning out. Hope that's helpful.

Yes, it is, really. Thanks so much, Mark.

Peter Appert, Goldman Sachs.

Ken or John, could you share with us some more color on the trends in the cable network revenues, specifically some more on scatter pricing? And I guess in the context of what seem to be fairly strong ratings numbers, it feels like the revenue guidance for the first quarter isn't quite as strong as I might have anticipated. So I was hoping you could give us insights on that.

Sure. Happy to do that. Scatter pricing is up about 20% when you compare scatter to the broadcast up-front, but when you compare scatter to scatter, in other words scatter in Q1 versus scatter a year ago, it's really up just in the low single digits, 2% to 3% to 4%. And what was your other question? I'm sorry.

The question was you're posting some pretty good ratings numbers, and I would think the combination of the ratings and the scatter pricing might generate revenue growth a little bit higher than what you've indicated, so I'm wondering if I'm missing something.

No, I think they're tracking fairly well. If you look at scatter year over year, we're in the low single digits. Our ratings are in the high single digits right now in terms of the adult demo. So the discrepancy is not all that great. We're putting some of our inventory to work in promoting the network in order to help grow the ratings, and that is part of that discrepancy.

Okay. Good enough. And then a question for Tim. I'm wondering if you are rethinking the profit potential of the interactive business. When you first bought this business, you were doing 30% margins in some quarters, at least. I'm wondering if you are thinking now in the context of the competitive dynamic you need to spend more on keywords, marketing, etc., that this, perhaps, is a significantly lower margin business than that.

We don't think so. Absolutely, are we investing in the business? The answer is yes, and that's because we believe the profit potential is still there. When you think about what I said in the first quarter for uSwitch, that's a $10 million offline marketing campaign to launch into new categories, new verticals in personal finance and communication. We're doing so well in the existing categories that we believe we need to go in the other ones, so this is a onetime marketing launch to get into these new categories that we think will pay great dividends.

And with uSwitch or with Shopzilla, remember our investment thesis from the very beginning was to use our traditional brand-building techniques and assets to build the loyalty and the free traffic area. We've always anticipated that SCM is not going to be the long-standing, most dominant marketing approach to build these businesses.

So with the competition, we are absolutely aware of it. We've been thinking about it. We've been closely monitoring it, and the functionality that we're going to be improving this year on Shopzilla, which primarily relate to the what-to-buy situation, which is when you think about the comparison shopping services today strategically, you're really solving the consumer question, which is where to buy. And for quite some time, we've been focused on answering the question of what to buy in addition to where to buy, with research and things like that. So we think in 2007, with our brand building from traditional assets we have, as well as the strategy of our product, that the profit potential is still as big or bigger than we originally anticipated.

Do you think, Tim, this is a 30% kind of EBITDA margin business over time?

It depends on the -- sure. It could be there. It's really tough -- it's easy for more mature businesses to anticipate what the profit margin is going to be, but we are absolutely happy with where we see the profit margins today. And that's why you find us investing in these businesses like we are. We're not terribly concerned that the quarter-over-quarter growth for the division is upset by the $10 million marketing investment. What we are concerned about is making sure the product is right for the long haul, and that's what we're focused on.

Fair enough. And Ken, I can't constrain myself. I just have to say that I think you're moving in the wrong direction in terms of less disclosure with regard to eliminating the monthly data and the breakdown on the cable networks. Just my thoughts.

Duly noted, Mr. Appert.

Steven Barlow, Prudential Equity Group.

Joe, on your guidance in December on the segment profit for Interactive Media, you said $80 to $85 million. You've got $9 million in the first quarter. Does that $80 to $85 million still hold?

Yes, it does.

Okay. On uSwitch, you have -- you were doing a series of accruals here to figure out what the eventual payout will be to the people you bought it from five or six years from now. Has anything changed in the accruals either plus or minus in terms of what you think the business is worth for their payments out, I guess, five years from now?

Well, we monitor that, obviously, and we update it based on new long-term plans when we get them. We've only had one planning cycle with them in the mix, and so there hasn't been a significant change to that. We will know next fall when we do the next long-term plan, because they are based on, as you've said, five- to six-year projections for the business.

Okay, and I may have missed something here. Interest expense -- why is it going down so much? I know you've got some inflows coming in with the television sales, but what else is there?

Well, it's really just a combination of things. It's all the cash flows into the business. We paid down -- we're below where we were prior to the uSwitch acquisition, so we paid down all of that late in the year, so it didn't -- we didn't have a huge effect in '06 from that, but we will have a full year of savings on that debt reduction in '07.

Because you stated, I think, $50 million back in December, so that's quite the difference.

Well, we were quite conservative on that one. And we, at that point, didn't have the TV proceeds in. There was some question about whether or not that would get in and what time of year that would get in. So there were a number of factors there, but I think we were just overly conservative at that point.

And then last one on the network side, since we're not going to see any numbers on a monthly basis here -- is there a way to -- how are you looking at Food versus HGTV in terms of total revenue? It looks like Food obviously is making a great run on HGTV to be the highest revenue number of those two networks. Would we expect that Food would be a bigger network by the end of '07 than HG?

I can take that. The short answer to that is no. HGTV will significantly outpace Food Network in total revenue during '07.

Steve, this is Ken. Just one thing to add -- as we've said numerous times, when we acquired Food, which was totally dependent on advertising revenue, the inventory that we carried on Food Network was at that time significantly higher than Home & Garden. We've since cut that back over the years, but still, Food carries slightly higher hourly on inventory than does HGTV.

So on an apples-to-apples basis, when you see some of those increases, and you have to remember where HGTV is relative to Food, it's not necessarily apples to apples, but also a nice problem to have when you've got a network like Food that continues after, what, 15 years, to just be gaining altitude and popularity, especially with younger viewers, so -- of course, we are seeing the same thing with younger viewers with HGTV.

So back to a question earlier about the overall revenue growth, maybe it with Peter's question, about maybe not as strong as had been anticipated -- I thing once you kind of see how the other cable networks stack up, once again we will be leading the peer group.

William Bird, Citigroup.

Tim, your comments on newspaper segment plans were very clear. Do your comments mean you've completed the review process? And second, were there any particular factors that contributed to the moderation in interactive revenue growth beyond SEM costs rising more significantly? Thank you.

Yes, I think our statement about newspapers was very clear, although going back to your conference comment I made, there's no timeline and no plans in the near future. It kind of got brushed aside, I think. So I was restating, really, where we are. We're always, as I said in my comments, we're always routinely weighing these strategic options for all of our media assets, and we've got a history of that as a company. So I don't think you ever quote/unquote complete processes. You just kind of update them as we roll along, and we will continue to do that. But to be very clear, no plans now to spin or sell the newspaper division.

And Tim, do you want to comment on Bill's interactive question?

Yes, I think it's consistent with the previous question, which is the primary reason you had a 20% revenue growth in the fourth quarter, which I believe was the point of your question, is because we saw -- we did see more expensive rates in the SEM marketplace, and as a result, with this business in comparison shopping, you can drive your revenue just by buying more and more keywords. The question is, are you getting the keywords in at price that you think is profitable to the business and that also improves the experience for the merchants?

Remember, we're one of the biggest if not the biggest in terms of scale in providing leads to these merchants, and we believe we are a dependable source of those leads to merchants that have a high conversion rate. And so you have to balance a variety of things in determining how aggressive you're going to be in the SEM marketplace. And so at a certain point when they exceeded those I think we were comfortable with in terms of pricing, we decided not to participate. So that is the reason.

And if you think about -- back to the original point is that our people were really focused on our beginning pieces, which is driving free traffic. And with the promotion from the networks and the other things, if you -- I don't know if you guys saw any of the countdown pods we had on the websites for any of the spots we had on the networks, the TV stations or any of the smart shopping segments we had on the newscast -- they were all very effective at really testing and proving out what we're trying to do here, which is we think the end game is not going to be through superior SEM. It's going to be through superior loyalty traffic, bringing people back, getting people to type in Shopzilla into their Web browser and not being taken there from some other place, and that continues to be our focus short term and long term.

Just a follow-on on newspapers. I was wondering if you can give us an update on the financial impact of the Cincinnati JOA expiration at year end.

I don't think we've broken that out in the past.

No, we haven't.

Bill, let's dig out that number and we'll come back to you. (multiple speakers) if you don't mind.

Lauren Fine, Merrill Lynch.

Thank you. I guess thinking on the newspaper side, a couple of quick questions. First of all, what happened to retail in December? And then secondly, I'm trying to understand why costs would be up in the first quarter, given that your news [print] pricing looks like it's down, given that you are cycling against a very big increase a year ago, and I'm wondering if any of it, I guess, on a consolidated, wouldn't have to do with Denver, by I'd love an update on Denver in terms of if the new presses are running.

Lauren, I'll start with retail. This is Mark. Local was really a bit of a mixed bag in the fourth quarter. Seven of our 13 markets actually were up in retail, anywhere between 2% and 18%. We had a couple of really good showings there, but the larger market tended to be slower. We actually had an increase in retail, Lauren, in local CPMs of a pretty healthy clip. But again, the larger markets affected the overall.

The second question that you had, could you refresh my memory?

Yes, costs in the first quarter -- I'm trying to understand why they [decreased].

Most of that is related, Lauren, to online-related costs. As you know, we did this deal with Yahoo! that comes with some extra expense, but in terms of the people costs and payroll costs, they're going to be moderated significantly compared to the first, second and third quarters of '06. We're hoping to do better than that, obviously. And given the revenue environment, we're going to be undergoing a very comprehensive process to look at all fixed costs because, as you know, we're a heavily fixed cost business, and that is something that we're turning over rocks we haven't turned over in the past, I guess is the best way to characterize it.

And then in Denver, just an update on the new production facility?

The Rocky Mountain News produced its first copy of a redesign last Monday, and so the Rocky Mountain News is going. The costs associated with production expense is going down. That plan that had been put together is proceeding, as well as continued efforts on their part because they are a large market and they're suffering similar revenue problems. They are undergoing a very serious exercise in retooling their entire expense base at the Denver newspaper agency, led by Harry Whipple.

And then I guess a couple quick follow-ons. I know Memphis had been a trouble spot for most of '06. Did it end on a better note? And what was the ad revenue decline there for the year? And then I have a question back on interactive.

Lauren, I don't think we break out specifically market by market.

Okay. On the interactive side, with Shopzilla and uSwitch, would you characterize it as how dependent they are on online e-commerce versus total retail sales? Are they dependent on one more than the other, because there's a new Jupiter research report indicating that online retail is going to have slower growth than it has in the past, and I didn't know how much of a factor that might or might not be for your business.

It's an interesting question, Lauren. I'm sure a bunch of people have different points of view. What you heard me earlier talking about was the where to buy and what to buy. I think for some time the comparison shopping has been focused on where to buy, strictly focused on the online opportunity. I think as you get out in '07, what we are also focused on is helping consumers figure out what to buy, which will meander into regular retail sales as well as online, because people will research, find things to do and then sometimes they don't convert online for some reason, for a variety of reasons.

So I think if we fulfill our ambitions on where to buy just as much as what to buy or what to buy just as much as where to buy, I think that it will be difficult for us to pinpoint one side or the other, but right now, clearly it's heavily focused on online.

Lauren, this is Ken. To your question and questions earlier, a couple of things we ought to mention, that this is something we think is impacting across the Company. For example, in our Fine Living network, we're doing a show called American Shopper in conjunction with Shopzilla, and really taking a hard look not only at driving free traffic, but as they're a connection between necessarily showing products, demonstrating products in these shows, and allowing people to then move to the Internet to get more product information and possibly purchase.

So there's a lot going on here, that information is falling down through the entire Company, via newspapers, via television stations, but especially the cable networks right now. And as I think Tim alluded to earlier, we are seeing some ups and downs in this division, but I remember -- Rich will, too -- we saw some of the same ups and downs early on in our cable network business when we were trying to grow it, invest in it, market it properly. As you recall, sometimes, it was a little hard to track quarter to quarter as far as investments, and we're really in the early, early days of this whole online comparison shopping business and how it relates to our others, so we think it's not only going to be a good division for us long term, but there's a lot of learning going on throughout the entire Company.

Great, and then just one last question. Why was DIY revenue flat in the quarter? Is it tracking with your expectations or not? And you mentioned a lot of the video opportunities. What do you think the business model will be?

Yes, Lauren, it's John. I will take that. As you know, I think you're aware that DIY became a Nielsen-rated service beginning in September, and as a result, the rates that we were selling were very aggressive up until that point, and that was strategically done on purpose so that when we became a rated service and when the actual impressions were weighed against our historic unit rates, there was an investment, a onetime adjustment, down slightly. But our from perspective, better to have that adjustment come down a little than to have gone into the marketplace with weak pricing, because the most challenging thing to do is to drive pricing up in this very, very competitive CPM environment. So you saw that onetime adjustment in that quarter.

Now, the good news is that as we've seen the ratings for DIY develop over the last four months, we're very pleased with the development. In fact, we're meeting all of our advertiser guarantees and then some in certain dayparts and in certain particular programs, even exceeding our expectations, some programs getting as high as a 0.4 in key demographics.

We're also seeing, thankfully, a mix of both men and women in younger demos, which introduces some new demographic buckets, if you will, for us to go and attract advertisers that would be new to any of our Scripps Networks, and our ad sales team has just done a terrific job in developing that business going forward.

So I have to tell you, I'm just really optimistic about DIY today and into the future.

Now, in terms of the broadband video and the business model, just to remind you, the CPMs on broadband video are actually double the CPMs on flat interactive content. We are seeing, in other words, $30 to $35 CPMs for broadband video, where our regular Internet inventory would be more in the $15 to $18 range, and we're seeing a significant growth. In fact, we're projecting growth beyond 50%, upwards of 70% on just that broadband video portion of all of our interactive revenue. And we anticipate that by the end of this year, '07, we will have already crossed over into profitability with all of our broadband channels rolled up, because of the efficient nature of the expense model, because all the video already exists in-house. So that is a very promising area for our growth.

Can I jump in on Bill Bird's question? We had a follow-up, Bill, if you're still listening. 2006 results of the JOA were about $14 million in net profit after the editorial expenses were taken out, so -- and we don't have a forecast for '07. We don't provide that on a market-by-market basis, so that gives you a sense.

Lisa Monaco, Morgan Stanley.

Not to harp on the interactive side, but just two questions. One, in the fourth quarter, you said pro forma revenue growth was 21%. Can you break that out, the growth between Shopzilla and uSwitch?

And secondly, seeing that the traffic, the unique visitors, was down in the fourth quarter for -- or in December, I'm sorry, for Shopzilla and Shopping.com, how are revenues growing, and how do you get comfortable not being concerned that just general user trends are moving away from price comparison sites and going directly to the retail sites? Thanks.

I'll be the -- Lisa, this is Joe, and on the first question, we're not going to break down the revenue by line of business. I'll let Tim handle the second question.

The greater question -- we don't really see the information we see internally from the networks Shopzilla and at uSwitch, but you're talking about Shopzilla, I assume, as well as the outside metrics of unique visitors from the various different -- Hitwise, Nielsen, comScore -- as well as talking to the merchants and talking to consumers. We don't see that the trend is moving away from comparison shopping.

What we do see is that more and more folks in the comparison shopping, just like the general search engines did not provide enough feedback to shoppers and that's created the opportunity for comparison shopping to create itself, we think the customers are getting more sophisticated and wanting more from their comparison shopper. They want a deeper answer and a quicker answer. And so that's what we're focused on providing.

And if you think about -- if you look at the European landscape and some of the comparison shoppers there, they really do a great job of linking together the where to buy and the what to buy. And that's what we believe the consumer information that we are seeing and trends we are seeing are telling us, not that they're moving away, they're just wanting more.

Okay, and then just a quick one on the newspapers. In December, is there a way to give us the newspaper ad revenue growth excluding the extra Sunday? Thank you.

Lisa, not with any great science. So I think it's probably best to defer on that question.

Alexia Quadrani, Bear, Stearns.

Just a couple of questions. Can we assume from your comments that investment spending in interactive media will then peak in the first quarter? And second question is just on the broadcast segment, what your expectation for political is in '07. Will it drop off less than usual in a nonelection year?

I'll take the interactive question. Yes, it's safe to assume that the investment spending will peak in the first quarter regarding the interactive division.

And this is Bill. It's so hard to predict political. The budget that we built, we predicted that we would have about the same amount of political as we had in 2005, but there's no real science to that.

Philip Olesen, UBS.

In terms of Tribune, as their kind of ongoing auction process continues to evolve, is there any reason for us to believe that there may be an increased likelihood that you would have the ability to buy in that minority stake in Food TV?

Phil, this is Ken. As we've said and it's consistent, we stay very close to Tribune. We talk about it a lot. I think until the dust settles, there's no reason to speculate one way or the other that our odds would increase or decrease. They know that we're interested and we are really the only potential buyer, so I don't know. You are probably better at speculating that than we are as far as where that process may end up.

Okay, and just an unrelated question, going back to some of the comments with respect to kind of the ongoing fit of newspapers and the review that -- the ongoing kind of review, I guess, at the conference in early January, you had indicated that there were some potential structural constraints that would have limited or potentially limited your sale or spend of all of the newspaper segment. Can you maybe just go into a little bit of how you interpret the constraints that are embedded in the trust?

Sure. I'll let Rich take that question.

It's Rich Boehne. The trust agreement speaks to the nature of how the trust controls the Company. That's not a company document, however. And although -- it's discussed in some detail on the proxy, so we probably would refer you over to the proxy if you want to read about the nature of the trust and its control. That's the best place to do without us trying to explain it all in the call.

Okay, and I guess, then, if there ever came a point in time where the decision by management was made that a spinoff in the entirety of the newspaper business was in the best interest of the shareholders, under your interpretation of the trust agreement, would that be allowed?

We're not here to -- as Rich said, we're not here to interpret that document at this point. It's not a company document, and since I said earlier there's no planned spin or sale of the papers planned, it would just be speculation.

Debra Schwartz, Credit Suisse.

Quick question on the TV business. Are you still expecting only a 3% to 5% decline in TV revenue for the year, given the tough comp in Q1, and where do you see, I guess, declines moderating other than Q2?

As you point out, we are going against tough comps, and as we enter the year, we're going against particularly tough comps, so it feels soft. It is an odd year, which is something we experience every other year. Really, our focus during 2007 is identical to 2005, and that is to manage expenses in concert with the expected lower revenues and invest to make our stations as strong as they can be and our websites as strong as they can be as we enter 2008, were we anticipate there will be a robust revenue environment, so that's really kind of our focus.

And then just a follow-up on the newspaper business. So for Q1, I understand that the first quarter of classifieds, you are facing a very difficult comparison, but are you expecting the Florida papers to grow in the first quarter or because of the tough comparison, are you expecting a decline? And then if you are expecting growth, then that would -- am I correct in assuming that some of the papers could be down double digit in the first quarter?

This is Mark. Let me just give you some numbers kind of in the aggregate to illustrate what we're going to be dealing with. In the first quarter of last year, our real estate in the aggregate was up 37.5%. Real estate in the second quarter was up 31%. And again, if you looked and you peeled it back to just look at Florida, those were 40% or 50% up. They were huge.

So we are expecting that, particularly in Florida, but really across the board, that real estate is going to be softer and down, and potentially double digits, but we particularly know that we've got a tough nut to crack in the first and second quarters. We also know that Florida real estate is a cyclical business, and as we've talked about earlier, we don't anticipate that it is going to last forever, but it's really hard to call when that uptick is going to happen. And so we are anticipating very conservatively as we go throughout all of '07. Hope that's helpful.

Great. That is helpful. Thank you.

Craig Huber, Lehman Brothers.

A number that struck me, you said scatter was up 2% to 4% versus a year ago. Just curious what you think scatter is tracking at here in the first quarter, what your outlook, more importantly, is for the full year on scatter, and what gives you the confidence that you will -- actually, for the whole year, cable could be up 10% to 13%, back to your original guidance? Thank you.

Yes, Craig, this is John. Well, the scatter marketplace for the first quarter is really mirroring the fourth quarter. We're seeing low-single-digit growth when you compare scatter to scatter, but it's 20% growth above the up-front pricing, which was laid in in the summer of '06. So that's healthy, and it's significantly more healthy than it was a year ago. If you recall, last year, in the first two quarters of '06, our scatter was actually below the prior-year scatter, so this improvement shows some health in the marketplace.

In addition, we have growth in impressions. We have both Food Network -- well, all of our rated networks -- all four of our rated networks are showing growth in impressions, and that's essentially what we sell in the marketplace -- our impressions, so that's helping to drive our results.

And then the third component is the interactive piece for Scripps Networks, where our growth through all of '06 was in the high 50%, almost 60% range, representing about 6% of all of our advertising revenue, and our intention is to aggressively grow our interactive, continue to grow it, as you've heard us speak about the broadband initiatives, etc., and that, in addition, augments the overall growth of our ad revenues. So the market -- that combination of the marketplace, the improvement in our ratings, and the aggressive growth of interactive comes together to form the basis for our projection.

And then if I could just switch over to TV for a second, there's been a lot of talk in the marketplace in recent weeks and months about potential retransmission fees going to local TV stations from the cable operators. I'm just -- your thoughts -- I am curious over the next few years, are you anticipating getting any pennies per sub for any of your TV stations? And if so, how significant do you think it roughly could be as a percent of total revenues of a given local TV station?

We've gotten value from retransmission consent for a good number of years. It's not a new phenomenon for us. We've done so by using it to leverage carriage of the various Scripps Networks. And that will probably continue to be our model near term as we go into the future.

Craig, this is Ken. I think even though we have chosen, and hopefully smartly, it seems that way, that if you go back to 1994, when a lot of folks were scrambling to try to get some value out of retransmission consent, it's somewhere in Scripps Networks these days, but it is an interesting statement to the overall fundamentals of the television station business that 14 years, almost, after retransmission consent was introduced, we're seeing it add value to over-the-air broadcast television stations.

So while in our case we've chosen a retransmission consent model that works for Scripps, I think you are going to see some revenue going back to over-the-air broadcast television stations, who have kind of made, if you will, a rebound, especially with now high definition and the overall rise of the broadcast network. So, it wasn't that many years that we were sitting around in conference calls like this talking about future broadcast TV not being all that great, but it's turned out to -- its death notice was somewhat premature, I think.

Paul Ginocchio, Deutsche Bank.

This is Dave Clark for Paul. Just one quick question again on broadcast TV. What do the broadcast TV trends look like ex the impact of the Super Bowl and Olympics, I guess, in the first quarter? Is it just a tough comp or are the underlying trend soft as well? Thanks.

That is the question. You look at the major categories right now. As we look at first quarter, we see automotive being soft, but we had a ton of automotive in the Super Bowls and in the Olympics. So it's hard to tell really whether that's because of the events that we had last year or there's something structural going on. But we are seeing a shift -- clearly foreign manufacturers and foreign dealer groups seem to be more active than the domestics. There may be an underlying real weakness in the automotive category because of the reluctance of the domestic manufacturers to be very aggressive, but looking at our numbers, it's a little hard to determine that.

Fred Searby, JPMorgan.

A couple questions. One, if national looked fairly weak last quarter, and it's been clearly bete noire for the newspaper industry, I wonder how that is going to play out in the first quarter, if you had some insight.

And then secondly, this may be beyond the scope of the conference call, but the uSwitch launch in the U.S. and bringing the model from the UK, given how different electricity in some of the markets are, can you just give us how you think it's gone to differentiate itself in this market? Thank you.

Fred, this is Mark. On national, as you know, for our newspapers, which have mid- and small-size markets nationally --

I know it's small, but I just --

Yes, it's relatively small. It's 7%, and what we saw quarter by quarter last year in national was really kind of a 5% down, 3% down. Third quarter was particularly rough, 5% down in the fourth quarter and about 8% down for the year. A lot of that was telecommunications in '06 that didn't reoccur from '05, but our first-quarter estimate is that national performs about what it did for the full year of '06. Does that help?

Yes, I just wanted to get a barometer on that.

Tim, on the anticipated?

Yes, with uSwitch, what we are thinking about here in the U.S. is the product launches would be in the personal finance and communication areas. Obviously, energy deregulation is not here in the U.S. It is in the EU. So that would not be the first product that we go out with.

In terms of differentiating and helping in the launch, when you think about what we're trying to do, if the product, we think, and the focus of the product has a big marketplace, so we think there's an opportunity there, we think that with the unique visitor traffic, the brand-building possibilities for not only our traditional media assets, but its relationship with Shopzilla here that generates some 20 million uniques a month, along with the technology that uSwitch has in its business over there, we think that kind of scale, that kind of technology, that kind of product gives us a much better than fair shot at building this business here in the U.S. And then, as the business scales, as we begin to prove ourselves out, we will begin to, in smart ways, using our traditional Scripps media assets, to begin branding the uSwitch business, but those are the beginning building blocks of our thinking regarding the U.S. marketplace.

We have time for one more question, operator.

Edward Atorino, Benchmark Company.

Mine has been answered many times, though I would like to echo Peter's comment that I think cutting out the monthly numbers is not a good idea.

Okay, Ed. Did you have a question or just a comment?

No, my questions have been answered many times.

Okay.

Any closing comments from the presenters?

This is Tim Stautberg. I will be in the office all afternoon. If there are any further questions, you can reach me at 513-977-3826. Otherwise, thank you and have a good day. Operator?

Thank you. Ladies and gentlemen, this conference is available for replay. It starts at 1:30PM Eastern and will last until February 6 at midnight. You may access the replay at any time by dialing 1-800-475-6701 or 320-365-3844. The access code is 859061. (OPERATOR INSTRUCTIONS). That does conclude your conference for today. Thank you for your participation. You may now disconnect.