A dissident shareholder challenges the status quo at E.W. Scripps

May 7, 2018
Category: Business & Work

When Rich Boehne stepped down as CEO of E.W. Scripps last summer, he described the multimedia enterprise as an "adventurous 140-year-old company."

That's putting it mildly. Wall Street, which typically prefers predictable to adventurous, has marked down the stock 50 percent over the last year as its profitability lags industry norms by a lot.

Now gadfly billionaire investor Mario Gabelli, who owns 17 percent of the company's stock, has nominated his own candidates for the three seats on the 11-person Scripps board not occupied or controlled by the Scripps family.

And management seems to partly agree that financial results need to quickly improve, announcing in January that it plans to sell all 34 of the company's radio stations, leaving just a local broadcast group of 33 stations and some start-up specialty networks. Gabelli has said that margins should improve by six percentage points. New CEO Adam Symson says he can achieve growth in profits with plans already in place.

Management got a boost last week when the influential analytic firm Institutional Shareholder Services recommended against Gabelli's nominees, saying he had "not presented a sufficiently detailed or compelling case" that Scripps issues require changes at the board level.

Even if management does prevail, Scripps, whose roots are in the newspaper business, will be left a TV and digital company, under pressure to expand with acquisitions or get swallowed by a bigger fish as the industry continues to consolidate rapidly.

How Scripps got into the current pickle relates to its past two decades of "adventurous" history, as Boehne put it. A friendly former journalist, Boehne was among executives suggesting the company, til then a conventional newspaper and broadcast group, get into the cable network business just before the turn of the century.

Its initial launch, HGTV, was a huge hit, soon joined by Travel and Do-It-Yourself networks. By the time I started covering the news business in the early 2000s, the networks were becoming bigger than the parent company and providing all of its growth.

Scripps Interactive Networks split off from the parent company in 2008. Then in 2015, Scripps merged its papers, which include the Memphis Commercial Appeal and Naples Daily News, with the parent of the Journal Sentinel in Milwaukee. Within months, the new group was sold to Gannett.

With all that wheeling and dealing, Scripps missed out on the first wave of local station consolidation. It also has been locked into below-market retransmission deals with cable providers, so is just now poised to cash in on the much higher rates that prevail in 2018.

Scripps did up its the acquisition game last fall but not by buying more stations. Instead it spent $302 million to acquire Katz Broadcasting, a group of four networks targeting very specific demographics with original programs. The company also owns the millennial-targeted Newsy network.

One of Boehne's bold moves, which he described at a Poynter conference on new audiences in early 2014, was to launch a full paid digital site out of its hometown Cincinnati station. The station's staff was scaled back by seven positions as part of economizing moves announced last month.

Management has renominated two current directors and suggested Lauren Rich Fine for the remaining seat. Fine was a prominent newspaper industry analyst for Merrill Lynch (and a member of Poynter's National Advisory Board).  She has since been doing civic work in Cleveland and has joined a local wealth management firm, Gries Financial. Boehne, who announced his intent to retire as CEO a year in advance, remains as chairman.

Gabelli has had mixed results as a minority shareholder stirring the pot.  He owned a large block of Media General stock for many years without apparent impact, for example, before finally pressuring management to sell its newspaper group to Warren Buffett's BH Media. The remaining TV group was later merged into Meredith.

I write mainly these days about newspapers, magazines and digital start-ups.  But the Scripps saga seems to demonstrate that all is not tranquil either in the generally prospering local broadcast industry.

Correction:  The original version of this story misstated the number of Scripps radio and television stations and had several other wording errors.