Item 1. Business
Item 1. Business
We are a 142-year-old media enterprise with interests in local and national media brands. Founded in 1878, our motto is "Give light and the people will find their own way." Our mission is to do well by doing good — creating value for customers, employees and owners by informing, engaging and empowering those we serve. We serve audiences and businesses in our Local Media division through a portfolio of local television stations and their associated digital media products. We are one of the nation's largest independent owners of local television stations, with 61 stations in 41 markets that reach about 25% of U.S. television households. We have affiliations with all of the “Big Four” television networks as well as the CW and MyNetworkTV networks. We operate national brands including next-generation national news network Newsy; five national multicast networks - Bounce, Grit, Laff, Court TV and Court TV Mystery - that make up the Katz networks; and Triton, a global leader in digital audio technology and measurement services. We also operate an award-winning investigative reporting newsroom in Washington, D.C., and serve as the longtime steward of one of the nation's largest, most successful and longest-running educational programs, the Scripps National Spelling Bee. For a full listing of our outlets, visit http://www.scripps.com.
We completed the acquisition of ION Media Networks, Inc. (“ION”) on January 7, 2021, for $2.65 billion. ION is a national broadcast television network that delivers popular crime and justice procedural programming to more than 100 million U.S. homes through its over-the-air broadcast and pay TV platforms. To comply with ownership rules of the Federal Communications Commission, we simultaneously divested 23 of ION's television stations, which were purchased by INYO Broadcast Holdings, LLC upon completion of the acquisition. These divested stations became independent affiliates of ION pursuant to long-term affiliation agreements. As a result of the acquisition and related divestitures, ION's programming is delivered through 48 owned and operated stations and 63 independent ION affiliated stations.
The acquisition of ION enables us to create a full-scale national television networks business. By combining ION with the Katz networks and Newsy, the new Scripps Networks will reach nearly every American through free over-the-air broadcast, cable/satellite, over-the-top and digital distribution, with multiple advertising-supported programming streams. The ION network airs on primary channels in its owned and operated markets and on digital subchannels in its affiliates’ markets. Our five Katz networks air on digital subchannels on our and other broadcasters stations.
The ION transaction was financed with a combination of cash, debt financing and preferred equity financing, including Berkshire Hathaway's $600 million preferred equity investment in Scripps. Berkshire Hathaway did not receive any board seats or other governance rights with the preferred equity investment. Berkshire Hathaway also received a warrant to purchase up to 23.1 million Class A shares, at an exercise price of $13 per share.
During 2020, we also reached an agreement to sell our Stitcher podcast business for $325 million, with $265 million of cash upfront; earnout of up to $30 million based on 2020 financial results and paid in 2021; and earnout of up to $30 million based on 2021 financial results and paid in 2022. The transaction closed on October 16, 2020.
During the first quarter of 2021, our Board of Directors approved the sale of our Triton business. On February 16, 2021, we signed a definitive agreement to sell the business for $230 million. The transaction is expected to close in the second quarter of 2021 upon satisfaction of normal and customary closing conditions and regulatory approval.
Financial information for each of our business segments can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to Consolidated Financial Statements of this Form 10-K.
4
LOCAL MEDIA
Our Local Media segment is comprised of our 61 local broadcast television stations and their related digital operations. We have operated broadcast television stations since 1947, when we launched Ohio’s first television station, WEWS, in Cleveland. Our television station group reaches approximately 25% of the nation’s television households and included 18 ABC affiliates, 11 NBC affiliates, nine CBS affiliates and four FOX affiliates. We also had 12 CW affiliates - four on full power stations and eight on multicast; two MyNetworkTV affiliates; three independent stations and 10 additional low power stations.
We produce high-quality news, information and entertainment content that informs and engages our local communities. We distribute our content on multiple platforms, including broadcast, digital, mobile, social and over-the-top (OTT). It is our objective to develop content and applications designed to enhance the user experience on each of those platforms. Our ability to cover our communities across various digital platforms allows us to expand our audiences beyond traditional broadcast television.
We believe the most critical component of our product mix is compelling news content, which is an important link to the community and aids our stations' efforts to retain and expand viewership. We have trained employees in our news departments to be multi-media journalists, allowing us to pursue a “hyper-local” strategy by having more reporters covering local news for our over-the-air and digital platforms.
In addition to news programming, our television stations run network programming, syndicated programming and original programming. Our strategy is to balance syndicated programming with original programming that we control. We believe this strategy improves our Local Media division's financial performance. Original shows we produce ourselves or in partnership with others include:
• The List, an Emmy-award winning infotainment show, is available in 41 markets reaching viewers in approximately 34 percent of the country.
• The Race is a weekly show that focuses on the issues impacting Americans as we face a quickly changing economy and nation. We travel coast to coast talking to Americans about their lives. It is real people talking about real issues. This show is available in more than 50 markets.
• RightThisMinute is a daily entertainment program featuring consumer-generated viral videos. RightThisMinute reaches nearly 95 percent of the nation's television households.
5
Information concerning our full-power television stations, their network affiliations and the markets in which they operate is as follows:
Station Market Network
Affiliation/
DTV
Channel Affiliation Agreement
Expires in FCC
License
Expires
in Market Rank (1) Stations
in
Market (2) Station Rank in Market (3) Percentage
of U.S.
Television
Households
in Mkt (4) Average
Audience
Share (5)
KNXV-TV Phoenix, Ch. 15 ABC/15 2022 2022 11 13 3 1.8% 5
KASW -TV Phoenix, Ch. 61 CW/27 2021 2022 11 13 11 1.8% 1
WFTS-TV Tampa, Ch. 28 ABC/29 2022 2021 13 13 4 1.7% 4
WMYD-TV Detroit, Ch. 20 MY/21 2021 2021 15 10 7 1.5% 1
WXYZ-TV Detroit, Ch. 7 ABC/41 2022 2021 15 10 2 1.5% 8
KMGH-TV Denver, Ch. 7 ABC/7 2022 2022 16 12 3 1.5% 5
KCDO-TV Denver, Ch. 3 Ind/3 N/A 2022 16 12 N/A 1.5% N/A
WSFL-TV Miami, Ch. 39 CW/27 2021 2021 18 14 10 1.4% 1
WEWS-TV Cleveland, Ch. 5 ABC/15 2022 2021 19 9 2 1.3% 7
WRTV-TV Indianapolis, Ch. 6 ABC/25 2022 2021 25 9 4 1.0% 4
KGTV-TV San Diego, Ch. 10 ABC/10 2022 2022 27 12 3 0.9% 5
WMAR-TV Baltimore, Ch. 2 ABC/38 2022 2028 28 10 4 0.9% 3
WTVF-TV Nashville, Ch. 5 CBS/25 2021 2021 29 11 1 0.9% 12
KSTU-TV Salt Lake City, Ch. 13 FOX/28 2022 2022 30 12 3 0.9% 6
KMCI-TV Kansas City, Ch. 38 Ind./41 N/A 2022 34 12 8 0.8% 1
KSHB-TV Kansas City, Ch. 41 NBC/42 2021 2022 34 12 4 0.8% 5
WCPO-TV Cincinnati, Ch. 9 ABC/22 2022 2021 36 9 3 0.8% 6
WTMJ-TV Milwaukee, Ch. 4 NBC/28 2021 2021 37 13 3 0.8% 6
WPTV-TV W. Palm Beach, Ch. 5 NBC/12 2021 2021 39 9 1 0.7% 8
WHDT-TV W. Palm Beach, Ch. 9 Ind/34 N/A 2021 39 9 N/A 0.7% N/A
KTNV-TV Las Vegas, Ch. 13 ABC/13 2022 2022 40 13 4 0.7% 4
WXMI-TV Grand Rapids, Ch. 17 FOX/19 2022 2021 41 8 3 0.6% 5
WGNT-TV Norfolk, Ch. 27 CW/50 2021 2028 46 8 5 0.6% 2
WTKR-TV Norfolk, Ch. 3 CBS/40 2022 2028 46 8 2 0.6% 8
WKBW-TV Buffalo, Ch. 7 ABC/38 2022 2023 53 8 3 0.5% 5
WFTX-TV Fort Myers/Naples, Ch. 4 FOX/35 2022 2021 54 14 4 0.5% 4
WTVR-TV Richmond, Ch. 6 CBS/25 2022 2028 56 9 1 0.5% 8
KJRH-TV Tulsa, Ch. 2 NBC/8 2021 2022 61 11 4 0.5% 4
WLEX-TV Lexington, Ch. 18 NBC/39 2021 2021 63 8 2 0.4% 9
KWBA-TV Tucson, Ch. 58 CW/44 2021 2022 64 12 7 0.4% 1
KGUN-TV Tucson, Ch. 9 ABC/9 2022 2022 64 12 3 0.4% 5
WGBA-TV Green Bay/Appleton, Ch. 26 NBC/41 2021 2021 69 9 4 0.4% 3
WACY-TV Green Bay/Appleton, Ch. 32 MY/27 2021 2021 69 9 7 0.4% 1
KMTV-TV Omaha, Ch. 3 CBS/45 2022 2022 72 9 4 0.4% 5
KOAA-TV Colorado Springs, Ch.5 NBC/42 2021 2022 82 11 3 0.3% 7
KXXV-TV Waco, Ch.25 ABC/26 2022 2022 83 7 1 0.3% 5
KIVI-TV Boise, Ch. 6 ABC/24 2022 2022 101 9 3 0.3% 5
WTXL-TV Tallahassee, Ch. 27 ABC/27 2022 2021 108 9 2 0.2% 5
WSYM-TV Lansing, Ch. 47 FOX/38 2022 2021 115 8 4 0.2% 3
KSBY-TV San Luis Obispo, Ch. 6 NBC/15 2021 2022 121 11 1 0.2% 9
KATC-TV Lafayette, Ch. 3 ABC/28 2022 2021 122 9 2 0.2% 8
KERO-TV Bakersfield, Ch. 23 ABC/10 2022 2022 125 11 3 0.2% 4
KRIS-TV Corpus Christi, Ch. 6 NBC/13 2021 2022 130 12 2 0.2% 8
KPAX-TV Missoula, Ch. 8 CBS/7 2021 2022 161 6 1 0.1% 9
KTVQ-TV Billings, Ch. 2 CBS/10 2021 2022 167 7 1 0.1% 12
KXLF-TV Butte-Bozeman, Ch. 4 CBS/5 2021 2022 185 6 1 0.1% 11
KRTV-TV Great Falls, Ch. 3 CBS/7 2021 2022 192 6 1 0.1% 11
KTVH-TV Helena, Ch. 12 NBC/12 2021 2022 205 6 2 —% 7
6
All market and audience data is based on the October 2020 Nielsen survey and 2021 Nielson HH Universe Estimates. Share includes live viewing plus 7 days of viewing on DVR.
(1) Market rank represents the relative size of the television market in the United States.
(2) Stations in Market represents stations within the Designated Market Area per the Nielsen survey excluding public broadcasting stations, satellite stations, and low-power stations, including filtering out spill from other markets.
(3) Station Rank in Market is based on Average Share as described in (5).
(4) Percentage of U.S. Television Households in Market represents the number of U.S. television households in Designated Market Area as a percentage of total U.S. television households.
(5) Average Audience Share represents the number of television households tuned to a specific station from 6 a.m. to 2 a.m. Monday-Sunday, as a percentage of total viewing households in the Designated Market Area.
Historically, we have been successful in renewing our FCC licenses.
Revenue cycles and sources
Core Advertising
Our core advertising is comprised of sales to local and national customers. The advertising includes a combination of broadcast spots, as well as digital and OTT advertising. Our core advertising revenues accounted for 41% of our Local Media segment’s revenues in 2020. Pricing of broadcast spot advertising is based on audience size and share, the demographics of our audiences and the demand for our limited inventory of commercial time. Our stations compete for advertising revenues with other sources of local media, including competitors’ television stations in the same markets, radio stations, cable television systems, newspapers, digital platforms and direct mail.
Local advertising time is sold by each station’s local sales staff who call upon advertising agencies and local businesses, which typically include advertisers such as car dealerships, health-care facilities and other service providers. We seek to attract new advertisers to our television stations and to increase the amount of advertising sold to existing local advertisers by relying on experienced local sales forces with strong community ties, producing news and other programming with local advertising appeal and sponsoring or promoting local events and activities.
National advertising time is generally sold through national sales representative firms that call upon advertising agencies, whose clients typically include automobile manufacturers and dealer groups, telecommunications companies and insurance providers.
Digital revenues are primarily generated from the sale of advertising to local and national customers on our local television websites, smartphone apps, tablet apps and other platforms.
Cyclical factors influence revenues from our core advertising categories. Some of the cycles are periodic and known well in advance, such as election campaign seasons and special programming events (e.g. the Olympics or the Super Bowl). For example, our NBC affiliates benefit from incremental advertising demand from the coverage of the Olympics. Economic cycles are less predictable and beyond our control.
Due to increased demand in the spring and holiday seasons, the second and fourth quarters normally have higher advertising revenues than the first and third quarters.
Political Advertising
Political advertising is generally sold through our Washington D.C. sales office. Advertising is sold to presidential, gubernatorial, Senate and House of Representative candidates, as well as for state races and local issues. It is also sold to political action groups (PACs) or other advocacy groups. Political advertising revenues were 18% of our Local Media segment's revenues in 2020.
Political advertising revenues increase significantly during even-numbered years when local, state and federal elections occur. In addition, every four years, political spending is typically elevated further due to the advertising for the presidential election. Because of the cyclical nature of each political election cycle, there has been a significant difference in our operating results when comparing the performance in even-numbered years to that in odd-numbered years. Additionally, our operating results are impacted by the number, importance and competitiveness of individual political races and issues discussed in our local markets.
7
Retransmission Revenues
We earn revenues from retransmission consent agreements with multi-channel video programming distributors ("MVPDs") in our markets. Retransmission revenues were 39% of our Local Media segment's revenues in 2020. The MVPDs are cable operators, telecommunication companies and satellite carriers who pay us to offer our programming to their customers. We renegotiated three key retransmission consent contracts in 2020. Additionally, our agreement with Comcast reset, and for those stations we owned prior to 2019, we began to receive retransmission fees for which we had historically received little to no compensation. We also receive fees from over-the-top virtual MVPDs such as Hulu, YouTubeTV and AT&T Now. The fees we receive from our retransmission consent agreements are typically based on the number of subscribers in our local market and the contracted rate per subscriber.
Expenses
Employee costs accounted for 43% of our Local Media segment's costs and expenses in 2020.
We centralize certain functions, such as master control, traffic, graphics and political advertising, at company-owned hubs that do not require a presence in the local markets. This approach enables each of our stations to focus local resources on the creation of content and revenue-producing activities. We expect to continue to look for opportunities to centralize functions that do not require a local market presence.
Programming costs, which include network affiliation fees, syndicated programming and shows produced for us or in partnership with others, were 39% of our Local Media segment's costs and expenses in 2020.
Our network-affiliated stations broadcast programming that is supplied to us by the networks in various dayparts. Under each affiliation agreement, the station broadcasts all of the programs transmitted by the network. In exchange, we pay affiliation fees to the network and the network sells a substantial majority of the advertising time during these broadcasts. We expect our network affiliation agreements to be renewed upon expiration.
Federal Regulation of Broadcasting — Broadcast television is subject to the jurisdiction of the FCC pursuant to the Communications Act of 1934, as amended (“Communications Act”). The Communications Act prohibits the operation of broadcast stations except in accordance with a license issued by the FCC and empowers the FCC to revoke, modify and renew broadcast licenses, approve the transfer of control of any entity holding such a license, determine the location of stations, regulate the equipment used by stations and adopt and enforce necessary regulations. As part of its obligation to ensure that broadcast licensees serve the public interest, the FCC exercises limited authority over broadcast programming by, among other things, requiring certain children's television programming and limiting commercial content therein, requiring the identification of program sponsors, regulating the sale of political advertising and the distribution of emergency information, and restricting indecent programming. The FCC also requires television broadcasters to close caption their programming for the benefit of persons with hearing impairment and to ensure that any of their programming that is later transmitted via the Internet is captioned. Network-affiliated television broadcasters in larger markets must also offer audio narration of certain programming for the benefit of persons with visual impairments. Reference should be made to the Communications Act, the FCC’s rules and regulations, and the FCC’s public notices and published decisions for a fuller description of the FCC’s extensive regulation of broadcasting.
Broadcast licenses are granted for a term of up to eight years and are renewable upon request, subject to FCC review of the licensee's performance. While there can be no assurance regarding the renewal of our broadcast licenses, we have never had a license revoked, have never been denied a renewal, and all previous renewals have been for the maximum term.
FCC regulations govern the ownership of television stations, and the agency is required by statute to periodically review these rules. In November 2017, the FCC adopted significant changes to its local television ownership rules, but late in 2019 a reviewing court vacated these changes. Accordingly, the FCC’s relaxation of the television “duopoly rule” that generally restricts an applicant from owning or controlling more than one television station (or in some markets under certain conditions, more than two television stations) in the same market is no longer in effect. In particular, that rule’s requirement that eight independent local television station “voices” should remain after any merger and the prohibition against common ownership of two of the four most-viewed stations in a market have been reinstated. Prior to the court’s vacating this rule change, Scripps was permitted to acquire two stations that were in the “top-four” at the time--Stations WTKR and WGNT in the Norfolk-Portsmouth-Newport News, VA market. While the reviewing court also rejected the FCC’s determination that stations in joint advertising sales agreements should not be treated as if they were under common ownership, stations already in such joint sales agreements enjoy a congressionally directed “grandfathered” status that permits continuation of these arrangements. Stations
8
WSYM-TV, Lansing, Michigan, and KRIS-TV, Corpus Christi, Texas, are parties to such joint advertising agreements. These court-ordered rule changes remain subject to further judicial review.
With respect to national television ownership, the FCC voted in December 2017 to consider whether and how it might revisit its rule preventing applicants from obtaining an ownership interest in television stations whose total national audience reach would exceed 39% of all television households. Earlier in that year, the FCC reinstated the 50% discount applied to the number of households deemed covered by UHF television stations, and the new notice expressly addresses whether to retain this distinction for UHF. This proceeding remains open. Scripps' recent acquisition of ION brought the Company's national audience reach to 38.9% of television households.
In December 2018, the FCC began another of its statutorily required reviews of its multiple ownership rule, including a broad review of whether all the current local radio and television rules continue to serve the public interest. This proceeding remains open.
We cannot predict the outcome of the expected and pending court reviews of the FCC's television ownership rule changes or the effect of further FCC rule revisions on our stations' operations or our business.
The restrictions imposed by the FCC’s ownership rules may apply to a corporate licensee due to the ownership interests of its officers, directors or significant shareholders. If such parties meet the FCC’s criteria for holding an attributable interest in the licensee, they are likewise expected to comply with the ownership limits, as well as other licensee requirements such as compliance with certain criminal, antitrust, and antidiscrimination laws.
In order to provide additional spectrum for mobile broadband and other services, the FCC in 2017 conducted an incentive spectrum auction in which some television broadcasters agreed to voluntarily give up spectrum in return for a share of the auction proceeds. No Scripps station went off-air or relinquished a UHF-band allocation for a VHF-band allocation as a result of the auction, but many of Scripps' full-power, Class A, and low-power and translator stations relocated to new channels in the reduced broadcast spectrum band. All Scripps stations completed this transition timely.
Broadcasters are currently beginning to deploy a new voluntary digital television standard, ATSC 3.0. This Internet-protocol based transmission system permits television stations to offer enhanced and innovative services coupled with much improved broadcast signal reception, particularly by mobile devices. The new standard, however, is incompatible with both existing television receivers and with a station’s ability to continue offering its service via the current ATSC 1.0 digital standard. To avoid loss of service to those viewers who lack a new receiver, stations switching to ATSC 3.0 are required to arrange for a local station that continues to use the current 1.0 standard to air (on a subchannel) programming “substantially similar” to that offered by the switching station on its 3.0 channel. In return, the 3.0 station could host the 3.0 signal of its 1.0 “host” station. This “simulcasting” requirement will sunset in July 2023, unless extended by the FCC. Scripps stations in several markets are operating with the new transmission system.
The FCC remains committed to permitting increased non-broadcast spectrum use in the “white spaces” between television stations' protected service areas despite broadcasters’ concerns about the possibility of harmful interference to their existing service and to the potential for innovative uses of their broadcast spectrum in the future. In connection with the auction process, the FCC announced that it might further reduce the spectrum available for television broadcasting by reserving a 6 MHz channel in each market for non-broadcast, unlicensed services (including wireless microphones). The reservation of spectrum in the “broadcast” band for interference-protected non-broadcast services could have a particularly adverse effect on the ability of low-power and translator television stations to offer service since these stations may not be able to find space to operate in the reduced band and they enjoy only “secondary” status that offers no protection from interference caused by a full-power station. We cannot predict the effect of these proceedings on our offering of digital television service or our business.
Full-power broadcast television stations generally enjoy “must-carry” rights on any cable television system defined as “local” with respect to the station. Stations may waive their must-carry rights and instead negotiate retransmission consent agreements with local cable companies. Similarly, satellite carriers, upon request, are required to carry the signal of those television stations that request carriage and that are located in markets in which the satellite carrier chooses to retransmit at least one local station, and satellite carriers cannot carry a broadcast station without its consent. The Company has elected to negotiate retransmission consent agreements with cable operators and satellite carriers for both our network-affiliated stations and our independent stations. Prior to the Company’s recent acquisition of ION, only two Scripps stations elected “must-carry” status, but all 48 ION stations rely on “must carry” to ensure carriage.
9
The Commission continues to accept comments in connection with proceedings first opened in 2010 to reexamine the standards that govern retransmission consent negotiations and the obligation of parties to negotiate in “good faith.” We cannot predict the outcome of these proceedings or their possible impact on the Company.
Other proceedings before the FCC and the courts have reexamined the policies that protect television stations' rights to control the distribution of their programming within their local service areas. For example, the FCC in 2014 initiated a rulemaking proceeding on the degree to which an entity relying upon the Internet to deliver video programming should be subject to the regulations that apply to multi-channel video programming distributors (“MVPDs”), such as cable operators and satellite systems. That proceeding raised a variety of issues, including whether some Internet-based distributors might be able to take advantage of MVPDs' statutory copyright licensing rights. More recently, the major broadcast networks have filed suit against the streaming service Locast, alleging that its retransmission of local television stations’ signals without their consent violates copyright law. We cannot predict the outcome of such proceedings that address the use of new technologies to challenge traditional means of redistributing television broadcast programming or their possible impact on the Company.
The FCC may impose substantial penalties for violations of its rules and policies. While uncertainty continues regarding the scope of the FCC's authority to regulate indecent programming, the agency has increased its enforcement efforts regarding other programming issues such as sponsorship identification, broadcasting proper emergency alerts, and extending service to persons with disabilities. We cannot predict the effect of the FCC’s expanded enforcement efforts on the Company.
NATIONAL MEDIA
In 2020, our National Media segment represented our collection of national and international businesses including Katz, Newsy and Triton. These businesses compete on emerging platforms and in marketplaces where there is significant growth in both audience and revenue, such as over-the-top (OTT) and over-the-air (OTA) video and digital audio. OTT refers to the delivery of content over the internet which can be accessed through apps on internet-connected devices such as set-top boxes (such as Roku or Apple TV), smartphones, smart TVs and tablets. OTA content can be viewed using antennas or through a cable subscription. Digital audio is on-demand, streaming music or spoken-word programming that can be accessed by consumers through web, mobile and OTT platforms.
Katz
Katz operates five national multicast networks — Bounce, Grit, Laff, Court TV and Court TV Mystery. The networks are primarily broadcast over-the-air on local broadcasters' digital sub-channels, but they are also available for cable, satellite and over-the-top carriage. Each of the networks is a fast-growing, audience-targeted national broadcast network. Bounce programming is aimed at African-Americans; Grit airs western movies and series targeted to men; Laff airs classic, well-loved comedies; Court TV is devoted to live, gavel-to-gavel coverage, in-depth legal reporting and expert analysis of the nation's most important and compelling trials; and Court TV Mystery targets women with programming anchored in true-crime. Each network reaches approximately 90 percent or more of all U.S. households as reported by Nielsen. The networks capitalize on the growing audience consuming over the air broadcast programming. Over the past 10 years, over the air viewership has increased from 9% to 15% of households.
The primary source of revenue for Katz is through the sale of advertising to national customers. The advertising revenue generated depends on viewership ratings and the rate paid by customers for certain viewer demographics. Katz sells its advertising in the upfront and scatter markets. In the upfront market, advertisers buy advertising time for upcoming seasons and, by committing to purchase in advance, lock in the advertising rates they will pay for the upcoming year. In the scatter market, advertisers buy their spots closer to the time when the spots will run. The mix of upfront and scatter market advertising time sold is based upon the economic conditions at the time the upfront sales take place, impacting the sell-out levels management is willing or able to obtain. The demand in the scatter market then impacts the pricing achieved for our remaining advertising inventory. Scatter market pricing can vary from upfront pricing and can be volatile. In some cases, advertising sales are subject to ratings guarantees that require us to provide additional advertising time if the guaranteed audience levels are not achieved.
Due to increased demand in the spring and holiday seasons, the second and fourth quarters normally have higher advertising revenues than the first and third quarters.
10
Katz programming is primarily distributed by reaching carriage agreements with local television broadcasters and cable and satellite providers to carry one or more of the Katz networks. Katz generally pays a fixed fee for these carriage rights over contract terms of three to five years.
For programming, Katz enters into agreements to license existing programming and movies, as well as to produce several original shows.
Newsy
Newsy is our national news network focused on bringing, to a younger audience, perspective and analysis on world and national news, including politics, entertainment, science and technology. Newsy's cable programming lineup includes eight hours of daily live news coverage consisting of shows such as the evening newsmagazine “The Why,” the morning show “The Day Ahead,” and the newsmaker spotlight program “In The Loop.” Newsy also produces investigative reports and documentaries.
Newsy is distributed to more than 6 million subscribers on platforms providing over-the-top (OTT) television service, including Fubo, YouTube TV, Sling TV and Philo. We also have agreements with cable and satellite operators, including Comcast, Spectrum, Dish and Verizon, to carry Newsy to more than 29 million subscribers. We expect continued investment in Newsy as we look to increase distribution and enhance our content.
Newsy earns revenue from the sale of advertising on the platforms on which it is distributed. It also receives carriage fees from cable providers who pay us to offer our programming to their customers. The revenue we receive is based on the number of subscribers who receive the programming and the contracted rate per subscriber.
Triton
Operating in more than 50 countries, Triton is a global leader in digital audio technology and measurement services, serving the growing digital audio marketplace. Triton provides innovative technology that enables broadcasters, podcasters and online music services to build their audience, maximize their revenue and streamline their operations. Triton’s technology is trusted by many of the biggest names in digital audio, including iHeart, Entercom, Cumulus, Beasley, One Media Sales (Netherlands), Prisa (Spain), Mediacorp (Singapore) and Karnaval (Turkey).
Triton’s software-as-a-service (SaaS) business-to-business model has two main lines of business - measurement and infrastructure. Their primary source of revenue is the licensing of digital audio technology and services to a wide range of global audio publishers. Triton’s measurement technology platform is the standard in the digital audio marketplace, and its national and local metrics are the currency through which agencies and brands buy digital audio advertising from streaming audio companies across various geographies and devices. The national audience measurement product is offered for a fixed monthly fee with additional fees based on total audience listening hours. The local audience measurement product is offered on a fixed license fee for each market on which data is reported, along with annual fee escalations. Triton’s hosting and advertising infrastructure enables publishers around the world to deliver high-quality, digital audio streams with data-powered dynamic ad insertion to their listening audience. The hosting product is offered to users via a monthly license fee for access to the platform with additional fees for excess data delivery usage. For its advertising technology platform, Triton charges a fixed license fee with additional fees based on the number of impressions delivered. Through the advent of the world’s first programmatic audio advertising exchange, Triton provides the infrastructure in which publishers and advertisers can seamlessly transact audio inventory programmatically.
On June 10, 2019, we completed the acquisition of Omny Studio ("Omny"), a Melbourne, Australia-based podcasting software-as-a-service company now operating as a part of Triton. Omny is an audio-on-demand platform built specifically for professional audio publishers. Omny serves as the content management system for those publishers and the platform includes publishing tools and an analytics dashboard to track listening.
Employees and Human Capital Resource Management
Scripps operates under the fundamental philosophy that people are our most valuable asset. Identifying quality talent is at the heart of everything we do and our business success is dependent upon our ability to attract, develop and retain highly qualified employees. The Company’s core values of courage, compassion, excellence, fairness, integrity and respect establish the foundation on which the culture is built and represent the key expectations we have of our employees. We believe our culture and commitment to our employees help us attract and retain our qualified talent, while simultaneously providing significant value to Scripps and its shareholders.
11
Employees
As of December 31, 2020, we had approximately 5,400 full-time equivalent employees, of whom approximately 4,500 were with Local Media and 600 with National Media. Various labor unions represent approximately 413 employees, all of which are in Local Media. We have not experienced any work stoppages at our current operations since 1985. We consider our relationships with our employees to be good.
COVID-19
During the first quarter of 2020, an outbreak of the coronavirus that causes the disease COVID-19 was declared a pandemic by the World Health Organization. As the United States began to combat the crisis, Scripps identified three priorities to guide its actions, the first of which was to protect the health and well-being of its employees. By mid-March, we had transitioned nearly all of our employees out of our workplaces without the interruption of news programming or other media delivery. We continue to provide employees with flexible working arrangements.
Additionally, the Company's philanthropic organization, The Scripps Howard Foundation, created a fund to give aid to qualified Scripps employees adversely affected by the COVID-19 crisis. The Company made a donation to this employee relief fund equal to the amount of voluntary salary reductions from the senior leadership team and fee reductions from members of the Company’s board of directors. Members of the Scripps family also contributed significantly to the fund. Through year-end, the fund has disbursed about $1.3 million to provide more than 800 employees up to $2,000 each for needs caused by the pandemic, such as food and basic household supplies, housing-related assistance, and childcare or eldercare costs.
Equity, Diversity and Inclusion
Scripps is committed to an equitable, diverse and inclusive workplace that reflects the communities where we live, work and play. Our overarching Equity, Diversity and Inclusion (EDI) strategy focuses on building awareness of the importance of EDI in our workplaces and communities, empowering leaders to employ EDI practices in their business units or reporting structures, and tracking its equity, diversity and inclusion efforts, which culminates in regulatory reporting (Equal Employment Opportunity-1 reports), divisional analysis and regular reports to the Company’s Board of Directors.
Leading Scripps’ diversity, equity and inclusion strategies across the enterprise is a chief diversity officer. She and her team partner with business and human resources leaders across the Company to develop and implement the EDI strategy as well as action plans that continually evolve Scripps’ EDI commitment. The components of these plans include:
• EDI Strategic Premise: Scripps’ equity, diversity and inclusion strategy will support the Company’s continued evolution by maximizing the potential of our diverse workforce, leading to better business results.
• EDI Vision: Transforming our business and the communities where we live, work and play by acknowledging, incorporating and uplifting our increasingly diverse world.
Compensation and Benefits
Critical to our success is identifying, recruiting, retaining, and incentivizing our existing and future employees. We strive to attract and retain the most talented employees in the industry by offering competitive compensation and benefits. Our compensation philosophy is based on rewarding each employee’s individual contributions and striving to achieve equal pay for equal work regardless of gender, race or ethnicity. We use a combination of fixed and variable pay, including base salary, bonus, commissions and merit increases, which vary across the business. In addition, as part of our long-term incentive plan for executives and certain employees, we provide share-based compensation to foster our merit-based culture and to attract, retain and motivate our key leaders.
As the success of our business is fundamentally connected to the well-being of our people, we offer benefits that support their physical, financial and emotional well-being. We provide our employees with access to flexible and convenient medical programs intended to meet their needs and the needs of their families. In addition to standard medical coverage, we offer eligible employees dental and vision coverage, health savings and flexible spending accounts, paid time off, employee assistance programs, voluntary short-term and long-term disability insurance and term life insurance. Additionally, we offer a 401(k) Defined Contribution Plan and Deferred Compensation Plan to certain employees. Our benefits vary by location and are designed to meet or exceed local laws and to be competitive in the marketplace.
12
Commitment to Values and Ethics
Along with our core values, we demonstrate a commitment to operate at the highest ethical standards by enforcing the principles in Scripps’ Code of Conduct, which is applicable to all employees and sets forth expectations and guidance for employees to make appropriate decisions. Our Code of Conduct covers topics related to accounting and auditing matters, antitrust activity, confidentiality and privacy, conflict of interest, discrimination or harassment, diverting of product or business activity, embezzlement, employee relations, falsification of contracts, reports or records, gifts or entertainment, improper supplier or contractor activity, leadership or management issues, securities law violations, sexual harassment, substance abuse, theft, and unsafe working conditions, among other things. The Code of Conduct reflects our commitment to operating in a fair, honest, responsible and ethical manner and also establishes a means for employees to submit confidential and anonymous reports of suspected or alleged violations of our policies (including through an anonymous hotline). Our executive officers and supervisors maintain “open door” policies and any form of retaliation is strictly prohibited. Additionally, the Company has in place a Code of Business Conduct and Ethics for the Chief Executive Officer and the Senior Financial and Accounting Officers. We also require our journalists to read and sign our Journalism Code of Ethics, and we provide Social Media Guidelines that help our employees understand how to protect the reputations of themselves and the Company on social media platforms.
Professional Development and Training
We believe a key factor in employee retention is training and professional development for our talent. We have training programs across all levels of Scripps to meet the needs of various roles, specialized skill sets and departments across the Company. We use certain employee turnover rates in assessing our employee programs to ensure that they are structured to instill high levels of employee tenure, low levels of voluntary turnover and optimal productivity and performance across our workforce. Additionally, we have implemented an improved performance evaluation program that adopts a modern approach to valuing and strengthening individual performance through on-going interactive progress assessments related to established goals and objectives.
Communication and Engagement
We strongly believe Scripps’ success depends on employees understanding how their work contributes to the Company’s overall strategy. To this end, we communicate with our workforce through a variety of channels and encourage open and direct communication, including frequent emails and videos from corporate leaders to all employees; daily company social media postings; an annual all-employee awards program; employee engagement surveys; and, during the work-from-home environment due to the global pandemic, regular town hall meetings with the CEO and other executives.
13
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.