Meredith Executives Credit TV Station Margin Growth to Hubbing Strategy
Meredith’s moves a few years ago to begin consolidating the back office functions of all its TV stations in a few regional hubs has begun to pay off in the form of more efficient station operations, executives said during the company’s fiscal Q2 earnings call Tuesday. Its EBITDA margins approached 40 percent, nearly matching a record high for the unit during a non-election year, CEO Stephen Lacy said.
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"We're finally realizing the full benefits of having hubbed all our stations,” said Paul Karpowicz, president of Meredith’s local media group, which includes its broadcast division. All its business operations are handled out of its Atlanta offices, master control and traffic duties are handled in Atlanta and Phoenix and all station research is done in Atlanta, he said. “We have taken all the back room functions out of the TV stations and moved them to Atlanta and Phoenix,” in a way that’s completely transparent to viewers and advertisers, he said.
Beyond the reduced costs associated with consolidated some operations, margins benefited from lower programming costs associated with the end of The Oprah Winfrey Show, Karpowicz said. “We are very careful in doing our program analysis to make sure our program profitability stays at significant levels,” he said. Still, overall station profits dipped from a year earlier, in part because of windfall in political ad sales that came during the year-earlier period.
Operating profit at Meredith’s local media group for its fiscal Q2 fell 30 percent from a year earlier to $27 million as revenue dropped 13 percent to $84 million, the company said. Excluding political ad sales, revenue gained 9 percent to $75 million, the company said.
Online ad sales have also helped results at the local media group, Karpowicz said. “We think we'll be looking at double digit growth for quite some time to come in that area,” he said. “Our traditional business is certainly not at those levels, but we don’t see anything slowing down on our digital platform,” he said. Meredith’s stations are also seeing growth in the usage of their mobile websites as smartphones usage in its markets increases, he said.
Separately, Meredith said it agreed to buy the website AllRecipes.com from the Reader’s Digest Association for $175 million. The deal will nearly double the annual revenue for Meredith’s online Women’s Network, and give it the leading food website, the company said. The acquisition also brings more search engine optimization expertise to Meredith and it expects to spend less on online search marketing as a result, Lacy said. Moreover, AllRecipes.com has untapped multiplatform potential, he said. “AllRecipes at this point is not developed beyond digital,” he said. “We think there are print opportunities, we think there are video opportunities and we also think it will add to our online subscription opportunities,” because Meredith can market them to AllRecipes.com’s audience, he said.