The E.W. Scripps Company (SSP) Earnings Call Transcript & Summary

Good morning, everyone, and thank you so much for joining us for the E.W. Scripps Company's Virtual Investor Day. A quick note just to point out that we have included in this presentation certain non-GAAP financial measures. They are not meant to replace GAAP financial measures. A reconciliation to GAAP is in the appendix of this presentation, which you can find on our website by 11:30 a.m. this morning. A replay of this webinar video also will be available at scripps.com beginning tomorrow. We have about 90 minutes of prepared remarks, followed by about 30 minutes of Q&A. [Operator Instructions] And now here is Scripps President and CEO, Adam Symson.

Thanks, Carolyn, and good morning, everybody. Thanks for joining us for our 2021 investor presentation. We appreciate you joining us virtually this year, and I look forward to a time in the not-too-distant future when we'll have the chance to see each other again in person. Today, for some context, I'll start by looking back briefly at the work we've done over the last several years to reposition the company. And then at the highest level, I'll introduce you to the new E.W. Scripps company, a fully scaled television business. And I'll explain why I think we're so well positioned, there I even say uniquely positioned to navigate the future of television. Then I'll turn it over to Lisa Knutson, the new President of the Scripps Networks. Lisa will paint a very clear picture of our leadership position in the fast-growing free TV marketplace and detail the growth strategy we expect that will be responsible for the value creation ahead. Brian Lawlor will then give you a robust update on our Local Media division, spoiler alert, things in the advertising marketplace continue to strengthen. And despite the pandemic, I expect 2021 and 2022 to be very good to us. And then our new CFO, Jason Combs, will wrap us up with a complete financial picture before we take your questions. So let's begin. Well, it's been a little more than 3 years since our last Investor Day in New York, and we have been busy remaking the company to be higher performing, more durable and better positioned for the longer term. We cut costs, restructured and reorganized twice, doubled the size of our local TV portfolio for national scale and added 8 duopolies for local market depth. These moves made us economically stronger, helping us to navigate the business disruption caused by the pandemic, and they set us up well for last year's retransmission rate negotiations. And of course, we bolstered our geographic footprint to bring in a record-setting level of political revenue, segment profit and free cash flow in 2020. Ahead of the pack, we got into podcasting and digital audio early, grew those businesses and then exited at the right time for very nice returns. And then most recently, we acquired ION Media to completely transform our national networks business with more than $500 million in anticipated and mostly contractual synergies over the next several years. We run a mission-oriented company with a culture of creativity and entrepreneurship, but we do so as disciplined operators. Scripps is fast-moving, never complacent, focused on growth and generating greater free cash flow. But to what end? Well, the company's total shareholder return over the last 3 years has been nearly 60%. Prior to the pandemic, we met or exceeded guidance 9 quarters in a row. And as I promised we would, we took the pandemic as an opportunity to continue to remake the company, never playing defense but opting instead for an aggressive offense. As you'll see today, leaning into the disruption. Again, back 3 years ago, I told you we would pay as much attention to our near-term operating results as to our long-term value creation. And so I hope you'll agree that we do what we say we will do. Now that's true not just with respect to our financial performance, but it's also core to the kind of company that Scripps is. A company that has been focused on the elements of corporate social responsibility far before it was fashionable. For 142 years, we have been dedicated to the kind of quality objective journalism that frankly, America needs more of. As our motto says, give light and the people will find their own way. We consider ourselves stewards of the communities we serve. And when we talk about equity, diversity and inclusion, it rings true from our boardroom to our newsrooms. It's in our culture because it's the right thing to do and because it makes our product superior, more inclusive workplace, better product, better business results. So today, welcome to the new E.W. Scripps company, a full-scale television business. We are leaning into the macro trends changing the media landscape to create new value from the disruption. Our Local Media brands reached 25% of U.S. households through 61 stations in 41 markets. We connect audiences and advertisers across every platform, on air, online, on OTT and through pay-TV. Last year, Local Media generated $1.5 billion in revenue, a record $265 million in political revenue and $579 million in retransmission revenue, growth of more than 30% over 2019. Brian will be along shortly with a lot more detail and a look at what's ahead. The new Scripps Networks is the leader in free television. We reached nearly every U.S. household, however they watch TV over the air, through pay-TV and on OTT platforms. 2020 adjusted combined revenue for the Networks was $847 million, with segment profit at $320 million. Today, we have 7 networks. Yesterday, we announced the launch of 2 more, each of which have programming strategies carefully designed to attract specific audiences with demographics attractive to the advertisers in the national television advertising marketplace. And Lisa will spend all of her time breaking that down. Our story is clean and easier to understand now as a result of some of the moves we've made over the last 6 months. In the fourth quarter, we sold Stitcher to SiriusXM. And a few weeks ago, we announced the sale of Tribune to iHeart, both represent very good deals for our company and our shareholders. Our strategy is never arbitrary. Scripps has a long history of creating shareholder value by creating or acquiring new businesses, growing and operating them or unlocking value through spin-off or divestiture. Today, our sites are squarely set on the opportunity in television. A medium and a media business model that has confirmed its value and durability better than any other. Television news, especially local broadcast journalism has demonstrated its relevance time and time again during this pandemic through the social justice protests and civil unrest and certainly through the historic election. The business is a complicated and regulated web of interrelated parties all incentivized to continue to work together to serve the American people. And there is no medium more effective to build brands, move cars off lots, drive retail sales than television. Advertisers know there is a direct correlation between their television advertising spend and the share of the consumers' wallet that they will have. Now at Scripps, we often say 2 things can be true at the same time, and now we've put that into action because as great as the TV business is, I don't mean to insinuate that television, as we understood it for years, isn't being disrupted. Consumers have more choices than ever with how they watch, even how they define television viewing. Cord cutting, the growth in streaming and subscription services look to the uninitiated as pure threat, but herein lies the Scripps difference, or should I say the Scripps advantage. Because the shift we are witnessing to over-the-top viewing, specifically, the subscription video on-demand services is also driving the shift to over the air. And Scripps is the leader in the fast-growing free over-the-air television marketplace. Some brand-new data. 40% of U.S. households now have a digital antenna for television. That's 50 million households using free ad-supported television. More than 50% of those users new over the last 3 years. Nearly 60% were drawn to free TV for local broadcast. And of course, we're not surprised by that. And once they're there, they discover a new universe of premium programming channels. And as Lisa will show you in a few minutes, it's a universe dominated by Scripps. The consumer is self-bundling, combining their multiple subscription services with free ad-supported television. Self-bundling. That's something you're going to hear us at Scripps say a lot. To further understand the shift, look at it from the consumer's point of view. In 2015, Americans were complaining about their cable packages, annoyed about how paying high prices for bundles of programming that other people chose for them. So by 2018, when digital services like Netflix, Prime and Hulu, were gaining acceptance, people saw cord cutting as a way to save money. While they still had to pay for their Internet access, the few subscription services out there provided an economically efficient alternative. But today, more and more brands are holding back their content from the general SVOD services to build their own direct-to-consumer plays. SVOD has itself become a crowded marketplace, a high risk, expensive street fight over a finite share of the consumer's wallet. In addition to still paying for Internet access, families are paying for 1, maybe 2 general subscription on-demand services like Netflix and Prime. And then they're layering on more and more until 1 day, they realize that their a la carte bundle is giving them access to more choice, but it's also costing them as much, if not more money. Look, the SVOD services are great, but let's face it. They've also created a content flood and a discovery challenge. Once you run through all of your friends' suggestions, you find yourself struggling with what to start next. And sometimes, you just want to lean back, relax and find something comfortable to watch. It's in this new predicament that consumers find themselves in where we see the growth of free ad-supported television because of its consumer proposition, premium entertainment programming, that's free. And free is always very compelling. So this is the media landscape where we see the new Scripps winning. Our Local Media businesses girded by multiple revenue streams, deep connections with the communities that we serve and the indispensable role we play in the local advertising marketplace combines now with the Scripps Networks, the leading portfolio of free ad supported network television. Welcome to the new E.W. Scripps company. Now here's Lisa.

Thanks, and good morning, everyone, and thanks for joining us today. I'm thrilled to be giving you a more in-depth look at the new Scripps Networks. Our portfolio of networks is the leader in free TV, offering audiences compelling premium content, original programming and news and information. As I mentioned last week, we decided to call this newly formed division Scripps Networks because we want it to be 100% clear that Scripps is operating a full-scale national television network business, reaching nearly every American, either over the air, over the top, on cable and satellite. Here you see the Scripps Networks brands, which make up the single largest portfolio of free over-the-air networks. We've merged ION with Scripps media assets that include Bounce, Laff, Mystery, Grit, Court TV and Newsy. And I'm sure you saw the exciting news yesterday, where we announced 2 additional networks, Doozy and Defy, that we'll be launching later this year. I'll say more about those 2 new networks in a few minutes. Our Networks offer deeply loved premium content across a wide genre of programming options. Literally, there's something for everyone. Our networks provide viewers access to some of the most popular shows in TV history. Viewers drop into their favorite comfort TV shows, they know and love, and they watch for hours. We cater to many different tastes, offering genres and series that have been mainstays in American TV comedies, crime shows and dramas. Shows like How I Met Your Mother, Chicago P.D., Scandal and That '70s show. And our Networks offer high-quality programming and bingeable blocks known for escapist lean back entertainment. And that's what a story in the New York Times said about the most watched shows on streaming services in 2020. Consumers are frequently drawn to streaming services by their high-profile original programming. However, the most watched shows on streaming services in 2020 were classic network TV shows, and this is the same type of premium content that airs on our networks for free. Our 78 million viewers are a mosaic of the U.S. population. That's because we cater to many different tastes, comedy, drama, movies, unscripted entertainment and news across our portfolio of networks. Each of our networks is designed to attract specific demos for advertisers to sell. Young comedy lovers, women who watch true crime and men who love a good western. Our brands aid marketers and effectively reaching a diverse mix of consumers, including key demos such as African-Americans and English dominant Hispanics. And over-the-air audiences skew younger. Of the over-the-air only households, 1/3 are aged 18 to 34. And one important point to emphasize about ION, 90% of ION's viewing is done live. A common industry measure you may be familiar with is length of tune, how long viewers tune in per viewing event. ION's length of tune is #1 among all television networks. Our network's stickiness is a testimony to how engaging our content is. And it's because our audience is watching live and staying with programs. ION, in particular, has 97% commercial retention. Another important statistic for advertisers. And here you see our networks and how they measure up against their competitive sets. ION's audience, which has grown steadily year-to-year, was initially the size of a midsized cable network. In 2020, it ranked #1 in prime time viewing when you exclude news, beating out ESPN, HGTV and the Hallmark channel. And a few years ago, ION overtook the CW to be the fifth largest broadcast network in prime time. Bounce, our African-American targeted network, ranks third in prime time average viewing against its competitive set, BET and the OWN Network. And here, you see how Grit, Mystery and Laff stack up against the competition. We have assembled a portfolio of networks that are watched by millions of viewers each month and are programmed to attract desirable demographics for advertisers, and we're delivering on that promise with highly rated competitive networks. And we see what you see. A rapidly changing television landscape marked by the emergence of new direct-to-consumer services. About 3/4 of U.S. homes now subscribe to a streaming service and half subscribe to more than one. And today, nearly 50 million U.S. households can watch free TV with a digital antenna. Nearly half of these homes don't subscribe to cable or satellite. The changing TV landscape is leading to a new phenomenon, a trend we've dubbed self-bundling. Television consumers have taken control and are assembling their own TV packages. The future isn't a question of just pay-TV or streaming or over the air, the future of television is a combination of all 3. By far, a vast majority of streaming services are ad free, including 4 of the top 5 services. So advertisers know for every hour a consumer watches a streaming service is an hour of opportunity lost to reach that consumer. 35% of TV viewing goes to ad-free sources. And this is becoming the advertisers' biggest headache. When consumers are self-bundling with streaming services that don't carry ads, free TV is the only way to get the consumer to see ads. And that's where the Scripps Networks come in as the leader in free TV. We provide advertisers the most effective way to reach cord cutters and cord nevers with their messages and ads. We've already begun to capitalize on the strategies we outlined in the acquisition announcement. And as a result, you will see immediate value creation. The foundation of this value creation for the short and long term rest in 4 key growth drivers: capitalizing on the accelerating growth in the OTA marketplace; expanding our distribution to where the consumer is over the air, over-the-top and on pay-TV services; expanding our share of nationwide viewing; and lastly, driving higher revenue through enhanced yield management strategies. There are a growing number of Americans watching free TV through digital antennas, and we forecast the antenna adoption will continue to grow in the near and midterm. Our best forecast indicates that the size of the over-the-air only marketplace will increase by almost 30% over the next 5 years. And we're delivering the eyeballs that advertisers are looking for. Time spent watching TV grew in 2020, while cable viewing for key demos was down. And the advertising impressions for free television were way up 10%. We expect the growth to continue on the -- as the OTA marketplace continues to grow. We will continue to expand distribution everywhere the consumer wants us to be, OTA, OTT, fast services and pay-TV. We have plans for each of our networks to build on Newsy's success as they have been a leader with ubiquitous OTT distribution. With our 6 OTA networks, we command a large share, if not the largest share, of viewing over-the-air than any other company. You can see here how we have grown over the last 5 years. And this is before we launched the 2 new networks later this year. We intend to grow our share of nationwide viewing, capitalize on our already strong position. And take a look at the TV program guide. With the DMA, sample DMA or market, Scripps controls more real estate than any other company, period. The Scripps Networks are 6 networks deep and soon to be 8 and if we own a local station with a duopoly in that market, we have 10. 10 opportunities for viewers to engage with our programming and unparalleled ad inventory to monetize. Scripps is a must-buy for media buyers. Given how quickly free TV is growing, we announced that we're launching 2 new networks this July. With the launch of these networks, we'll lock in more of that valuable real estate we talked about on the previous page. We will launch these 2 new networks using the same successful formula we've used in the past with one very important exception. We will distribute these networks on our owned and operated distribution platform. When we launched previous networks, we did so by paying for that distribution. Herein lies the opportunity to create value by efficiently expanding our business and further growing our share of the nationwide viewing. At launch, the 2 new networks will be available in at least 75% of U.S. television homes and in all major markets. The 2 new networks will target specific demos that are attractive to advertisers. And both networks are reality based and will carry some of the most popular and top-rated unscripted shows nearly 70 in all. These shows have never been aired on broadcast TV, only on paid TV services. Doozy will serve women ages 25 to 54 and their strong interest in can't stop watching unscripted drama. And Defy TV will reach men ages 25 to 54, with exciting bingeable programming with series like Pawn Stars, Forged in Fire and American Pickers and really so much more. We've licensed nearly 6,000 hours of content, 70 different series in total at very attractive rates. And most important, it's all about driving -- it's all -- it's important is driving higher revenue through enhanced yield management strategies. These strategies include selling the Scripps Networks in the upfront as a collection of attractive demos. In this year's upfront, we're laying the foundation for better pricing, higher ad rates and better positioning of the networks with advertisers as the largest free TV network, offering premium free video with tremendous, diverse and engaged reach, and we're capitalizing on the resilient and growing direct response advertising marketplace using the same strategies we've used so successfully at Katz. In fact, the new combined Scripps network portfolio will be the largest over-the-air source of national direct response inventory. And finally, we will more effectively manage inventory and ad rates to drive higher revenue on every platform. You may recall us telling you that ION, albeit the fifth ranked broadcast network, was 25th in revenue in billings, and we intend to change that. I wanted to give you a sense of the revenue mix for each of the Scripps Networks. On a blended 2019, 2020 basis, you can see a little over half of our revenue is general market, sold in the upfronts and scatter market and nearly 45% direct response advertising. The remainder comes through OTT and programmatic advertising. Each of our brands have different opportunities to maximize the yield, and it's not a one-size-fits-all approach. Whether it's selling as a bundled networks business in the upfront, being opportunistic in the scatter market or capitalizing on growing DR marketplace, we intend to capitalize on each of our brand's potential to maximize revenue by driving higher rates, better inventory management and maximizing each brand in the marketplace it best performs, general market, DR or programmatic advertising. We have been a pioneer in designing networks that attract demo-specific audiences that appeal to marketers and advertisers, utilizing a mix of general market and/or direct response advertising. And speaking of direct response advertising, many people wrongly dismiss DR as low-rate, low-quality ads. Direct response is performance-based marketing. It's a flexible, efficient and measurable way for advertisers to reach their customers. And our networks have come together to form a fantastic business, which will provide more than 10% revenue growth for the next several years and efficient centralized expense structure and division margins of about 40%. We bought a great business in ION, and combining it with Katz and Newsy will give all 9 of our networks new growth levers, both immediately and over the longer term as we harness the scale of our Networks business to grow audience and national advertising share. And we're already delivering on the promises Scripps made when we announced the ION acquisition to realize the identified synergies and drive outstanding operating results. And now here's Brian.

Good morning, everybody. Over the next couple of minutes, we'll take a look at the company's Local Media division and discuss the economic drivers of the 3 primary revenue screens for the local TV business, those being core advertising, political advertising and retransmission revenue. So let's start with core advertising, which is the advertising we sell to local and national advertisers and this runs through our 61 local TV stations. In addition to our local channels, our account executives also sell digital, mobile and social ads as well as over-the-top platforms. 80% of our core advertising comes from 5 categories. It comes from services, auto, retail, home improvement and travel and leisure. Obviously, we spend a lot of time focused on these 5 categories and we're going to dive into our thinking on each of these with you today. In addition, there are 2 emerging revenue streams that are starting to make a material impact on our core advertising, sports betting and OTT. So we'll give you an early read on each of these opportunities as well. But let's start with services category, which is our largest category. It represents more than 1/3 of our core revenue. 5 years ago, services represent about 25% of all of our core advertising. So this has been a healthy growing category for us. Services is made up of businesses that include insurance, medical, legal, financial and then many home services like HVAC, pest control, things like that. The majority of the businesses in this service category are local companies, and therefore, most of this is developed over time by our local sellers who develop long-term relationships with our clients. I believe that, that's why this was our strongest category through the pandemic. Our local sellers were able to help these local businesses recognize and take advantage of the spike that was happening in TV viewing. And we help them adjust their campaigns and in many cases, even their creative ads to help them stay in business and, in many cases, thrive over the last year. Our second largest category is automotive, which represents about 20% of our advertising spend. We also have the challenges in the auto category in the last year with the closing of the plants, the lack of inventory for local dealers and now computer chip shortages affecting production. The good news is we see the category gaining momentum. After inventory opened up following the election, we saw auto down low single digits in December, and that continues into the first quarter. Long term, we believe auto will be a stable category, around 20% of our total advertising revenue. In talking to the local dealers, the pandemic has actually helped them make changes to their businesses that is gaining them better profit margins. And we expect the move to electric vehicles in the coming years will be best supported by the brand building platform of local TV. Retail remains our third largest category. It's been that way for over a decade. It represents about 15% of our core advertising. It's been a tough year for the retail category. The pandemic resulted in temporary closings of many brick-and-mortar stores and then state-imposed capacity limits and limited hours. Despite all the challenges, the category is recovering. March is one of our best months in a year with despite -- with declines less than half of the previous few months. Furniture is the largest subcategory in retail, and it's up double digits over last March, as is jewelry and appliances. With states loosening capacity limits and stimulus checks about the way -- about to make their way into local homes, it would appear retail is poised to have some of its best months since 2019. While the last 2 categories I discussed were challenged with issues associated with the pandemic, the home improvement category had one of its strongest years ever. As folks work from home, they had the opportunity to be there for service people to visit their house. With families moving away from cities and disposable income not being spent on vacations, people spent money fixing up their new and their old houses, with contractors, flooring companies and on things like windows, pools and hot tubs. Our home improvement category was one of our strongest last year. On the earnings call, we reported home improvement was up high single digits in November and up nearly 20% in December. We continue to see year-over-year growth in the first quarter and double-digit growth in March. And like the service category, this is almost exclusively local businesses working directly with our local sellers. The last of our top 5 categories that we'll discuss is travel and leisure. No category has suffered more during the pandemic than this one. The category is made up of travel, hotels, casinos, cruises, concerts, sporting events, I can keep going, but it's easy to understand why this category has been so adversely affected. At the height of the pandemic, this category was down around 90%. We do see some of the subcategories beginning to spend money as states are reopening and governors begin to allow fans at some events. As people get back to a more normal life, we expect aggressive spending as these organizations fight for a return of market share and their piece of the stimulus money that will be spent on families being families. While the traditional businesses that are the foundation of travel and leisure have been challenged over the last year, the category that had a recent spike as a result of the legalization of sports betting. Starting in fourth quarter last year, we saw the beginning of states ratifying sports betting. It started in Indiana and Colorado and has expanded to Tennessee, Michigan and Virginia, just in the last couple of months. And now Louisiana will become legal in the spring, and other states are actively working it through their state government. The introduction of sports betting to a state is usually met with 4 to 6 competitors, who are all aggressively looking to establish brand recognition and become the gaming site that people will download and activate. There's an education process here that supports long-term investment by these companies. And we expect this strong subcategory to be that way for the next few years as sports betting moves across the country, state by state. The other emerging revenue stream I mentioned earlier is the OTT space and specifically connected TV. As we see it, OTT is TV. It's video-based platforms with advertising ads that support the content. These are the ads that you see on platforms like Roku and Apple TV surrounding our content. And the beauty of the platform is it's a digital platform, which allows for the targeting of ads. On any of these devices, you can download one of our station apps and have a lot of unique local content. OTT provides the platform for targeted ads that support local and national advertisers. This is like having another TV channel of opportunity in each of our markets. Leaving core, I want to move to political advertising, which, as we've seen, continues to be a growing opportunity for local stations as we are the most efficient call to action platform that helps get people and candidates elected. After our record $265 million in political advertising in 2020, we expect the 2022 midterm elections to exceed the $9 billion national spending mark of last year. As we always say, you have to have the right footprint in the right states to take advantage of the opportunity. In the last 2 cycles, we have benefited from many tight races in our key states. And we see the same opportunity in 2022 when Scripps stations will host 18 Senate races and 17 governors races. With a 50-50 Senate and some redistricting following the 2020 census, we believe we are well positioned to grow beyond our 2020 political revenue. And the final revenue driver for the Local Media division that I want to discuss is retransmission revenue. As you can see from the left side of this slide, the trajectory of the revenue growth we have seen over the last 5 years is steep. And the good news is we still have rate growth ahead as we continue to pursue our fair market value. It's not unusual to see moderate growth and then a big step-up. It is a matter of timing as to when your deals expire. And on the top of the right side of the slide, you can see that in 2021, 4% of our households renew, in 2022, 21% of the households renew. And then we'll have another one of those big step-up years in 2023 when 75% of our households renew. And just below that, you can see that all of our network renewals will come up by the end of 2022, giving us great visibility into the long-term value of the network relationship. As you think about the content that motivates our local viewers to watch our stations, the 2 most influential dayparts for our viewers is local news and live sports. Combined, over 50% of our advertising revenue is placed in local news and in sports. Despite all of the challenge -- the changes in devices and platforms over the last 5 years, one thing that has remained remarkably consistent has been the viewership during our key news dayparts. What you see here is the percentage of the households watching TV during our 3 high visibility news dayparts. 6 a.m., 6:00 p.m. and 11:00 p.m. Yes, the pandemic affected how people were living their lives, working from home, not having to get the kids out of the door. So there was a change to viewership habits over the last 12 months. As we move beyond the pandemic and people's lives return to a more traditional routine, we expect viewing to also return to their very stable patterns. One thing that was confirmed last year is how important local news is to keep a community informed and safe. Our brand loyalty is very strong right now, and we expect that to continue as that goes far beyond our pandemic coverage and social protests. Last year, our Scripps journalist did dozens of stories that resulted in holding the mighty accountable, getting laws changed and surveying as the watchdogs over our communities. And now more than ever, our communities need and value our independence.

Brian, hold on just a second. We lost the screen. Let me restore that, just hold tight until I come back.

Okay. All good, Carolyn?

Okay. Slide 48. Yes. Go ahead.

So based on that commitment, it's not surprising that local broadcast TV news is viewed as the most trustworthy and trusted media source for news and information. And just as local news has the power to bring our communities together, so does that of the live sports that are run on broadcast TV. Live sports remains the largest platform for attracting large audiences. As you can see in this Nielsen ranker of the top 25 programs on TV over the last year, 24 of the top 25 were associated with live sports. Only the Oscars cracked the top 25 at #22. And finally, we're entering a time when we will experience the most stimulated economy in the history of our country. Local and national advertisers will all be competing with each other to grab their share of those available dollars. And it is because of that, we remain so optimistic about our opportunity for continued recovery in 2021. I'll now turn it over to Jason.

Thanks, Brian, and good morning, everyone. You've heard a lot today about the journey that we've been on the last several years that -- as we've reshaped the company. And as a result of all of this work, we now have 2 primary reporting units: the Scripps Networks and our Local Media division. Both are large players in their space who bring entertainment and news to audiences across the country. The primary difference between these businesses revolves around the marketplace as they operate in. Over the last few months, we've announced the acquisition of ION as well as the sale of Triton and WPIX in New York. A historical practice at Scripps has been to provide a view of the financials on an adjusted combined basis, showing what Scripps would have looked like in prior periods under our new segment reporting and asset ownership. As we transition to the next slide, you'll see that adjusted combined view for our new Scripps Networks and Local Media divisions. The adjusted combined tables for both Local Media and the Scripps Networks were part of the tables we released last week. I'm not going to walk through these numbers in detail, but what you see here provides some scope to the size of each business as well as the primary revenue and expense categories for each division. This adjusted combined view will provide a clean comparison as we begin to report on our 2021 operating results. Now let's turn our discussion to -- on to our capital structure and some of the key storylines that make us feel comfortable with the makeup of our current debt. As of the ION deal close on January 7, we had total debt of $3.8 billion and cash of a little over $260 million, translating into a net debt of $3.5 billion. This does not include the $600 million in preferred equity to Berkshire Hathaway as part of the funding for the ION deal close. At the end of 2020, pro forma for ION, our total net leverage was 4.9x and our first lien leverage was 3x. Leverage at this level is certainly higher than Scripps has historically run. But as we've said many times before, we're willing to flex our balance sheet for the right deal, and ION certainly falls into that category. The new combined entity will create significantly more cash flow and provide a path to swiftly pay down debt. In terms of our current debt, we're really pleased with the way that we were able to structure our most recent financing. Our roughly 50-50 mix of fixed and variable debt provides a natural hedge against the interest rates, and the balance of secured and unsecured debt leaves us a comfortable amount of room in our first lien leverage calculation. You'll also notice on the bottom left box that our weighted average maturity is out over 6 years, and our soonest maturity doesn't come up until 2024. On the right-hand side of the slide, you'll also see some key points regarding our overriding financial policies. As I've noted before, we're committed to paying down debt and to moving our leverage back in the direction of historical levels. Our first step in this will be paying down more than $300 million in debt once the Triton proceeds are received. In terms of liquidity, we manage our forecast to ensure around $75 million in cash on hand at all times to meet -- in order to meet our short-term needs. In addition to this, we also have access to a $400 million revolver, which currently has 0 drawn on. Lastly, on our distribution policy, the terms of the Berkshire preferred equity prohibits us from paying back stock or paying dividends while the preferred is outstanding, which leads me back to my earlier comments, that our focus right now is on using excess cash to pay down debt. This slide provides some color on how we've deployed our capital over the last few years. First, I'll direct you to the right-hand side of the slide, where you can see both the Stitcher and Triton divestitures. We jumped into the digital audio space back in 2015 with the purchase of Midroll Media followed by the 2016 acquisition of Stitcher. We invested in these businesses and significantly grew their scale and top line revenue before selling to SiriusXM in 2020. This transaction yielded a 24% return on our investment. And more recently, we announced the sale of Triton to iHeartMedia. Triton was a great business for us that was accretive to our margins while we owned it, and again, we saw a return on investment of over 20%. In both cases, we opportunistically entered a growing marketplace. We invested, and then we monetized a nice return. On the left-hand side, you'll see how we've deployed our capital since 2016. Overall, 94% of our capital deployed has been targeted to strategic M&A. The size of the ION transaction tips the scales in terms of the split between our national businesses and our Local Media division, but keep in mind that we've made over $1.1 billion in TV station acquisitions to significantly increase our scale and build a more durable TV business. I think the previous slides really come together nicely in this slide. As I said earlier, part of Scripps DNA is to maintain a clean and flexible balance sheet. Several years ago, we identified need to get bigger on the TV side of the business. And as you can see, we levered up to 5.2x after the Nexstar, Tribune and Cordillera transactions. This larger footprint benefited us greatly as we renegotiated a significant amount of our -- significant percent of our MVPD contracts in 2020, and our political footprint also saw some significant upside from the new stations we acquired as part of those deals. These upsides drove a lot of the profit growth that you see on the right-hand side of the slide. The combination of our larger bottom line, along with the proceeds from the Stitcher and WPIX sales pushed our leverage down to 3.7x just prior to the close of the ION transaction. And now post the ION transaction, we'll have a much more robust cash flow profile. In last week's earnings call, we highlighted that we expect the ION transaction to yield a free cash flow per share accretion of 75% on a blended 2020, 2021 basis. All of this makes us bullish that we'll be able to move our leverage back closer to historical levels over the next few years. In summary, we've strategically transformed this business to create shareholder value, and we are now extremely well positioned for future growth. Now I believe, I'm going to hand it back over to Carolyn, to walk us through some questions.

Thank you, Jason. And I'll ask the panelists to come back on while we stop sharing our screen here. We have a number of questions in the queue. [Operator Instructions] So we will start with a question from Kyle at Stephens. Kyle Evans. Is there a point in the future when Scripps Networks might consider switching from must-carry to retrans with cable satellite providers, and the company is able to drive retrans carriage revenue? Lisa?

Yes. Thanks, Carolyn, and thanks, Kyle, for the question. Must-carry really drives our ubiquitous pay distribution strategy. So it really doesn't make sense for us to switch at this time. As I said in my remarks, our key -- our distribution strategy is to be everywhere that the consumer wants us to be, and that includes on pay-TV. So we won't be switching to retransmission revenue anytime soon, if at all.

Thanks, Lisa. Another question from Kyle. How did ION, which is 70% general market, hold up so well during the pandemic recession, down only 8% last year?

Yes. Good question. It's -- the short answer is rate and mix. And so what you saw last year as the pandemic took hold in second and third quarter, there was some shift, I would say, in terms of ION placing focus on the DR marketplace. And in many cases, the DR marketplace, which we've talked about on our own Katz Networks, held up very, very well last year. It was very resilient. And in some cases, we saw in ION rates on the DR side 50% higher than general market rates. And so it was really a shift from a rate and mix perspective. So obviously, you see sort of big numbers there. But if you looked at the mix for 2020, it was a bit different than 2019, given the fact that they pivoted quickly to DR advertising.

Thanks, Lisa. This one is for Brian, also from Kyle Evans. Which channels were shared donors in the services category in local media? Is that related to the demise of newspapers?

Hey, Kyle. Look, over the last couple of years, we've been very aggressive in our new business developments around -- and targeting many of the advertisers that spent a lot of money with the newspaper. I think, in most places, newspaper isn't quite what it used to be. Its circulation is down, and it's been a really good opportunity for us to bring TV as a platform. So I think over several years, we've had a lot of success taking money from newspaper. I would say, last year, during the pandemic, we were also -- and especially in services, able to have success taking money from billboard and radio. I mean when you think about the change to people's lifestyle last year where people weren't commuting to work, that means they weren't driving by billboards. And they weren't in their car during the morning drive and afternoon drive, listening to the radio. And so there was a lot of money in play on that. We're able to take advantage of that and build some very creative and timely ads that spoke to the environment people were in, good call to action. And so I think we're able to benefit from all 3 last year.

Thanks, Brian. And a follow-up from Kyle for you. He asks, how could your local content evolve to better capture the emerging sports betting advertising opportunity?

Yes. Look, we're working pretty closely with all of the new players in that space, DraftKings, FanDuel, specifically, is the two biggest. We've been very innovative, I think, in the conversations with them about creating content that helps them achieve their goals of educating the community about sports betting and what it's like and what the opportunity is. I think we -- whether a regulated business, there's a fine line of walk, and I think we're doing that. But I think -- you think of, for example, call the -- our commitments to programming, which were unique and early compared to many others that we were creating our own programming. So we have a show like The List that runs in access all over -- or in many of our markets. One of the things that we, sports betting companies, would like to do is buy a half-hour program. And for us, on a Friday night, selling them 30 minutes where we could preempt our own show and allow them to lead into a big sports weekend with educating people about it, it's a great platform. If we had syndicated programming in those time periods, we wouldn't be able to preempt it. We'd have barter and we'd be sideways with the syndicator. So I think a lot of our own content initiatives give us flexibility to capture, hopefully, more than our fair share of those dollars.

Thanks, Brian. Lisa, this next one is for you from Mike Kupinski at NOBLE Capital. ION is a general interest television channel versus most of your other national networks being more focused demographic channels. Can you talk about the challenges that this represents? And as you bundle your sales effort among your networks, what challenges might you have with advertisers that might be more interested in the target demographics?

Mike, thanks for the question. I actually see it not as a challenge, but as an opportunity and actually a position of strength for us. ION has unduplicated audience reach and unique reach. It also has, as I said in my comments, 90% live viewing, and it's #1 in terms of length of tune with 97% commercial retention. So advertisers love those statistics about ION. And what you might not know is ION does skew a bit higher in terms of African-American demos. And so we've already seen opportunities and capitalized on some opportunities to sell cross-network buys from advertisers, where they're buying Bounce and ION as an example. And so we really do see this not as a challenge, but as an opportunity.

Thanks, Lisa. Next question from Steve Wilson, an investor and shareholder. Can you discuss the timing of the $500 million of synergies from the ION deal as it plays out over each of the next 5 years? Jason, do you want to talk about the cadence there?

Yes, I can take that one. Yes, we had talked about previously that kind of our run rate synergies as we get out in year 5 and 6 is about $125 million. And so that kind of folds in, hitting about 20 -- I'm sorry, about 25% of our run rate in year 1, and then it builds to 40% of that run rate, 50%, 75%, and ultimately, 100% of that run rate once we hit year 5.

Thank you. Adam, here's one for you, Steve Cahall at Wells Fargo. Many investors see OTT as the nucleus of the new TV ecosystem. While digital antennas may be cheap, so are Roku devices, and there's a benefit to the OTT hub. A lot of AVOD is really taking off. So how do you think about getting the OTA content onto the connected TV world into the [ contact -- ] connected TV world? And how does that evolve the monetization of those networks?

Sure. I mean, we've obviously been focused on the AVOD world for a long time. Newsy is a big player in the advertising video-on-demand world. Frankly, I think our programmatic tech stack really leads the industry with respect to monetization. We've also taken Court TV, for example, and taken that stream into the Fast ecosystem and also use it in the AVOD world. So I would expect that we'll continue to run in place from that playbook, moving more of our free network programming into the free ad-supported streaming marketplace, whether that's delivered via over-the-air or on OTT. As we've said a couple of times, we don't really see it being an either/or sort of proposition for consumers. We expect they'll continue to use OTT. Certainly, we're seeing good growth there, but that growth is also driving the lean back experience of free ad-supported television over-the-air. Thanks, Steve.

Got them. Now a question from John Janedis for Lisa. Can you talk more about the market opportunity for the new networks, Doozy and to Defy TV? As you expand the number of networks, to what extent is there overlapping viewers? And how quickly can revenue ramp?

Thanks, John. So we see the opportunity really as a way of capitalizing on what we talked about actually during the ION acquisition, which is locking up more of that valuable real estate over-the-air, being able to reach more of the country than any other free over-the-air network. So that is part of the value creation story. In terms of the two new networks, they will complement our other brands, so there will be opportunities for cross-network buys for advertisers because we're attracting some of the same demographics. And then also, we see revenue ramping, I think, was the other part of your question. We see revenue ramping. We'll launch these networks in July. I think you can expect maybe a 1% to 2% pop in revenue this year, growing in year 2 to maybe sort of adding another 4% top line. And then beyond that, really expanding from there. So we're pretty excited and very, very glad to be able to really very quickly make a move like this to seize the value that we really identified and told you about during the ION acquisition.

Great. Thank you, Lisa. Next one, Brian. Steve Cahall was asking if you could clarify on political. Is it right that 2022 political revenue for Scripps will exceed 2020 despite not having any presidential?

Yes, that's correct. Steven, the presidential last year represented less than 20% of our total political spend. And so with 18 senate races, 17 governor races, we expect, as I said, 50-50 senate. We expect some of that's going to start this year. I think for the races that are considered closer toss up, there's going to be aggressive spending on both sides, and there would be some outside money that comes in to support it. I think the governors' races there are going to be highly political and awful important as well. So I think our footprint really sets us up to have a very strong year next year, and I do expect it to surpass our 2020 level.

Great. Thanks, Brian. And I know I've gotten that question a number of times since Friday, people are excited, and I'm surprised to hear that. Steve Wilson again. Adam, for you. Please discuss the offset as cord cutters abandon pay-TV. Your national OTA opportunity improves, but your retrans pool is shrinking, putting the nearly $600 million of retrans revenue at risk.

Well, I actually still see growth ahead for retrans, mostly on the back of resets and pricing changes. I think Brian walked you through the way the cadence looks for us. While it's relatively minimal in 2021, 2022 has about 20-plus percent of our retrans rates resetting. And then we have a very significant year in 2023. It's absolutely true, the pay-TV ecosystem is under pressure. It's nice to see the virtual MVPDs performing well and the compensation we get back from the networks equating to essentially about the same net. But for us, the company has made a strategic move to recognize the disruption and to create opportunity from it. We do expect that when somebody cuts the cord and plugs in a digital antenna, they go from a lineup of 250 channels for -- that they can choose from to a lineup of somewhere between 20 and 30. And as you saw, we have a significant share of those 20 and 30, once you move outside of even the public broadcasting, it gets even smaller. So we see a significant opportunity for us to really capitalize on the opportunity that we see in the free over-the-air television space. Thanks for the question.

And here's another one for you from Dan Kurnos at The Benchmark Company. Do you have a view on the Roku acquisition of Nielsen's advanced ad unit, potential ramifications for linear shift to CTV in the future? And if there's any impact or possible benefit relating to our National segment going forward?

Well, I definitely think there's going to be a benefit. Frankly, I think everybody in the industry recognizes the need for there to be a greater cross-platform currency alignment. The idea of a buyer being able to buy on-air and online impressions more easily and for those things to line up, I think, will benefit on-air, quite frankly. One of the things we hear from all the time from the buyers is that they would like to be able to reach demos anywhere and everywhere that they are. We're excited about the opportunity in on-air. Frankly, when we think about even a little bit further down the line, the transition with ATSC 3.0 and the opportunity for some managed multi-versioning of advertising, we think dynamic ad insertion will play a role in the future of the monetization of over-the-air. And certainly, we've made a big investment in our over-the-air share and expect to be able to monetize that and increase the yield as the technology allows us to do it. Our company is, I would say, leading the industry from the local perspective, participating in a lot of experiments right now already with multi-versioning and programmatic in an effort to make sure that we are really at the table setting the terms as a result of our share of the free over-the-air television marketplace.

Great. Thank you, Adam. This next one is from John Janedis. Brian, I think it's for you because it refers to the households using television chart. If anyone else wants to jump in, that's fine too. And John, if I don't have that quite right, you can jump back in the queue and let us know, but here's the question. The average percentage of TV households using television in your markets has been surprisingly stable in the past few years, pandemic aside. As you think about the self-bundle and more ad-free viewing, can you talk a little more about your confidence level on the stability of viewing? And again, I assume this is local programming.

Yes. Look, I think that provides even greater opportunity because there's less options out there as people begin to debundle. I think what we've seen is, whether it's 300 channels of this 20 or 30 channels, local news, there's only at 3, 4, 5 local news channels available in any market. Those -- that information is really valuable to people, and it's irreplaceable. And so we will be on every platform. We're free over-the-air. It's not that hard to find us, but local news is really valuable information. And I think as people get back to their prepandemic lives, I think we'll see the shift back to early morning getting back to the consistency that it had for the 5 years before, or I think the late news will find a little consistency. We had a great run in the early news at 6:00 p.m. That may stabilize a little bit, but I think what we have seen is local news is irreplaceable. It doesn't matter what platform. It's easier to find either over-the-air, with a digital antenna, with your MVPD service, with a virtual service, but we're not concerned about any changes in habits to viewing affecting our local news audience.

Great. Thanks, Brian. This next one is for you, Lisa from Craig Huber at Huber Research. Can you please talk more about pricing for advertising on the Scripps Networks for direct response versus brand advertising? Is there a material difference or not a strong preference?

Thanks, Craig. We are seeing, as I said, strength in the DR marketplace, and we're capitalizing on that. And we'll go where the highest rate is certainly garnered. And last year, toward the end of the year, DR performed extremely well, and so we capitalized on that. Certainly, in the upfronts, one of the things that I talked about was ION's ranking in terms of revenue, delivery on revenue. And I think we see a real opportunity for better pricing driving higher ad rates, better positioning of our networks with advertisers in the upfronts. And so we're really bullish on this year's upfronts and being able to sell as the Scripps Networks reaching more eyeballs across America than anyone. So again, we'll go where the highest rate is garnered.

Thanks, Lisa. Jason, for you from Kyle at Stephens. Given expectations for better political in 2022, why doesn't '22 leverage come down more?

Well, first of all, I think that we'll start to see leverage really start to improve as we roll -- start to roll the pandemic quarters out of our [ LQA ] calculation. I would also say what we presented today was a conservative view. It didn't fully reflect all of the political upside that Brian's talked about. So we're bullish that we'll be able to outperform a little bit what you saw today.

We have about 15 more questions in the queue right now. I'm just going to pause for a minute. I've had a few questions on whether the deck will be posted, so as I said at the beginning of the call, the PowerPoint presentation will be posted by 11:30 at scripps.com, and a replay of this webcast, including the video, will be up tomorrow on scripps.com. Okay. Next question from Steve Cahall for Brian. You talked about the importance of live sports. We've seen a couple of D2C platforms like Peacock and Paramount+ offer live sports like the NFL without local station content. How are these partnerships evolving? Do you think we'll see [ logical ] station content added? And/or does it mean that reverse comp expense growth did moderate?

Yes. Look, I think those are all good questions, Steven. Right now, obviously, is an interesting time with the NFL negotiation happening. I only know what I read, which is the same stuff you read. So I won't comment earlier other than I think the NFL was built on the back of local broadcast stations, and our local stations play a really important role in the success of the NFL. And so we'll see, ultimately, when these new deals are announced if they include streaming, they may. To this point, we have participated in that streaming. So when there's been an NFL game or there's been a Notre Dame game on nbc.com, we've had local ads that we've been able to sell in that. And so it would -- precedent would indicate that there is a way for local stations to participate. So we'll see what those deals look like. Yes, I remain optimistic that local broadcast will be the foundation of all those deals. I think you see the new SEC deal that just got done with ABC and ESPN for the next decade. So I think local stations are great partners to universities and to sports teams and leagues, and I'd expect us to continue to play a really important role in that moving forward.

Carolyn, can I jump in here also? To Steve's other point, I mean, if, in fact, the networks are taking some of these feeds, local avail or local content free, and putting it into their OTT services, then I would absolutely expect there to be some moderation for the reverse comp. Feels unlikely that we will take increases as a result of changes in the compensation -- or changes in the NFL program, for example, when the networks are using that same content exclusively without our participation. So this is what I meant by the fact that there is an interrelated group of parties who are all incentivized to work together. For me, I think it would be a tall order for us to increase the fees we're paying for sports that are reaching consumers around us exclusively.

Great. Thank you, Adam. Thanks, Brian. Next question on the upfronts, Lisa, for you, from Dan Kurnos. How do you think the upfronts will proceed this year after the disruption last year? You anticipate less upfront participation, given limited visibility, or more to lock-in rates ahead of the potential economic and further ad recovery?

I think the latter, Dan. We see advertisers and sellers eager to make up for a rough 2020, assuming that we're returning to some sort of version of normal. By the new TV season, we think CPM increases can be substantial as key categories return. So we think advertisers are anxious, and sellers are anxious to get back in the game after a really rough 2020.

Next question from Nick Diaz from Neuberger Berman. As content costs rise, will Scripps shift to more original content and away from syndicated content to lower programming costs? And Lisa, I believe this is a networks question.

Yes. Thanks for that question. All of the major studios are offering direct-to-consumer services and acquired programming, which acquired programming will still be available at really attractive rates. By far, the most expensive programming is really the original programming you do yourself. So we found this really great economic model where we're buying license programming at attractive rates, creating networks that appeal to key demos and selling the advertising against those eyeballs. And we see that formula as very, very lucrative and certainly, value creation over the next several years. We've dabbled in a bit of original programming, and we'll continue to do that where we see really the economic return for that original programming. But by far, our networks will be licensing programming and programming those networks to sell against the demographics.

Thanks, Lisa. Next question is for Brian from John Janedis. What are your travel and leisure advertisers telling you about the budgets and the reopening? Will it take several years to get back to somewhere close to prior peak? And do you think it can be a material tailwind later this year?

Hey, John, I think it's a material tailwind. In talking to them, they are anxious to get going and get people back. I think of all the states that advertise, visit Florida, visit Michigan, visit Pennsylvania, you think of all the amusement parks. As I said, and we believe the amount of stimulus money that's about to be injected into our society at the same time that shots are going in people's arms, I'm sure you saw that [indiscernible] for business. No more mask and 100% capacity announced in the last 24 hours. So I think there's -- in talking to our advertisers, they're ready to go. They're ready to regain market share and reestablish relationships. I read a report this morning, I wrote down the quote. Of course, I'm not going to be able to find it now that -- now where did I write it down? Here it is. From Ad Age, spring is the new Christmas for marketers. With the stimulus money coming in and summer hitting, it looks like there's going to be a very strong opportunity, especially in travel, leisure in the back half of the year moving into next year.

Great. Thank you. Adam and Jason from Steve Cahall. The Berkshire preferred prevents dividends and repurchases, but is it fair to assume not M&A? Scripps has been impressively evolutionary over the past decade. So should we expect acquisitions and divestitures to be a constant theme?

Well, yes, we are not precluded from doing M&A. Right now, our top priority for free cash flow is paying down debt and delevering, for sure. But look, I think we would continue to be opportunistic for ways to economically improve the company, whether that's through the continued improvement of our local media portfolio, adding -- efficiently adding second stations that improve the revenue share and the cash flow that we generate in specific local markets. We've done that a couple of times over the last year. So we will continue to be acquisitive, but I would not expect any transformational or large acquisitions in the near-term because we really are focused on doing what we said we would do, paying down debt. We've just, I think, really made a 5-year move with respect to the launch of the Scripps Networks, and I expect us to continue to develop those businesses internally as well.

Great. Thank you. A question from Mike Kupinski. And Lisa, you hit on this a little bit already in terms of original content for the networks. Is there anything else you want to say? He says, given the fact that you have a broader distribution platform, can you talk about your plans to develop more original content for your networks? And actually also for local TV, so we'll go to Brian next.

Yes. Carolyn, I think I probably answered that question in my previous. So I'll toss it to Brian to give our local [ stand ].

Hey, Mike, you've followed us for a long time. You know our history, and I think we were really the first to take some creative risk and put ourselves out there to eliminate some syndicated programming and create original programming ourselves. We're now a decade, believe it or not, into that initiative. The List, which was launched more than 10 years ago, remains on our air, a really important part of our broadcast schedule in many of our markets. RightThisMinute, which, if you remember, was a partnership between ourselves and 2 other companies, it continues on the air in 97% of the country. So we continue to very much control part of our own program schedules. That said, syndicated programming remains really important. And so I think we often try to find that right balance of stuff that we can control and having great shows that are created by syndicators. The other thing I would just say is we've been very aggressive in news expansion in the last couple of years, especially since our acquisitions last year. Probably in 8 or 9 different markets, we launched our expanded news for the first time since we owned Lansing. We began producing our own news at our Fox station there this year. In the Waco Bryan-College Station market in Texas, we had a news operation in Waco, but 2.5 hours later -- away is College Station, and we launched news there. In Boise, we were able to extend what we do there and launch a local news cast in Twin Falls. So I think local news is clearly our expertise. It's highly profitable. 40% of our revenue plus comes from local news. And so we've been very aggressive in that space in the last couple of years, but we will continue to look to either partner or develop our own programming as it makes sense.

Thanks, Brian. A question for you again from Craig Huber. He asks, where are you spending your investment dollars at your local TV stations this year? And where are you getting the best return on those dollars at the TV stations? And then Lisa, he'd like to ask you that same question for the networks.

Hey, Craig, so two things. Number one, business isn't totally back to where we want it to be. And so I think we're going into the year relatively conservative on our approach to our expenses. I think just like we were last year, we pulled back in a lot of our travel and leisure as well as incremental expense in some places. We put money to work in the OTT space in trying to develop out those products as well as try and acquire customers there. On the capital standpoint, we continue to innovate, find very cost-efficient ways to produce news and distribute news. And so we're probably putting more money to work there than we are anywhere else.

Great. Thank you. Lisa, do you want to take that on the network side?

Yes. Obviously, Craig, we announced the launch of 2 new networks, and we see really attractive returns in doing so, especially since we own our own distribution and we're able to expand the distribution really to 75% of the country immediately. We are refreshing some programming on our networks and especially on ION, as we continue to drive ratings and eyeballs there. And then I mentioned in my prepared remarks, I think what you'll see is us really aggressively going after the OTT marketplace with our networks. So as I said, Newsy was the most ubiquitously distributed. And we really intend to move all of our networks to OTT.

Another question for you, Lisa from David Steinhardt at Litespeed. He asks, can you talk more about the long-term value opportunity with respect to Scripps networks? What, if any, are the long-term goals for the division?

Yes. So we believe we are creating a new media powerhouse, National Media powerhouse, focused on the over-the-air TV consumer, capitalizing on the trends of -- that we're all seeing, right? This trend of self bundling. And so we are putting the pieces in place with the ION acquisition. The ION acquisition, along with our Katz Networks and Newsy, made so much sense in terms of the industrial logic to put these assets together, and we really see capitalizing on that over the next several years is really our #1 priority.

So the next question we've got previously from Steve Birenberg, I'm going to skip over that. If there's something else you wanted to add, that's -- you can go ahead and jump back in the queue. So the question after that from Dan Kurnos, can you give us a little more color on the new channel launches? I'm assuming you're able to keep content costs down similar to what ION has done historically. Why would those networks choose to license those shows to you versus keep them behind their own growing pay walls?

So Dan, it's not an either/or. As I said, most -- almost all the studios are certainly launching their own direct-to-consumer products. And at the same time, licensing that content as many ways as they can. Certainly, whether that's on cable or, in this case, over-the-air broadcast, right? So cash is king, and they are looking to monetize their content. We were able to, as I said, 6,000 hours of programming, almost 70 different series for very attractive rates, really at a much lower average rate than what we've seen in the past in terms of our content acquisition. So I would say this plays well into their strategy, and it certainly plays well into our strategy as well.

So Brian, question from Craig Huber. What percentage of your retrans subs come from the virtual MVPDs right now? And then also, how are the economics? Are they at least as valuable as traditional MVPDs?

Hey, Craig, less than 10% of our total paid subs are coming from the virtuals and the economics of the way we've negotiated it with the networks are as good as the net of what we get on the traditionals that we negotiate ourselves.

Brian, from Steve Wilson. Regarding the renewals with the broadcast networks, they are eager to capture a larger share of the retrans and their need to lock up broadcasting rights to sports and entertainment programming is ballooning their costs and requiring more pass-through to the local station operators. So I guess he's asking about the dynamics with the network negotiations.

Yes. I mean we, every year it seems, have a couple of negotiations up. [ They don't really ] have a portfolio as big as ours. And I don't think much has changed there, of course, I was looking for more, and we're looking to pay less. But I think it's a value conversation. We look at what sports rights to include and what that looks like. It looks -- we look at the value that is created from the programming they have. Scale matters. I think that certainly helped us as we have increased the size of our portfolio, but I think we're really blessed to have the relationships we have with all 4 networks. I think we have a -- we're a meaningful contributor to their national scale. We're the second largest owner of ABC stations in the country, with a big CBS and the NBC footprint. We have good working relationships. And just keep in mind that the relationship goes two ways. We have some market-leading news brands, those news brands and our aggressive approach and independent voice in news is really valuable as they have Good Morning America and The TODAY Show and CBS This Morning and having access to our journalism, our video, the use of our chopper. So all of that makes them better as well. And so it's a cooperative relationship, and we'll go into our new negotiations and expect that we'll come out of them with a deal.

Great. Thank you, Brian. Lisa, a couple in a row here for you. First from Se Kim at Wolfe Research. As you scale the Scripps Networks, can you expand on your appetite to invest in original programming versus syndicated content? Actually, I think we're already pretty much covered that. He asked us about 20 minutes ago. Next from Steve Cahall at Wells Fargo. Could you talk about industry verticals and direct response? I think investors have traditionally viewed this as a type of marketer that's skews to older consumers. But I think a lot of direct response is now coming from younger companies. So help us think about marketers you're bringing in into your networks. Also, any details on ION CPMs?

Yes. So I think it's -- in the past, certainly, DR was probably 1 (800) sort of call direct, and you saw probably some younger companies. But today, you're seeing large CPG companies, Procter & Gamble, American Express on the financial services side really spending money in the DR space. As I said, it is a direct. You're able to measure it, you're able to absolutely place those buys in the demos that you're looking to attract. So we see the DR space continuing to evolve as more attractive larger companies are getting into the space. We saw that certainly on the Katz side, but we're also seeing it on ION's side. In terms of the second part of the question, I think it is, any details on ION CPMs? I think ION -- when we bought ION, as I said, we saw the opportunity to really capitalize on the revenue in terms of rates. As I said, it was the fifth-ranked network, but 25th in terms of revenue. And so we really see that as an opportunity to increase rates and the yield, really, the flow-through on the advertising that we have, whether that's on general market or DR. And so ION started, really, that process last year. And then we're really fueling that to ensure that those rates -- that we're getting our fair share of the rates because we're attracting a large set of eyeballs.

Thanks, Lisa. I'm going to turn to Adam for this next question from Steve Wilson. The story of over-the-air networks is compelling. Can you discuss the barriers to entry of new entrants and the risk that others fight you -- that they fight you for the same programming you have access to, inflating your cost and cutting your margins? Think we kind of hit the programming cost side, but maybe on the other piece, barriers to entry?

Yes. Actually, this is why we really love this business. There are significant barriers to entry. Obviously, in order to reach the over-the-air consumer, you have to have a broadcast license and the government isn't really handing many more of those out. I think also the fact that we are so dominant already. I mean Lisa, I think, just described our strategy, as we talked about expanding to two more, Doozy and Defy, yesterday. Again, about locking up real estate -- a lot of the real estate that we also own and then incrementally growing past that. So there are certainly other folks in the -- over-the-air space. Many of them, I think, were networks formed to monetize some cost content that they had on the shelf that they wanted to just throw on to the over-the-air networks. That's why today, the Scripps Networks are among the very few that are large enough based on viewing to actually command Nielsen ratings. And that's why we've taken a sort of a growth approach to create programming strategies designed to bring together audiences valuable in the national advertising marketplace, in the general markets' upfront scatter and the direct response marketplace. I would be delighted to see the over-the-air marketplace continue to be built out, but there are very significant barriers to entry. As you saw that channel guide, we already have a commanding share of the audience, and we don't expect to do anything other than expand upon that from where we are today.

Thanks, Adam. Lisa, a question from Craig Huber. What percentage of your ad inventory for Scripps Networks are you planning or hoping to be able to sell in the upfronts? What's the timing again of our upfront presentations?

Yes. So we -- so I'll answer the latter part of the question first. So the upfronts, really, we're actually delivering our upfront presentations currently, right? We started last week, and that will continue over the next several months. I think the other part of the question -- Carolyn, is it still up?

Yes, the percentage of ad inventory.

So just to give you a sense, we would likely maintain about the same percentage that was sold in the upfronts for ION. Remember, it's about maximizing yield. It's about maximizing rate, whether it's on -- whether it's sold in the upfront scatter market or on DR. So about 55%, which has been ION's historical levels, is what we would aim to really garner in the upfronts. Again, want to make sure that we're maximizing rates. So we're not going to give sort of too much of that inventory away early as we know the year is going to build.

Lisa, one more for you from Kyle Evans. He asks, what is the size of the DR TV addressable market? And what is our projected share today?

Yes. So the -- so I'm going to talk about the OTA DR marketplace, which is about $12 billion to $15 billion. We're in -- as a percentage of that, certainly, we make [ up ] a good percentage of it. From an inventory perspective, we probably have the most over-the-air inventory in the DR space as anyone. So we see that as opportunity. A $12 billion marketplace, we're in the $400 million or so in terms of revenue if you think about 2020. And so we see opportunity for growth there as we're maximizing the yield on all of our networks, especially in that growing attractive marketplace.

Thank you. This one looks like one for Jason from Michael Kupinski. The company historically repurchased shares in order not to have share creep. How important is it to free up restrictions on the company's ability to repurchase shares? Is there a time frame that the company would like to have those restrictions removed?

Yes. As we referenced earlier, the Berkshire agreement prohibits any share buyback for 5 years. And so from my standpoint, I go back to what we said before, our focus right now is on paying down debt. And delevering as quickly as we can. Beyond that, I don't think we have anything else to add there.

Thank you. Let's see, few more to go. From Se Kim at Wolfe. Looking at Court TV as a playbook for Doozy and Defy TV, how long did it take for Court TV to become profitable and gain meaningful ratings share following its launch?

So thanks, Se. Court TV, we launched in May of 2019. And we saw a really great response to that. We had just begun to ramp up last year and the courts closed. And so we did -- that put us behind a little bit, although ratings at Court TV grew last year by nearly 60%. So we -- and we have a lineup of really, really important trials this year. In fact, starting this week, we will be live in Minneapolis, covering the Chauvin murder trial, the George Floyd murder trial that was set to take place later this month. And we see that as well as several other sort of [ key ] court cases that will go to trial later this year as an opportunity for really fueling the growth at Court TV.

Great. Thank you. A question for Brian from Steven Birenberg at Entermedia. Let's see, can you discuss what's happening at local stations in relation to your local websites, mobile apps, the digital products? Are there other strategies in this area in relation to [ ADTECH ]?

Hey, Steve. Looks like my video froze for a second there. I think, look, we've been very aggressive over the last decade, two decades in the digital space. I think we've got local sites and microsites built out in all of our markets. We've been a leader in the mobile and the social space. We sell O&O advertising on our own platforms. We also have developed our own ad network. And honestly, we serve millions of dollars for clients that aren't running ads on our sites, but are running them on others with a great margin. And so that's a relatively big business for us. But as I said earlier, really, of all of the -- OTT is the biggest opportunity. It is TV. It's video. It's video around video content. It's at television cost per points. As I said, we've been in the digital space for a long time, but OTT is the most meaningful revenue we've seen off of our main channel of any of these other platforms. And so a lot of our focus in the last 18 months has really been about building out and establishing an OTT presence in our markets. I think we've been more aggressive, really making them local news-focused. I think that paid great dividends last year when so much of the country was engaged in news and wanting from that trusted source, the information on local, and we were able to stay engaged with our customers when the networks are into regular programming. So I still think that's the biggest opportunity. But I assure you, we haven't backed off of our digital, mobile, social desktop platforms to make tens of millions of dollars on those, but we think OTT is the biggest opportunity.

Thanks, Brian. I have one more question in the queue. Lisa, for you. Can you talk a little bit about the shutdown of QUBO and the ION multi-cast networks and what our strategy was there?

Yes. I think it was really clear during the acquisition announcement that our intention was to move to really capitalize on the multi-cast positions that ION had. It had previously aired QUBO and ION Plus. QUBO being a kids programming and ION Plus being a combination of some of ION's, what I would say, outdated programming. So we saw the opportunity to move the Katz Networks onto ION's multi-cast open channels. That's a big part of the acquisition thesis as well as the synergies that Adam talked about earlier in terms of the distribution synergies that are really locked in from a contractual perspective. So it was something from the beginning that we had certainly communicated, and it was really part of the strategy from the get-go.

Great. Thank you, Lisa. Any closing words, Adam, from you that you'd like to -- before we wind down?

Yes. Just thanks very much, everybody, for joining us. We're very appreciative of your time. And for those of you that have been along for the ride in this adventure with us, we expect that it will continue to be terrific. As always, you can reach us through Carolyn Micheli and our IR team. And we hope everybody has a great day and remain safe and healthy.

Thanks, Adam. The website now has our investor presentation on it, so you can go there at scripps.com to pull down the PDF and again, tomorrow, this recording will be available. Thanks very much for joining us. Have a good day.