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Operator
Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2023 earnings call. At this time, our participants are in a listen-only mode. Later, there will be time for questions. If you wish to ask a question, please press star, then zero. Instructions will be given again at that time. If you should require assistance during the call, please press star, then zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Carolyn Michelli. Please go ahead.
Carolyn Michelli
Thanks, Don. Good morning, everyone, and thanks for joining us for a discussion of the E.W. Scripps Company's financial results and business strategies. You can visit Scripps.com for more information and a link to the replay of this call. A reminder that our conference call and webcast include forward-looking statements, and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. We do not intend to update any forward-looking statements we make today. Included on this call will be a discussion of certain non-GAAP financial measures that are provided as supplements to assist management and the public in their analysis and valuation of the company. These metrics are not formulated in accordance with GAAP and are not meant to replace GAAP financial measures and may differ from other companies' use or formulations. Included in our earnings release are the reconciliations of non-GAAP financial measures to the GAAP measures reported in our financial statements. We'll hear this morning from Scripps President and CEO Adam Simpson, Chief Financial Officer Jason Combs, and Chief Operating Officer Lisa Knutson. Here's Adam.
Don
Good morning, everyone. We're pleased today to be reporting third quarter financial results across the company that met or exceeded expectations. Our local ad sales teams executed at a high level despite a soft advertising marketplace. On the network side, connected TV revenue growth continues to be a bright spot, while the direct response and general market sales teams held their own. In addition, careful expense management supported by the continued pursuit of a more efficient cost structure led to a stronger than expected segment profit number. Alongside the rest of the advertising industry, we do face further macroeconomic headwinds as we wind down this year. As you know, the national advertising upfront season was weak across the industry. But as we head into the fourth quarter, we have seen some green shoots in the scatter markets. Local media core advertising is coming into the quarter strong, with our four top categories up year over year. Jason and Lisa will give more color on the full advertising environment in just a moment. Despite the macroeconomic conditions that we are all contending with, I really like the Scripps setup for free cash flow growth over the year ahead, and here's why. Number one, we have a robust new run rate for local media distribution dollars. Number two, our local core and distribution revenue and national advertising revenue will benefit from continued, disciplined expansion into sports rights, fueling organic growth. Three, we're educating audiences about the appeal of free TV and making it easier than ever for people to watch it and for us to profit from it. Four, we project double-digit growth in our network's connected TV advertising revenue. And fifth, We will benefit from the high-margin political ad revenue that broadcasters get as the primary beneficiaries of political ad spending, projected now at $10 billion for the coming presidential election year. I'll start with our outlook in the retransmission ecosystem. As we reported to the street in October, we have now successfully completed distribution agreements covering about 75% of our local media paid TV households, without any blackouts. The net effect of these negotiations for 2023 is as we promised, growth of 15% in revenue and more than 40% in net distribution dollars. Annualizing that growth next year gives us a strong tailwind. A lot has been said about the future of the MVPD and broadcaster relationship, especially after the Disney charter dispute. But our experience leads me to believe that investors' fears are off base. The concessions charter negotiated, including SVOD services in the bundle and thinning out the lower view channels, will benefit the pay TV consumer, benefit the ecosystem, and therefore benefit broadcasters, especially since our programming represents the very best of the channel lineup. Our negotiations and new deals are a testament to the strength of the MVPD broadcaster proposition. Our renewals come as a result of both good negotiating and the strategic moves the company has been making over the last several years. Because now, in addition to capturing full market value on rates, we're creating new value by expanding the number of our stations that receive retrans. For example, in Las Vegas, we flipped an ION station to an independent carrying the Vegas Golden Knights as its anchor programming. The new stations Vegas 34 joined our ABC affiliate there, expanding our advertising opportunity and distribution fees significantly. So despite erosion in the nation's pay TV landscape, Scripps is now getting higher rates and getting paid on more stations than before, a key growth driver for us that comes as a direct result of the flexibility of our broadcast platform in service to our sports strategy. Second, We're creating material new value by tapping into the passion Americans feel for their favorite teams and athletes and their love of the game. This passion has an unparalleled ability to unify us as a community, to bring us in front of the television, and to do it in real time. Linear television, specifically broadcast TV, is made for this. The leagues know it, the teams know it, the fans know it, and so do the distributors and advertisers. And that's the reason Scripps is leading the broadcast renaissance in live sports. On the local side, we now have broadcast partnerships with two National Hockey League teams, the recent Stanley Cup champion Vegas Golden Knights and the Arizona Coyotes in Phoenix. We're broadcasting their games across a multi-state region to both teams' large regional fan bases. And we're seeing tremendous growth in viewership, now that every TV household in the markets can receive their games. In Las Vegas, the Golden Knights have more than doubled their local ratings so far this season compared to last. And in Phoenix, the Arizona Coyotes' ratings have increased a whopping 900% from their RSN distribution last year. The equation is simple. More audience reach generates higher ratings to deliver Scripps' significant new revenue right now, primarily through incremental and meaningful core advertising revenue growth and higher distribution revenue for the independent stations on which they air. On the core advertising side, I'm pleased to be able to quantify the value we have just begun to create through our sports rights deals. Baked into our guide for the fourth quarter is an incremental lift to local media core of four percentage points driven by our two local sports deals. And for full year 2024, we're projecting at least a three percentage point lift in core advertising from just those two local NHL deals. And on the distribution side, adding retrans to these new independent stations with live sports is both growing our top line revenue and expanding the portfolio's distribution margins because traditional and virtual MVPDs Know how important this programming is for their customers. With each new local rights agreement we sign, core advertising and distribution fees will grow, adding profit and generating free cash flow. Sports is a significant opportunity for us on the national level as well. We're pleased to have completed a very successful first season with the WNBA on ION. We harnessed the power of our over-the-air signal, pay TV carriage, and connected TV distribution to help the league increase its TV reach by nearly 30%. A third of our viewers this season watched the WNBA Friday Night Spotlight on ION over the air, while 10% watched on Fast. All new reach for the league. Here, too, live sports rights drove new value for Scripps. with 65% of the revenue we generated from sponsorships and advertising coming from new to script accounts. And as you know, advertising around live sports commands a hefty premium above our average unit rates. We're already well into the sales cycle for our second season with the WNBA and off to a very good start. In the near future, we expect to tap into ION's powerful reach for similar national rights agreements, with leagues that recognize the power of partnership with Scripps Sports, setting us up well for growth in 2024 and beyond. As you can see, Scripps is enthusiastic, for good reason, about the ongoing value of the advertising-supported TV marketplace. And our third lever for 2024 will create new opportunity for growth in the over-the-air television market. Given our company's outside share of over-the-air viewings, we've told you that we'd be working to accelerate OTA's growth. Last year, our marketing campaigns drove up to a 30% increase in digital antenna sales, as reported by the antenna makers we work with. But we still recognize the need to solve some of the challenges consumers faced with digital antennas. And we saw an opportunity to revolutionize the free TV experience, especially at this time of rapidly rising streaming costs and relative indifference to the pay TV bundle. That's why in August, we relaunched Tableau, an over-the-air TV device that aggregates OTA and connected TV fast channels with a DVR in a modern user experience that appeals to Gen Z as much as baby boomers. It allows you to stream and watch OTA on any TV, phone, or tablet in your house through an app. For the new Tableau consumer, it's a one-time cost, can be purchased bundled with or without a digital antenna, and today has no subscription fees. Tableau owners get free premium network and fast channel programming, every local NFL game, and all of the live professional and college sports on broadcast. In the two months since the soft launch, we're seeing very enthusiastic consumer and media reviews. People have a real passion for this product. Sales have been brisk through our retail partners Amazon, Best Buy, and directly at TableauTV.com. Just this week, Tableau was live on the Home Shopping Network and sold out in minutes. Soon, we'll be sold on Walmart.com. We're launching the marketing campaign in earnest this quarter and expect to share more metrics on future calls. For now, what's important to know is that Tableau will grow TV viewing over the year, especially for live sports, so we can turn more eyeballs into ad dollars. Turning to connected TV, our fourth free cash flow driver, our efforts to distribute and monetize our linear networks in the fast marketplace have quickly created a new $100 million business. We expect double-digit growth on that $100 million next year. And of course, the fifth cash flow driver is the influx of high margin political advertising in the presidential election year, when we and our broadcast peers are best positioned to capitalize on the $10 billion in projected annual election spending. Beyond these five growth drivers for 2024 is the ongoing benefit of our reorganization work, which Lisa will discuss in a moment. We remain focused on both aggressively tackling the near-term challenges in the media marketplace and creating a more efficient, cost-effective, and high-performing business. Scripps is carving out a valuable, durable niche in this chaotic media ecosystem. And because of that, I encourage investors not to paint us with the same broad brush as companies that are irrationally expanding into streaming, grappling with constant subscriber churn, and all the while bleeding off their valuable businesses with no clear path to profitability. At Scripps, our path to real near and long-term value is clear. I'd like to end by recognizing an accomplishment about which I'm very proud, the first National Emmy Award for Scripps News. As you know, we bought Newsy 10 years ago and rebranded it Scripps News in January. It's now distributed not just on national platforms, but on our local stations and garnering strong ratings with our local audiences. This Emmy for Outstanding Science, Technology, and Environmental Coverage is a testament to the impactful news organization we've built and America's need for its objective, fact-based reporting.
Jason
Now here's Jason. Good morning, everyone. For the third quarter, we reported financial results that all met or exceeded the expectations we set in August. with another significant beat on company segment profit as we had in Q2. Our segment profit over performance was driven by stronger-than-expected advertising revenue from local media core and in the Scripps Network segment, as well as continued expense management. For the third quarter, Scripps Network's revenue was $215 million, exceeding our guidance because of better-than-expected connected TV and direct response revenue. Networks connected TV revenue was up 75% from Q3 of 2022, if you back out the impact of our low margin programmatic product, which we began to sunset in Q2. Scripps Networks segment expenses were $166 million, up only about 1% from the prior year quarter. Segment profit in networks was about $50 million. In our local media division, total revenue was down 7% from the prior year quarter, mainly due to the absence of the election year political advertising revenue. Local core advertising revenue was down about 3% from the prior year period. Local media distribution revenue was up 20% to $198 million fueled by renewals in our cable and satellite agreements. We have now completed the renewals for all 75% of the subscriber households that were up this year, and we are very pleased with the results. Local media expenses were flat to the prior year quarter. Local media segment profit was $75 million. In the segment labeled Other, we reported a third quarter loss of $6.3 million. Shared services and corporate expenses were $21 million. The loss attributable to shareholders of Scripps was $16 million, or $0.19 per share. Restructuring costs for the quarter accounted for $0.04 of the per share loss. We announced in January a company-wide reorganization, and the restructuring costs are related to that work. As of quarter end, cash and cash equivalents totaled $16 million. Our net debt at quarter end was $2.9 billion, and our net leverage was 5.4 times per the calculations in our credit agreement. Looking ahead to the fourth quarter of 2023, in the Scripps Networks division, we expect revenue to be down in the 10% range, but only down about 8% if you back out the impact of the programmatic advertising product we discussed. The fourth quarter is being impacted by the industry-wide weak upfront season and ongoing softness in direct response spending. We expect fourth quarter networks segment expenses to be flat. We expect total local media revenue to be down in the low to mid double digit percent range since this is not a big election year. We expect local core ad revenue to be up low to mid single digits. In a tough ad industry environment, we expect to see the benefit of a four percentage point lift in Q4 core due to our two local Scripps sports agreements. Lisa will give more color in a moment about our strong start to the quarter with key core categories, including auto. Now I'd like to touch on two full-year local media revenue items. We've had stronger than expected 2023 political spending, especially from a contentious ballot issue in Ohio, and we now expect full-year political ad revenue to reach at least $30 million. Also, since completing our retransmission renewals, We have said we expect full-year gross distribution revenue of $750 million and net distribution dollars to increase by more than 40% from 2022. Back to the fourth quarter, we expect local media expenses to be up in the mid-single-digit range. That includes the cost of pay increases for key news-gathering roles at our local stations and costs associated with Scripps Sports. Fourth quarter shared services costs are expected to be about $22 million. We expect the segment labeled Other to generate a loss of about $10 million as we continue to educate consumers about free, over-the-air viewing and promote our Tableau device, as Adam discussed. Due to the ongoing macroeconomic headwinds facing our Scripps Networks division, we're also adjusting our full-year free cash flow guide. We still expect it to fall within our previous range, but at the low end, between $50 and $60 million. Because of the economy, And because we continue to drop strong quarters from 2021 from our trailing eight quarters leverage calculation, we expect some upward pressure on our leverage ratio by year end. However, we see a strong glide path to bring that down a full turn to under five times from Q4 of this year to the end of next year. That's due to the five free cash flow drivers that Adam listed, including our high margin revenue from the presidential year political advertising, connected TV and distribution revenue, and continued expansion of our sports rights revenue. And I want to strongly reiterate that we continue to place our highest capital allocation priority on paying down debt. We're on track with our expectations of realizing more than $40 million in annual savings from our company reorganization. We expect those savings to be mostly operationalized by the middle of 2024, and we are on track, as we've discussed, to reach a year-end 2023 run rate of around $20 million in annualized savings. Now, here's Lisa to share highlights from both the local media and Scripps Network's operations.
Jason
Thanks, Jason, and good morning, everyone. I'd like to start this morning with some color on how fourth quarter is shaping up. Then I'll give an update on our ongoing restructuring work. In local media core advertising categories, we're seeing positive trends coming out of October. Services was up 9%. Auto was up 10%. And if Q4 ends in positive territory, it would be the sixth consecutive quarter of auto growth. Home improvement, our third largest category, in Q4 so far was up 13% in October, and retail was up 2%. We're also seeing good news in political advertising. The third quarter revenue of $9 million was higher than in Q3 of the past two off-cycle election years. We now expect to reach at least $30 million in political ad revenue this year. We're also optimistic about the large projected spending levels for next year's presidential election, since local broadcasters continue to capture the lion's share of those dollars. Turning to the network's division, our third quarter connected TV and direct response revenue bolstered our results enough to be guidance by two percentage points. ION, ION Mystery, Bounce, and Court TV in particular outperformed our growth expectations in CTV. For the network's fourth quarter, we begin to see the impact of the week industry-wide upfront season. We are far from alone among the national networks in seeing declines in upfront revenue this year. The overall volume of dollars in the whole ecosystem is estimated to be down about 10%. Two areas of growth for Scripps in the upfronts were Bounce, whose upfront dollars rose 6%, and CPMs rose nearly 50%. And Connected TV revenue for our portfolio of networks was up nearly 60% year over year. Connected TV continues to be a big growth area for us outside the upfront as well. In the third quarter alone, the weekly hours of viewing of our networks on fast platforms increased 17% from the prior quarter and 179% year-over-year. As we have said, we expect to end the year at nearly $100 million in total network CTV revenue. And for 2024, we are projecting a mid-teens percentage year-over-year increase in total dollars and more than a 30% increase if you back out the impact of the legacy programmatic product we're sunsetting. These projections include some new agreements that will be coming online early in the year. Now I'd like to give you an update on our restructuring work as we close out the year. Back in January, we announced a major reorganization of the company aimed at aligning all of our assets and the people to the best capture the opportunities in the media ecosystem. The reorganization is unfolding as we intended to transform our company and improve margins. fuel growth, and leverage the strength of our position in serving our audiences and communities. As Jason said, we are expecting to realize more than $40 million in savings through the REARG, with about 80% of that coming from eliminating positions and the rest from external spending, such as vendor contracts. But as you know, a company can't cut its way to growth, and the most important part of our work is what we're doing to reposition ourselves to thrive in the changing media landscape. Our approach to the reorganization has been fourfold. First, we have combined many corporate management roles that were separately housed in local media and Scripps Networks divisions. So we now have leaders who are responsible for their areas across the enterprise. For example, we hired a chief revenue officer from NBC Universal who oversees both local station and network sales and is charged with thinking holistically about the company's revenue growth. His work already is leading to benefits, ranging from better use of sales technology to more effective sales messaging and execution to the consolidation of vendor contracts. Second, as our leaders have taken on these broader roles, they have centralized teams in our local stations, including human resources, finance, and marketing, in a way that is appropriate for a company of our size and in line with our local broadcast peers. Third, our local media station newsrooms are rethinking how we adapt to what our audiences and communities want from their local news. We've undertaken extensive audience research over the last six years, including focuses on black, Hispanic, and rural households. These learnings have informed our approach to local coverage and the way we will serve viewers and audiences in the future. One key change is the redeployment of our anchor roles in some markets, so we can put more journalists in the field. Rather than broadcasting from a studio with a traditional anchor desk, more of our newscasts are filled with reporters telling stories from out in their cities and neighborhoods. We're also running Scripps News on our local stations. This has three benefits. It puts Scripps News brand in front of large new audiences. It allows local stations to use the quality, objective national content Scripps News produces, and it saves on programming costs. We're now airing 63 hours a week of Scripps News live on 48 local stations with advertising sold by the local teams. And the ratings are steadily growing. For example, stations that use Scripps News Morning Rush program saw viewership build by 12% from June to September, and Scripps News live programming is delivering sustained year-over-year ratings growth of 4%. The fourth and very important part of the reorganization was has been the emergence of Scripps Sports, led by Brian Lawler. It has been crucial for Brian and his team as they build out our reputation as a sports media partner to have support from people who think about all of our assets, from the market depth of our local stations to the national and demographic reach of ION and other networks. As we're putting together local and national deals, we are creatively deploying assets from both local media and Scripps networks, unencumbered by where they sit in the organization. We will wrap up most of our corporate-level work this year and will realize our full savings after our local stations complete their transitions in the first half of next year. But the true value of our transformation will come as these changes take root. We are forming new and even deeper connections with our audiences and advertisers through news, sports, and other quality entertainment programming on every platform where Americans watch TV. The enterprise value we're creating will propel our growth and perpetuation. I'd like to close by calling out the most recent awards of our impactful journalism. As Adam said, we are very proud to win our first National News Emmy at Scripps News. In addition, two Scripps local stations were recognized with National Murrow Awards. WTVR in Richmond won for an investigation into a string of sniper shootings, and KTBQ in Billings won for coverage of the devastating flooding there in 2022. And Phil Williams, Chief Investigative Reporter at WTVS in Nashville, was awarded Columbia University's John Chancellor Award for Excellence in Journalism. Phil is the first local TV news reporter to be honored with this award. And now, operator, we're ready for questions.
Operator
Ladies and gentlemen, if you wish to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1, then 0 at this time. And first, we're going to the line for Dan Kernel's benchmark. Please go ahead.
Dan Kernel 's
Great, thanks. Good morning. You guys talked all through the accolades, but Adam, no one brought up your own industry accolades, so kudos to you for being named BNC Broadcaster of the Year. Just a couple, I think I really want to dive into the sports angle and really appreciate the incremental data you've given us around local, and I really want to spend some time maybe, Adam, just parsing out kind of the local versus the national strategy. Obviously a lot, let's just start on the local side. A lot is really dependent clearly on what happens with some of the existing contracts. And it sounds like, you know, early, maybe next year, February timeframe, we might run out of extensions for Diamond. Just in general, sort of the opportunity that you're seeing out there, whether you have specific markets you target, PACE, anything you can kind of give us on just how you're thinking about the local opportunity, and then I'll follow up with kind of a national question after that.
Don
Thanks, Dan, and thanks for the kind words. Look, I think you should absolutely assume that we'll continue to execute this strategy where we see opportunities for our local brands to align with local sports. You know, we're obviously dedicated to approaching each of the deals with discipline, and I would say we've developed a real reputation that's appreciated among the owners and the leagues for partnership and shared risk and shared reward that frankly really feels good to them, especially after the trauma that they're coming off of with the sort of chaotic implosion of the RSN business. There are definitely markets where we see significant opportunity, markets where we think we can do what we've done in Las Vegas. In other words, you know, flip an ion station to a local independent without negatively impacting the ion reach because we move the programming stream to different spectrum. And then with sports as the anchor tenant of the programming of that independent station, really disrupting that local marketplace and significantly taking local advertising share and increasing our take of local retrans in that market. And so that's why I referenced earlier from a local perspective, with every new rights deal that we sign, we would expect to see core revenue growth and the opportunity for continued expansion for revenue for distribution, even between contracts. So I think that's an important thing to point out. Typically, you would only see us expand retrans revenue based on step-ups or based on new contracts. And in this situation, we have the opportunity to increase our retrans revenue every time we signed a new local sports deal. And so the opportunity there to dramatically impact, I think, core revenue growth is sizable. On the national level, the revenue growth we're seeing is just as important, but given the exposure of a single national deal, which is essentially like one night over 15 weeks, it's obviously not going to show up as impactful to the overall revenue growth of the Scripps Networks. But that said, we really think it's about the opportunity to leverage the national rights as a way to solidify linear viewing, grow, diversify the audience, and more broadly, raise the rates of ION, right? So we talked about the fact that 30% audience growth for the WNBA, in my prepared remarks, came from ION's rights. For us, the season also represented good diversification and expansion opportunity. The season drew in 2 million new viewers to ION. a significant expansion of the audience. And as I said in my remarks, 65% of the revenue we generated during that season was from new description advertisers. So we would expect to look again with discipline for additional rights opportunities on the national side as well, consistent with the brand we're building for ION. And we hope to have more to say about that in the near future.
Dan Kernel 's
Got it. That's super helpful. And then just on the CTV stuff, I mean, Lisa, I really appreciate the incremental color. Maybe you can just give us some more granularity on just how you plan on achieving the, let's call it 30% X sun setting growth next year and just what some of the drivers are there. I don't know if that's encompassing some of the aforementioned sports rights expectations, or if that's just simply figuring out the right way to go to market with expanded products and better lineup that you guys have.
Jason
All of the above, Dan. You just covered it. We're seeing both organic growth in our CTV revenue in 2024. We expect to see it. And we also, as I mentioned in my prepared remarks, had laid in a nice foundation from an upfront perspective in CTV, I think with growth of 60% year over year in terms of what we laid in. We also are benefiting from continued launching of new fast channels. I think we mentioned maybe even last quarter that we were launching two new fast networks, Laugh More, which now completes our ability to have each of our networks, with the exception of DeFi, carried on FAST. So Laugh More is now available on FAST. And we took our IP that we own related to Court TV and created a whole new FAST channel called Court TV Legendary Trials. And we're really utilizing that asset of IP that we've owned for quite some time and creating value there. So we've launched those two here in the last quarter. We'll continue to see some launches over this quarter and into next year. And then we are also launching on some large platforms. That guide includes in the early part of 2024. Got it.
Dan Kernel 's
Really appreciate that. Just one housekeeping, Jason, this may be better offline, but I think you have another synergy tranche next year from the spectrum side of the ION acquisitions. Is there any way to size that?
Jason
Yeah, when we initially announced the ION acquisition, we talked about sort of that cadence, and it was in the $15 to $20 million range incrementally next year tied to really one big contract that's coming up.
Dan Kernel 's
Perfect. All right, thanks very much, and nice result in the quarter, guys.
Operator
Thanks, Dan. Thank you. And next, we're going to the line for Stephen Cahal, Wells Fargo. Please go ahead.
Dan
Yeah, thank you. So, Lisa, I was wondering if you could talk a little bit more about just the Q4 guide for networks. It's a little bit worse than what you did in Q3. Q3 came in a little better than what you'd expected. So just trying to understand if the market has gotten worse, you know, you're trying to be a little bit conservative. I know you talked a bit about CTV as well. So just any more color you can provide there. And then more broadly, as more sports come on to the local side, how do you see the opportunity for moving more of ION's delivery to like a cross ad sales platform where you're using both local and ION together in the sales process to maybe deleverage yourself from direct response a little bit over time? And then, Adam, so I know you all are very excited about Tableau. Will you be sending that to sell-side analysts for trial? And then, more seriously, wondering what kind of marketing dollars you might be looking to put into that to get shelf space or promote it in some of the key retail channels over time? Because it seems like free TV is compelling, but it's also pretty misunderstood or unknown by a lot of the population. Thank you.
Jason
Yep, Stephen, I'll start and turn it over to Adam. So as you know, the fourth quarter is the start of our new upfront season. And as I mentioned in my prepared remarks, really industry-wide, the dollars that were written in the upfronts was down, I think, across the board about 10%, if not more, depending on sort of the networks. And I mentioned at least a bright spot for us was writing – more CTV dollars for the upfront starting in fourth quarter and next year, and also some of the real bright spot, which was bounce. So we're basically starting with a lower volume because of the upfront reset in third quarter. However, we are continuing to see, we've seen it in second quarter and third quarter, scatter revenue really holding its own. We are also seeing and expecting in fourth quarter for our scatter pricing to remain pretty strong in terms of CPMs compared to what we wrote in the upfront. For instance, in third quarter we saw about a 55% increase over our upfront dollars in terms of CPMs that were in the scatter marketplace. The part of the guide also includes, I would say, typically in fourth quarter, you see high dollar advertising on the DR side because of Medicare and those sorts of things, which has really, in many ways, is a little bit softer in fourth quarter. So that's flowing through our guide as well. I think the bright spot continues to be CTV. We continue to see that growth, not just ending Q4 of this year, but as I mentioned in my comments to Dan, into 2024. As for your next question, selling ION with local, that is absolutely something that's in our, not only something that we did this year as a result of a couple of big advertisers wanting both I think the reach that ION provides across the country, you know, reaching 97% of the country, and the depth of the markets that we have in local. And I think that's a really unique and go-to-market strategy that we are really working with our new chief revenue officer, working to put in place for 2024 and beyond, because we see that as a huge opportunity for us that maybe others in the marketplace aren't able to quite pull off.
Don
Dan, thanks for the question on Tableau. In the fourth quarter, we'll continue to leverage our own inventory across our local stations, national networks, digital media, alongside targeted paid media on linear TV, connected TV, social and digital platforms, and some work we're doing with influencers to drive sales of TV. of Tableau. The balance of the loss in the other segment is this work. We've essentially transitioned from the spend we had dedicated to, broadly speaking, the growth of the over-the-air marketplace to the spend that we are considering consistent with growing the over-the-air marketplace, except now through retail sales and through sales of Tableau. So this is really consistent with what we've talked about before. We expect to continue to track carefully the ARPU of Tableau. We're tracking the CAC or sort of the average customer acquisition costs and want to manage it effectively so that we're ensuring that we're doing activities here that are adding to the value of the company. And I expect to be able to share some of that information on future calls. Look, Tableau is not only consistent with our focus on growth of the over-the-air marketplace, it also is consistent with growth that we expect in the connected TV marketplace. And I would say, you know, for people who don't quite understand how it works, definitely visit TableauTV.com, and I'm happy to provide sell-siders with the full package, antenna plus Tableau if you can't afford the $99.00.
Operator
Thank you. And next, we're going to the line for Nick Zagler from Stevens. Please go ahead.
Nick Zagler
Hey, guys. I got a few here. First, just a high-level one. You kind of touched on it in the call, but just wanted to see if you could expand on the commentary regarding your thoughts on Disney Plus streaming service accessibility via the charter subscription. Just specifically, do you expect and do you think that we're entering a time where MVPDs and streaming services are going to collectively pivot their model such that it's accessible via a distributor, the streaming services, that is. And would this be a potential catalyst for stabilization across MVPDs in what seems to be in the face of what is accelerating churn, I guess, across distributors in this last quarter?
Don
Yeah, Nick, I mean, I think you're exactly right. Ultimately, first of all, the price of all of the streaming services alone and a la carte has gone up so much that we've essentially built a new, more expensive bundle. And so the pay TV ecosystem will absolutely benefit from bundling in SVOD services with the pay TV subscription. So we think... that the resolution of the charter Disney blackout validates the future of the retrans ecosystem, right? So their agreement showed us, first of all, that broadcast station content was still the most watched and most valuable content for distributors, and the power of the linear cable platform was obviously clearly visible in Disney's willingness to bundle in Disney+, which we believe will slow cord cutting and provide that stabilization you referenced. One thing I also want to add in You know, the fact that Charter was able to successfully drop Disney's lower-viewed cable nets frees up dollars in general to be redirected to the more valuable programming. Like, we've for a long time been calling for a rationalization of the cable lineup, and we think Charter came out with a clear and compelling case for value, and bundling it together is going to make the pay TV ecosystem better for the consumer. and will hold it together, benefiting broadcasters. So given the results of the negotiation, I think broadcasters benefit.
Nick Zagler
Very helpful. And then just a question on the network side, just expanding on the previous one. Just with regards to the upfront weakness that you talked about, definitely hearing that across the board. But I'm wondering if this is just a reflection of advertisers looking for more flexibility. And effectively, they're unwilling to commit to that upfront as they have been in years past. And therefore, you have less visibility, which is, you know, leading to your guide. And so my question is, you know, given that, are you guiding because of the less visibility that you have there? And then if the scatter market demand materializes, that would be the catalyst to fill it and then, you know, potentially generate upside versus what you're guiding for that line item. And then just thinking about 2024 and how we should think about networks for 2024, what would you think on modeling out the potential continuation of this trend that you're guiding right now? Just thoughts on how we should think about modeling out 2024 given how you're thinking about fourth quarter.
Jason
I think you're absolutely right. The less visibility phenomenon has really probably for the last several quarters been an issue and probably led to a little bit more conservatism, certainly in our guide for Q2 and Q3. I would say that certainly that lack of visibility continues. They're writing dollars later and later. Certainly, the weaker upfront, industry-wide weaker upfront, does in some ways give you an opportunity to write more in scatter. As I said, we see pretty big premiums from a CPM perspective in scatter versus our upfront dollars that are committed. And so if advertisers want that flexibility, they're going to pay for that flexibility with higher rates from a scatter perspective, which we're happy to do. So I think with our guide being down in the 10% range, if you back out what we've talked about in terms of the sunsetting of our lower margin CTV product, we would be closer to the, you know, the 8% range. So, I think we, you know, we're watching the marketplace carefully. We're, you know, being very diligent in writing the highest CPM that we can, whether that's in scatter or DR, if certain categories get hot.
Jason
And, Nick, I think in regards to your 2024 question, Jason, you know, I think because of that uncertainty that Lisa referenced, you know, it's really too early for us to really comment on 2024. Certainly, when we get to the February call, I think we'll be in a much better position to give you some insight into how we see the year shaping out.
Nick Zagler
Great. Thanks so much. Much appreciated.
Operator
Thank you. And next, we go on to the line for Michael Katynski, Noble Capital Markets. Please go ahead.
Michael Katynski
Thank you, and thank you for taking the questions. Nice quarter. Adam, thanks for providing more color on your sports rights strategy. I think it's amazing that The few that you already have so far is having such a meaningful impact on the total company revenues. A question on that, if you can provide, what are your margin assumptions as you enter these sports rights arrangements? Are they different from the local strategy versus your national platforms? And I kind of think that this would be helpful for investors to understand that because many broadcasters have historically viewed sports rights in some instances, as a loss leader to drive advertising and ratings. And I think it would be helpful just to kind of lay out your strategy for getting into sports rights.
Jason
Hey, Mike, this is Jason. I'll start and then Adam can add on. I would say when we look at the sports rights opportunities, We're not giving any specifics on individual deal margins. What I can tell you for is that we model these out. We model them out to be profit positive year one and to create incremental value and cash flow for the company. There is a different calculation that goes into a local deal versus a national deal because the local deal, we're essentially starting from scratch and adding this on top versus on the national side. we're replacing something that already makes good money over on ION. And so the math works a little bit different. You have a higher hurdle rate you need to clear on the national side. But all the deals that we've modeled out thus far, we've modeled out to be profit-positive year one.
Don
Yeah, Mike, let me just be really clear. With our strategy, sports is not a loss leader. We don't think there's a reason for sports to be a loss leader at this time, especially for a platform like ours with such significant reach in this fragmented marketplace. We think that the owners have recognized the value of the reach, and we think that the leagues are seeking partners that can provide that kind of reach. So in no scenario would we do a deal in which we would say that sports, over the life of a contract, is a loss leader for us. these deals have to stand on their own.
Michael Katynski
And thanks for the color. I think it's important that that's stressed out there. I appreciate that. That's all I have. Thank you.
Operator
Thanks, Mike.
Michael Katynski
Thank you.
Operator
And our last question, I'll go to the line for Craig Huber, Huber Research Partners. Please go ahead.
Craig Huber
Great. Thank you. Good morning. I thought it was interesting. You guys obviously talked about a 4% lift. to core advertising for your TV stations in the fourth quarter. I just want to make sure you're pretty happy with the profitability that you're going to get off those two NHL deals you have here. It's all incremental. And I'm bringing that up because you're talking about costs in the fourth quarter for TV up mid-single digits. So maybe, Jason, maybe just walk me through why is costs in TV stations going to be up mid-single digits in the fourth quarter year over year?
Jason
Yeah, so there are a handful of things going there, and two of my reference in the script, one being some of the costs for some of our frontline reporters and some compensation adjustments we did there earlier in the year and seeing that impact year over year. We also do have the costs starting to roll in for sports. What I would say is my comment earlier where we model these profit positive for the season, season one, there is some timing throughout the year. So when you're launching a new sports franchise, there's a lot of marketing initially to help viewers in that audience find where the product is. And so customer acquisition early on. We are not looking at sports as a, what is it happening in Q4? We're looking across season one. So from Q4 through Q1 of next year, these are profitable enterprises. And I would also reference in the case of the Coyote specifically, we announced that deal eight days before we launched it. And so from a sales perspective, that's one where the revenue is going to be more back-end loaded. as we work to go ahead and really get out in the local marketplace in Arizona and sell that franchise. So there is some timing there. And there are just some other costs, too, in the fourth quarter outside of sports. And the quarter item I mentioned, that just are up a bit in Q4 as well. So it's not just one thing. It's not just sports. It's a variety of things. And so I wouldn't take that as – I wouldn't take what – You're seeing Q4 as a trend.
Craig Huber
Okay. I mean, obviously, the extra 4% lift on the core advertising side is called another $6 million to $7 million of added revenue. You're saying costs, though, up mid-single digits take the midpoint of that 5%. It's about 14 million extra costs. You're saying it's a lot more than just sports costs. It's bumping that up, even though the year ago order did have some political-related costs in there. I'm assuming that's right. Correct.
Jason
There really would be, I mean, political is high margin, almost no cost, and so there wouldn't have really been any material political costs in the fourth quarter last year, so it's as other items I mentioned.
Craig Huber
Okay. I appreciate that. Adam, on the ATSC 3.0 side of things, can you maybe just update us on what percent of the households are in your markets have that signal and what do you think it'll be at the end of say next year please?
Don
What percent of the markets?
Craig Huber
Of your, sorry, of your markets, the households, what percent of ATSC 3.0 signal being broadcast to them? And where do you think that percentage will be end of next year? What's your goal there please?
Don
Craig, I can get that to you later this afternoon. It's not necessarily a Scripps goal. It's all ultimately done market by market with the rest of the industry because a station doesn't flip to 3.0 on its own. We can get you an up-to-date version of what the industry's transition looks like thus far and about where we think it's going by next year.
Craig Huber
Okay, and then a nitpick question. How much was auto up in the quarter here that we just finished? I know you said 10% up, I think, for October, but is that similar? Yes. last quarter?
Jason
Actually, auto was up 14% in Q3, which was really strong. And as I said, we're seeing some continued increases certainly in October. So we expect really to end the year in upward territory.
Jason
It was 18% of our core in the quarter, which is probably the highest percent it's been in quite some time.
Craig Huber
And Mike, that's my last question. On TV stations in the third quarter, can you just break out national core advertising trend there versus the local? I mean, how much worse was national? 3Q.
Jason
The local, national breakdown in Q. I would say in 3Q, there was not a material difference between the year-over-year change in local and national. Certainly, there had been earlier in the year, but in 3Q, I would say they were roughly in line with each other in terms of the year-over-year decline.
Craig Huber
Okay, great. Last question, please. Retrans, I do have one more. Retrans subs, you've been saying in recent quarters, down mid-single digits year over year. What was it in the third quarter, please?
Jason
It continues to be down in that mid-single digit range on a trailing 12-month basis.
Craig Huber
Is it at the high end? I mean, is it changing much variability there? That's obviously been a concern of investors.
Jason
I would say we did not see material change in it from what we communicated last quarter to this quarter.
Craig Huber
Okay, great. Thanks a lot.
Operator
Thank you. And there are no more questions in queue. You may continue.
Carolyn Michelli
Thank you very much, Don. Thanks, everyone, for joining us today.
Operator
And that does conclude our conference for today. Thank you for your participation and for using AT&T Conference and Service. You may now disconnect.
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