Keith J. Kelly

Keith J. Kelly

Media

Hearst’s minority stake in ESPN brings big profits

Hearst CEO Steve Swartz, who took over from Frank Bennack in June, should be the nation’s biggest sports fan.

On Thursday, he released the first “state of the company” letter since the hand-off, and it seems like full steam ahead to record profits.

And while he did not play it up, its minority stake in ESPN appears to have played an oversized role in reaching a new all-time high in profit and revenue.

“Hearst achieved record revenue and profit in 2013, and recorded its fourth consecutive year of revenue and profit growth since the recession of 2008 to 2009,” said Swartz.

Though he didn’t dwell on it, ESPN — 20 percent owned by Hearst and 80 percent owned by Walt Disney — appears to be generating the lion’s share of Hearst’s profit in 2013.

One source estimated that the ESPN venture cranked out around half of Hearst’s profits in the latest fiscal year.

The letter to Hearst’s employees was free of any hard numbers, but sources estimate the company approached $10 billion in sales last year — from far-flung operations that includes cable TV, magazines, information businesses and health care data.

Disney does not precisely break out ESPN either, but Forbes last year pegged ESPN’s 2012 revenues at $10.3 billion. With modest single-digit increases in 2013 reported by Disney, the total probably rose to $11 billion last year — with Hearst’s share at $2.2 billion.

Forbes also estimated ESPN had $3.9 billion in profits last year. With a slight uptick this year, it would bring Hearst’s haul from ESPN to just over $800 million.

Elsewhere, Swartz, not surprisingly, said that the company is planning a greater push into digital in the coming year.

“Today roughly 60 percent of our revenue comes from sources other than advertising revenue, including carriage fees for our cable networks and television stations, business-to-business and consumer subscription revenues and marketing services fees,” he said.

He also called out three of the executives it picked up from outside: ex-Say Media president Troy Young, who is president of digital, Todd Haskell, the ex-New York Times executive who is chief revenue officer, and Mike Smith, the former head of Forbes.com who is “marrying technology with advertising sales.”

Many see Smith as the point man for the push toward “native advertising,” which allows long form advertiser-sponsored content to mimic the independent editor-generated content on websites.

Swartz also said that “more than 20 percent of our revenue is derived from outside the US.“ He did say that Cosmopolitan and Elle will be the first titles in the company’s stable of magazines to unveil new Web overhauls this year.