ITEM 1A . RISK FACTORS

A number of significant risk factors could materially affect our specific business operations and cause our performance to differ materially from any future results projected or implied by our prior statements. Based on the information currently known to us, we believe that the following information identifies the most significant risk factors affecting our company. The risks and uncertainties our Company faces, however, are not limited to those set forth in the risk factors described below.

Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

In addition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

If any of the following risks or uncertainties develops into actual events, these events could have a material effect on our business, financial condition or results of operations. In such case, the trading price of our common shares could decline.

Changes in public and consumer tastes and preferences could reduce demand for our services and reduce profitability of our businesses.

Each of our networks provides content and services whose success is primarily dependent upon acceptance by the public. We must consistently create and distribute offerings that appeal to the prevailing consumer tastes at any point in time. Audience preferences change frequently, and it is a challenge to anticipate what content will be successful at any point. Other factors, including the availability of alternative forms of entertainment and leisure time activities, general economic conditions and the growing competition for consumer discretionary spending may also affect the audience for our content and services. If our networks do not achieve sufficient consumer acceptance, revenues may decline and adversely affect our profitability.

If we are unable to maintain distribution agreements with cable and satellite distributors and telecommunications service providers (“Distributors”) at acceptable rates and terms, our revenues and profitability could be negatively affected.

We enter into multi-year contracts for our national television networks with Distributors. Our long-term distribution arrangements enable us to reach a large percentage of cable households across the United States. As these contracts expire, we must renew or renegotiate them. If we are unable to renew them on acceptable terms or at rates similar to those in other affiliate contracts, we may lose distribution rights and/or affiliate fee revenues.

These distribution agreements may also include “most favored nation” (“MFN”) clauses. Such clauses typically provide that, in the event we enter into an agreement with another Distributor on more favorable terms, those terms must be offered to the Distributor holding the MFN right, subject to certain exceptions and conditions. The MFN clauses within our distribution agreements are generally complex. Parties may interpret them differently and reach a conflicting view of compliance of that held by the Company, which, if proven correct, could have an adverse effect on our financial condition or results of operations.

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The loss of a significant affiliate arr angement on basic programming tiers could reduce distribution of our networks, thereby adversely affecting affiliate fee revenue, subjecting certain of our intangible assets to possible impairments and potentially impacting our ability to sell advertising or the rates we charge for such advertising.

Three of our networks that are carried on digital tiers are dependent upon the willingness of consumers to pay for such tiers, as well as our ability to negotiate favorable carriage agreements on widely accepted digital tiers.

Further consolidation among cable and satellite operators and telecommunications service providers could adversely affect our revenues, profitability and financial condition of our businesses. Consolidation among Distributors has given the largest cable and satellite television systems considerable leverage in their relationship with programmers. The two largest cable and the two largest satellite television system operators provide service to approximately 69 percent of U.S. households receiving cable or satellite television service today.

Continued consolidation within the industry could reduce the number of Distributors available to carry our programming, subject our affiliate fee revenue to greater volume discounts and further increase the negotiating leverage of the cable and satellite television system operators and telecommunications service providers which could have an adverse effect on our financial condition or results of operations.

Our networks face significant competitive pressures related to attracting consumers and advertisers.  Failure by us to maintain our competitive advantage may affect the profitability of our networks.

We face substantial competition from alternative providers of similar services. Our national television networks compete for viewers with other broadcast and national television networks and with home video products and internet usage, as well as with other programming providers for carriage of programming. Additionally, our national television networks compete for advertising revenues with a variety of other media alternatives, including other broadcast and national television networks, the internet, newspapers, radio stations and print media. Our websites compete for visitors and advertising dollars with other forms of media aimed at attracting similar audiences and, therefore, must provide popular content in order to maintain and increase site traffic. Competition may divert consumers from our services, which could reduce the profitability of our networks.

Changes in consumer behavior resulting from new technologies and distribution platforms may impact the performance of our networks.

We must adapt to advances in technologies and distribution platforms related to content transfer to ensure that our content remains desirable and widely available to our audiences. The ability to anticipate and take advantage of new and future sources of revenue from technological developments will affect our ability to continue to increase our revenue and expand our business. Additionally, we must adapt to the changing consumer behavior driven by advances in technology, such as video-on-demand, and devices, such as tablets and mobile, providing consumers the ability to view content from remote locations and enabling general preferences for user-generated and interactive content. Changes of these types may impact our traditional distribution methods for our content. If we cannot ensure that our distribution methods and content allow us to reach our target audiences, there could be a negative effect on our business.

Our business is subject to risks of adverse changes in laws and regulations.

Our programming services and the distributors of our programming, including cable and satellite operators, telecommunication providers and internet companies, are regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC, as well as by state and local governments. The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect our operations. For example, legislators and regulators continue to consider rules that would effectively require cable television operators to offer all programming on an à la carte basis, which would allow viewers to subscribe to individual networks rather than a package of networks, and/or require programmers to sell channels to distributors on an à la carte basis. Certain cable television operators and other distributors have already introduced tiers, or more targeted network packages, to their customers that may or may not include some or all of our networks. The unbundling of programming could reduce distribution of certain of our networks, thereby leading to reduced viewership and increased marketing expenses and affecting our ability to compete for or attract the same level of advertising dollars or distribution fees.

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Changes in economic conditions in the United Stat es, the regional economies in which we operate or in specific industry sectors could adversely affect the profitability of our businesses.

Approximately 61.3 percent of our consolidated revenues in 2015 were derived from marketing and advertising spending in the United States and approximately 6.0 percent of our consolidated revenues in 2015 were derived from marketing and advertising spending in Poland including revenues from our advertising representation business in Poland. Advertising and marketing spending is sensitive to economic conditions and tends to decline in recessionary periods. A global or regional economic decline could reduce advertising prices and volume, resulting in a decrease in our advertising revenues.

The loss of key talent or inability to identify and locate new and engaging talent could disrupt our business and adversely affect the profitability of our businesses.

Our business depends upon the continued efforts, abilities and expertise of our corporate and divisional executive teams and entertainment personalities. We employ or contract with entertainment personalities who may have loyal audiences. These individuals are important to audience endorsement of our programs and other content. There can be no assurance that these individuals will remain with us or retain their current audiences. If we fail to retain key individuals or if our entertainment personalities lose their current audience base, our operations could be adversely affected.

We are subject to risks related to our international operations.

We have operations and investments in a number of foreign jurisdictions. The inherent economic risks of doing business in international markets that are beyond our control include, among other things (i) changes in the economic environment, (ii) changes in local regulatory requirements, including restrictions on content, imposition of local content quotas and restrictions on foreign ownership, (iii) differing degrees of protection for intellectual property and varying attitudes towards the piracy of intellectual property, (iv) exchange controls, tariffs and other trade barriers, (v) foreign taxation, (vi) anti-corruption laws and regulations such as the Foreign Corrupt Practices Act and the U.K. Bribery Act that impose stringent requirements on how we conduct our foreign operations and changes in these laws and regulations, (vii) foreign privacy and data protection laws and regulation and changes in these laws, (viii) shifting consumer preferences regarding the viewing of video programming, (ix) corruption, (x) confiscation, (xi) currency inconvertibility, (xii) nationalization of assets and (xiii), in some markets, increased risk of economic and geopolitical instability. Additionally, the local currencies in which our international operations conduct their business could change in value relative to the U.S. dollar, exposing our results to exchange rate fluctuations.

Events or developments related to these and other risks associated with international trade could adversely affect our revenues from non-U.S. sources, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Furthermore, some foreign markets where we and our partners operate may be more adversely affected by current economic conditions than the U.S. We also may incur substantial expense as a result of changes, including the imposition of new restrictions, in the existing economic or political environment in the regions where we do business. Acts of terrorism, hostilities, or financial, political, economic or other uncertainties could lead to a reduction in revenue or loss of investment, which could adversely affect our results of operations.

Global economic conditions may have an adverse effect on our business.

Our business is significantly affected by prevailing economic conditions and by disruptions to financial markets. We derive substantial revenues from advertisers, and these expenditures are sensitive to general economic conditions and consumer buying patterns. Financial instability or a general decline in economic conditions in the U.S. and other countries where our networks are distributed could adversely affect advertising rates and volume, resulting in a decrease in our advertising revenues.

Decreases in U.S. and consumer discretionary spending in other countries where our networks are distributed may affect cable television and other video service subscriptions, in particular with respect to digital service tiers on which certain of our programming networks are carried. This could lead to a decrease in the number of subscribers receiving our programming from multi-channel video programming distributors, which could have a negative impact on our viewing subscribers and affiliation fee revenues. Similarly, a decrease in viewing subscribers would also have a negative impact on the number of viewers actually watching the programs on our programming networks, which could also impact the rates we are able to charge advertisers.

Economic conditions affect a number of aspects of our businesses worldwide and impact the businesses of our partners who purchase advertising on our networks and reduce their spending on advertising. Economic conditions can also negatively affect the ability of those with whom we do business to satisfy their obligations to us. The general worsening of current global economic conditions could

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adversely affect our business, financial condition or results of operations, and the worsening of economic conditions in certain parts of the world , specifically, could impact the expansion and success of our businesses in such areas.

We assumed significant debt in connection with our acquisition of TVN, and we may incur additional debt in the future. Such debt could adversely affect our business, financial condition or results of operations.

In connection with our acquisition of TVN and the related financing, we incurred additional debt, including the assumption of existing TVN debt (see Note 4 – Acquisitions ). We currently depend on cash on hand and cash flows from operations to make scheduled principal and cash interest payments on our debt. We expect to be able to meet the estimated principal and interest payments on our debt through a combination of cash on hand, expected cash flows from operations and the use of our revolving credit facility. Additionally, we may incur further debt in the future for other corporate purposes.

The potentially significant negative consequences on our financial condition and results of operations that could result from our substantial debt include:

Our operations outside the United States may be adversely affected by the operation of laws in those jurisdictions.

Our operations in non-U.S. jurisdictions are in many cases subject to the laws of the jurisdictions in which they operate rather than U.S. law. Laws in some jurisdictions differ in significant respects from those in the U.S., and these differences can affect our ability to react to changes in our business and our rights or ability to enforce rights may be different than would be expected under U.S. law.    

Moreover, enforcement of laws in some overseas jurisdictions can be inconsistent and unpredictable, which can affect both our ability to enforce our rights and to undertake activities that we believe are beneficial to our business. In addition, the business and political climate in some jurisdictions may encourage corruption, which could reduce our ability to compete successfully in those jurisdictions while remaining in compliance with local laws or United States anti-corruption laws applicable to our businesses. As a result, our ability to generate revenue and our expenses in non-U.S. jurisdictions may differ from what would be expected if U.S. law governed these operations.

We face cybersecurity and similar risks, which could result in the disclosure of confidential information, disruption of our programming services, damage to our brands and reputation, legal exposure and financial losses

Our online, mobile and app offerings, as well as our internal systems, involve the storage and transmission of our and our users’ proprietary information, and we and our partners rely on various technology systems in connection with the production and distribution of our programming. Although we monitor our security measures regularly, they may be breached due to employee error, computer malware, viruses, hacking and phishing attacks or otherwise. Additionally, outside parties may attempt to fraudulently

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induce employees or users to disclose sensitive or confidential information in order to gain access to our data or our users’ data. Because t he techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preven tative measures. Any such breach or unauthorized access could result in a loss of our or our users’ proprietary information, a disruption of our services or a reduction of the revenues we are able to generate from such services, damage to our brands and re putation, a loss of confidence in the security of our offerings and services and significant legal and financial exposure, each of which could potentially have an adverse effect on our business.

If we are unable to successfully integrate key acquisitions, our business results could be negatively impacted.

We may continue to grow through acquisitions in certain markets. Acquisitions involve risks, including difficulties in integrating acquired operations, diversions of management resources, debt incurred in financing such acquisitions and other unanticipated problems and liabilities. If we are unable to mitigate these risks, the integration and operations of an acquired business could be adversely impacted. Similarly, declines in business performance and the related effect on the fair values of goodwill and other intangible assets could trigger impairment charges, which could materially affect our reported net earnings.

Financial market conditions may impede access to or increase the cost of financing our operations and investments.

The on-going changes in U.S. and global credit and equity markets may make it more difficult for many businesses to obtain financing on acceptable terms. In addition, our borrowing costs can be affected by short and long-term debt ratings assigned by independent rating agencies which are based, in significant part, on our performance as measured by credit metrics such as interest coverage and leverage ratios. A decrease in these ratings could increase our cost of borrowing or make it more difficult for us to obtain future financing.

Foreign exchange rate fluctuations may adversely affect our operating results and financial conditions.

We have significant operations in a number of foreign jurisdictions and certain of our operations are conducted and certain of our debt obligations are denominated in foreign currencies. The value of these currencies fluctuates relative to the U.S. dollar. As we have expanded our international operations, our exposure to exchange rate fluctuations has increased. As a result, we are exposed to exchange rate fluctuations, which could have an adverse effect on our results of operations and net asset balances. There is no assurance that downward trending currencies will rebound or that stable currencies will remain unchanged in any period or for any specific market.

Events that reflect negatively on our brands could diminish our brand reputation.

Any event that could negatively impact our brands and brand reputation could have a material impact to our consolidated earnings.

Variability in our earnings may result in disparate tax impacts.

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates.

Loss of satellite signal or transmission may affect profitability of our business.

Our revenues rely on our ability to stay on air to broadcast our content to a wide variety of audiences.  Any outages in delivery, whether due to satellite or fiber transmission disruption, could impede our ability to delivery audience impressions and result in additional liabilities and reduced revenue streams.

The concentrated ownership of our Common Voting Shares limits the ability of the holders of our class A common shares to influence corporate matters.

We have two classes of common stock: common voting shares and class A common shares. Holders of class A common shares are entitled to elect the greater of three or one-third of the members of the Board of Directors (the “Board”), but are not permitted to vote on any other matters except as required by Ohio law. Holders of common voting shares are entitled to elect the remainder of the Board and to vote on all other matters. Approximately 92 percent of the common voting shares are subject to the Amended and Restated Scripps Family Agreement (the “Scripps Family Agreement”). The provisions of the Scripps Family Agreement fully govern the transfer and voting of common voting shares subject to the agreement. As a result, the holders of the common voting shares subject to

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the Scripps Family Agreement currently have the ability to elect two-thirds of the Board and to direct the outcome of any matter that does not re quire a vote of the class A common shares. Additionally, some of the signatories to the Scripps Family Agreement are also directors of the Company, which could create conflicts of interest in certain situations. This concentrated control limits the ability of the holders of class A common shares to influence corporate matters and could potentially enable the Company to take actions that these shareholders would not view as beneficial. As a result, the market price of our class A common shares could be adver sely affected.