Discovery to acquire Scripps
$11.9B cable deal could boost channel access
Discovery Communications reached a deal to acquire Scripps Networks for about $11.9 billion in a major consolidation of cable TV networks amid a profound shift in how viewers consume entertainment.
The deal will give the combined company control of about one-fifth of all advertising-supported paid TV in the U.S. And the merger also positions the combined company’s channels for improved inclusion on traditional pay-TV networks, as well as burgeoning online TV offerings such as DirecTV Now and Sling TV. Discovery’s networks include the Discovery Channel, TLC, Animal Planet and the Oprah Winfrey Network. Scripps’ lineup includes HGTV, The Food Network and Travel Channel.
Cable magnate John Malone, a major Discovery shareholder, and Scripps family stockholders backed the deal.
The tie-up follows a bidding war between Discovery and Viacom, owner of BET, Comedy Central, Nickelodeon and Paramount Pictures. Viacom reportedly dropped its bid for Scripps in early July after the price escalated.
Discovery and Scripps tout that, combined, they operate five of the top women’s networks in Discovery Channel, Investigation Discovery, TLC, Food Network and HGTV. Discovery “sees strong opportunities” to expand Food Network and HGTV viewer-
ship globally.
The company said it also hopes to bolster its short-form social media video offerings as the cable-TV industry grapples with cord-cutting viewers who are gradually migrating to alternative sources, such as Netflix and online outlets.
This marriage should result in U.S. consumers getting more ways to see Discovery and Scripps programming, even though much of the deal is focused on international growth.
With its larger portfolio of channels, Discovery can better bargain for its position on cable TV networks and Net-delivered TV packages such as DirecTV Now, Hulu, Sling TV, PlayStation Vue and YouTube TV.
Currently, Discovery only has channels on Sony’s PlayStation Vue and DirecTV Now, while Scripps has a presence on those as well as Sling TV and Hulu. Their portfolio of channels could also be packaged as an entertainment-only “skinny” bundle, sold directly to broadband homes and wireless customers.
“This transaction supports and accelerates Discovery’s pivot from a linear TV-only company to a leading content provider, across all screens and services around the world,” Discovery CEO David Zaslav said in a conference call discussing the deal.
Together, Discovery and Scripps make 8,000 hours of original programming per year across their 50 channels.
Combining Discovery with “Scripps’ world-class portfolio of high-quality, deeply-loved brands,” Zaslav said, will create “a new global leader in real-life entertainment.”
“We think this gives us a huge content engine,” Zaslav said. “We now have some of the most important quality brands with super fans here in the U.S. Any enter- tainment bundle we would be right in the sweet spot.”
In a volatile TV environment, the deal with Discovery improves Scripps’ position and gives the network “an unmatched opportunity to grow Scripps’ leading lifestyle brands like HGTV, Food Network and Travel Channel across the world and on new and emerging social and mobile platforms,” Scripps Chairman, President and CEO Ken Lowe said.
“Together, no doubt, we will be a more innovative enterprise,” Lowe said. “It really futureproofs our brands.”
Michale Nathanson, an analyst with Moffett Nathanson, was not so optimistic. Even though the deal makes sense in the current climate of consolidation in cable and media, “we don’t think this merger will fundamentally alter the long-term prospects of these companies,” he said in a note to investors Monday. He maintained a “sell” rating on Discovery shares and changed Scripps shares recommendation from “sell” to “neutral.”
Shares of Discovery fell 8% to close at $24.60 on Monday, while Scripps rose 0.6% to $87.41.