After bidding against Viacom for Scripps Networks Interactive, Discovery Communications has emerged victorious in acquiring the lifestyle cable network for $14.6 billion in stock and cash, the company revealed Monday. [Read the release.]
Viacom backed out of a bidding war late last week with the rival network after making an all-cash offer that reportedly fell short of Discovery’s proposal.
Some Wall Street analysts speculated that acquiring Scripps would add to Viacom’s debt at a time when the company is already under pressure to improve television ratings and ad revenue.
And Scripps, the owner of popular lifestyle networks HGTV, Food Network, Travel Channel and DIY, went for a pricey $90 per share. As a combined company, Discovery and Scripps now claim access to 20% of ad-supported, pay-TV viewership in the US.
“We believe that by coming together with Scripps, we will create a stronger, more flexible and more dynamic media company,” said David Zaslav, president and CEO of Discovery, in a statement announcing the deal.
The combined companies have “a global content engine that can be fully optimized and monetized across our combined networks, products and services in every country around the world,” he added.
The Discovery-Scripps marriage isn’t the cable couple’s first courtship. In 2014, the two media companies had considered a merger until the Scripps family reportedly called things off.
Yet, the evolution of the pay-TV business – characterized by a migration from expensive, all-in-one cable packages to more affordable skinny bundles and vMVPDs – has led to a land grab for premium programming.
Think of Discovery and Scripps’ union as a power-in-numbers play.
Discovery sees Scripps as a bargaining chip for negotiating more competitive rates in cable distribution agreements with MVPDs such as Comcast and Charter – each of which has built a streaming service and skinny bundle.
Although Discovery owns big-name networks like Animal Planet and TLC, negotiating one’s way into a cable provider’s skinny bundle isn’t simple.
Monetizing premium programming is also now a lot more competitive as Netflix, Amazon and Apple each push deeper into original content.
But Scripps was so bullish on its brand’s programming – which caters to lifestyle, home decor, travel and cooking enthusiasts – that it discontinued a content distribution deal with Netflix in December.
Discovery and Scripps also share a lot in common with their content creation and distribution goals.
Being indie programmers, neither network enjoys the same luxury as NBCUniversal’s network portfolio, for instance, which is backed by cable giant Comcast and owns its own distribution pipes.
So Discovery has made a big push to invest in digital content, such as the $100 million it paid for a 40% stake in Group Nine Media, the publisher of Thrillist, NowThis and The Dodo.
In turn, Scripps’ brands benefit from Discovery’s international programming and distribution footprint.
On the flip side, Scripps Networks Interactive is known as an early mover on the digital platform front.
It was a beta partner for Snapchat Discover and will develop HGTV and Food Network programming for the new short-form video format Snapchat Shows.
So Scripps’ relationships with big platform companies gives Discovery a lot more digital clout. As a combined company, Discovery claims it delivers 7 billion short-form video streams monthly.
“It wasn’t long ago that as a TV network, your product was your programming, but agencies and clients are looking for more,” said Ben Price, president of advertising sales for Discovery Communications, during Discovery’s 2017 TV upfront presentation. “We can now push that content through linear, digital and social through channels like Snapchat. … And no team sells in a silo.”
This post was syndicated from Ad Exchanger.