Rumors about a Discovery Communications and Scripps Networks Interactive merger have been confirmed. Discovery will scoop up Scripps in a cash-and-stock deal valued at $14.6 billion, the media company announced Monday.
By joining forces, the combined company says it will have a strong range of popular TV networks to offer viewers. Discovery also reports the move will make it one of the top five networks for female viewers, with a 20 percent share of women watching its primetime programming.
Discovery already owns its namesake channel, along with TLC and Animal Planet, while Scripps will add favorites like HGTV, Food Network, and Travel Channel to the portfolio.
With some of the top-rated women’s networks on its roster, Discovery may be in a better position to offer a skinny bundle to viewers who are only interested in select channels.
“This is an exciting new chapter for Discovery. Scripps is one of the best run media companies in the world with terrific assets, strong brands, and popular talent and formats,” Discovery President and CEO David Zaslav comments. “Our business is about great storytelling, authentic characters, and passionate super fans.”
“We believe that by coming together with Scripps, we will create a stronger, more flexible, and more dynamic media company with 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 adds.
Together, the Discovery says it will create about 8,000 hours of original content a year, and house 300,000 hours of library programming, along with producing a combined 7 billion short-form video streams monthly.
As part of the deal Discovery will assume Scripps’ net debt of approximately $2.7 billion. The companies estimate the deal will create cost savings of about $350 million.
The acquisition, which is still subject to approval from shareholders of both companies, is expected to close by the beginning of 2018.
However, the deal’s ultimate payoff is uncertain for some analysts. Todd Jeunger, vice president and senior analyst at of U.S. media at Sanford C. Bernstein, presented at the Independent Show in Indianapolis, Ind., last week saying that consumers are watching less conventional TV and more on-demand.
This is certainly not a new idea, but Jeunger notes viewer migration has just begun, and says it’s a trend that will eventually spread globally and be accelerated by the next recession.
Jeunger concedes that content is king, but contends that TV networks aren’t “content,” they are “aggregators of content.”
TV networks have been a “phenomenal” business for over 50 years, Jeunger adds, and still on average earn 40 percent operating margins and 30 to 40 percent return on investment capital. But these impressive returns, are not sustainable, according to the analyst.
In Monday’s second quarter earnings report, Discovery Communications says revenues increased 2 percent year over year to $1.75 billion. The company notes 2 percent growth in its U.S. Networks division and 3 percent growth in its International Networks business were offset by a 4 percent decline in Education and Other. Net income and earnings per share dropped 8 percent to $374 million and 3 percent to 64 cents, respectively.
Top Image Caption/Credit: This Sept. 1, 2010 file photo shows the Discovery Communications networks headquarters building sign in Silver Spring, Md. Discovery Communications is buying media company Scripps Networks Interactive Inc. in a cash-and-stock deal worth $14.6 billion that will help it reach more female viewers, announced Monday, July 31, 2017. (AP Photo/Manuel Balce Ceneta)