Discovery Communications has agreed to shell out $14.6 billion in both cash and stock for Scripps Networks Interactive, creating a cable channel powerhouse that could be better equipped to thrive in a rapidly changing pay-TV world, the two companies announced on Monday.
The combination joins some of cable television’s most popular channels, including Discovery’s namesake network, Science, OWN and TLC with Scripps’ HGTV, Travel Channel and Food Network, among others. And it’s another big deal in a string of major transactions, headlined by AT&T’s $85 billion purchase of Time Warner, as companies stake claims on premium content in a shifting and increasingly competitive distribution landscape.
“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. 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,” Discovery Communications CEO David Zaslav said.
Scripps, with a strong channel lineup and its crown jewel, HGTV – one of the highest-rated cable channels, home of “Fixer Upper,” “Flip or Flop” and “Property Brothers” — has thrived amidst challenging time in pay-TV.
ESPN, once Disney’s cash cow and still the largest contributor to its profits, is a symbol of that, as the sports network has shed 12 million subscribers in six years as Americans increasingly opt for smaller cable packages, over-the-top slimmer streaming packages, or cut the cord entirely. That has put pressure on content owners, as marginal programming and channels are having a tough time finding their place in this new world — and it’s also caused strong brands, like Scripps’ HGTV, to be even more valuable.
That’s also made Scripps a logical acquisition target of other network owners like Discovery, as controlling a larger suite of popular properties can help with favorable carriage deals with traditional — and new — distributors.
“Through the passion and dedication of our incredible employees, and with the support of the Scripps family, we have built a lifestyle content company that touches the lives of consumers every single day,” Scripps Networks Interactive CEO Kenneth W. Lowe said.
Lowe continued: “This agreement with Discovery presents an unmatched opportunity for Scripps to grow its leading lifestyle brands across the world and on new and emerging channels including short-form, direct-to-consumer and streaming platforms.”
Viacom also pursued a deal for Scripps, but dropped out of the running earlier this week. Its networks, MTV and Comedy Central in particular, have been challenged by the younger demographics they’ve historically relied on watching less and less traditional linear television. Adding Scripps’ popular — and less youth-dependent — channels would have added more balance and heft to its family of networks.
Scripps may be a more natural fit with Discovery anyway, as channels like Science, TLC and Animal are similar thematically with Food Network, Travel Channel and HGTV. The combined company may also be able to offer its own over-the-top bundle of just those channels, or at least be in a stronger negotiating position with other distribution partners.
The deal still has to be approved by both companies shareholders, with the Scripps family controlling about 92 percent of its voting shares. It is expected to close by early 2018.