Discovery-Scripps merger will control 20% of the US's ad-supported Pay TV audience
Discovery is betting to up its advertising revenue with its latest acquisition of Scripps Network Interactive with the latter having a coveted group of advertisers
At a time when viewers are migrating to streaming video and mobile screens in the US, Discovery took a bold move to acquire Scripps Networks Interactive cable programming company in a deal valued at $14.6 billion in cash, stock and debt. With this deal the former (who has predominantly a male skewed audience) will have access to all female viewers that Scripps Networks leverages on with its popular lifestyle channels including HGTV, Food Network, Travel Channel and Cooking Channel once the pact closes in 2018.
Most importantly the viewers of Food Network and Travel Channel are reportedly valued by the advertisers. Scripps has about twice as many female viewers as male in the 18 to 34 age range. This means that Discovery will now command a greater leverage in talks with both advertisers and cable and satellite distributors.
Once the deal makes through, this union of two programming companies will control about 20 per cent of the ad-supported pay-television audience in the United States and have significant growth prospects for Scripps overseas through Discovery’s network of international channels. From value perspective it is reported to stand at more than $25 billion. According to media reports, the new line-up would improve Discovery’s leverage with pay-TV distributors and enable the company to offer a streaming service directly to consumers, made up of channels owned by Discovery and Scripps.
The transaction — made up of $63 a share in cash and $27 a share in Discovery common stock — reportedly includes the assumption of $2.7 billion of Scripps’s net debt.
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The proposed tie-up comes after two failed attempts over the last decade for the two companies to combine. This time, however, Discovery and Scripps were motivated to merge because it has become increasingly difficult for medium-sized media firms to stand on their own amid rapid consolidation in the industry.
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