Discovery Communications' $14.6 billion acquisition of Scripps Networks Interactive, announced today, combines two of cable TV's bigger brands in an era where cord cutting has hit impacted all the major players across the board. The telcos are scrambling to offer live TV streaming bundles in an effort to shore up pay TV subscriber losses, while the networks that had once relied on pay TV distribution to reach viewers are now having to negotiate new packages with the streaming services like Sling TV, Hulu, Sony's Vue, YouTube TV and others.
This Discovery-Scripps tie-up means the company will be able to better negotiate with both advertisers and distributors going forward, as the new entity will become home to a much larger portfolio of channels. Discovery brings to the table networks like its flagship Discovery Channel as well as Animal Planet and TLC while Scripps offers top cable channels like HGTV, Cooking Channel, and Food Network.
The channels account for 13.2 percent of cable viewership but only 7 percent of monthly cable fees, reports The WSJ.
The combined company will have nearly 20 percent of ad-supported pay TV viewership in the U.S., and will become home to five of the top female networks in ad-supported pay TV with an over 20 percent of women who watch primetime TV in the U.S., the companies said. Nielsen's data cited by The WSJ, however, puts TLC, HGTV, Discovery ID, and Food Network at the top, along with Disney, as the most female-skewing cable channels across the top 20 networks in the U.S.
The ability to target female viewers will increase demand among advertisers, in turn increasing ad rates.
But the companies also tout their increased ability to craft short-form video for mobile and social consumption - a necessity in today's age where people are watching less traditional TV in favor of time spent online, which includes time spent viewing web videos. As noted in the official announcement, the new company will deliver 7 billion monthly short-form streams and will bring together Scripps' expertise in short-form with Discovery's Group Nine Media to craft more of these types of videos for social media.
The deal will also allow the companies to seek out new digital distribution partners for their content, they said, including on mobile, over-the-top, and direct-to-consumer offerings. Discovery said it would be able to bring Scripps channels to more overseas markets, as well.
And, though not announced today, the combined companies could choose to launch their own subscription TV service aimed at cord cutters.
The acquisition could also lead to further consolidation among on other players in the market, including Viacom which had also been in talks to acquire Scripps. Prior to this deal, Viacom, AMC and Discovery had also been eyeing an online TV service bundle that would be priced lower than competitors by not including sports.
On the pay TV side of things, the deal will make it more difficult for cable and satellite to drop the combined network's channels; but cord cutters may benefit, too, as it could increase the distribution of the Scripps and Discovery channels across internet TV services.
The combination is expected to create cost savings of $350 million, the companies also said.
The deal is expected to close next year, following regular and shareholder approval.