For a corporate mega-merger, Discovery and Scripps are a perfect fit. Scripps was long a target for consolidation, and Discovery had the right numbers at the right time. Bingo.
But now, six weeks after the big announcement, the bingo game is a memory, and as some folks survey the changing media environment, they might feel, well, naked and afraid.
For starters, this kind of consolidation is seen by some as another portent of doom. Industry analysts are openly worried about the long-term prospects for cable networks. According to Reuters, five of the largest U.S. pay TV providers posted subscriber losses during the second quarter of this year. Employees are worried about layoffs, and the production community is wondering what it means for the program makers.
A similar trend has been taking place in the broadcast world, where TV and radio stations are now bundled into a few ultra-providers. Consolidation means that, in some markets, one owner can control as many as eight radio stations. Is this where cable networks are headed?
While mergers may be inevitable in a digital age, some TV producers fear that they may find it harder to make favorable deals for their shows. By definition, with more networks under one umbrella, there’s less competition. Companies that once battled for advertising and affiliate revenue are now joined at the hip.
In the business affairs office, there will be more transparency of costs among those networks that were once on opposite sides. As a result, the squeeze could be passed along to the program producers, who are already feeling pressured to work for low margins and few if any back-end rights.
Even with the amalgamation of several independent producers by bigger companies, a visit to the next Realscreen Summit will be visual proof that most production companies are small or medium-sized, working hard to pitch their shows to any network that will listen. As for those web-based distributors like Netflix, Amazon, Hulu and, now, Apple, we already know they operate on a different frequency. At present, there are few signs that they are picking up the slack in the non-fiction production community.
Consolidation can be difficult within the merged companies as well. I’ve seen several of these takeovers and inevitably two cultures are fused into one, which can be an uncomfortable experience. In the interest of achieving “cost synergies” or “efficiencies,” it can sometimes involve layoffs.
But it is possible for both sides to win. In this case, it’s not like the Scripps Networks aren’t successful. Their slow and steady, tortoise-like approach to growth in the marketplace has kept their lead turtles, HGTV and Food, in the top 10 or 15 networks for many years. Scripps favors long-running franchises with formulas that appeal to a loyal audience. Programming costs are relatively low, as dozens of episodes of formatted series like Chopped can be shot in the same location, while House Hunters has the benefit of multiple production companies. Because these and other series air so often, they can be commissioned by the boatload to build their inventory and keep the repeat factor low.
The Discovery networks are models of success as well, just in a different way — relying on a hit-driven strategy led by reality shows or docuseries like Naked and Afraid and Deadliest Catch. They play at a high level of risk and reward. Those programs generally cost more and don’t repeat as well, so the networks need to keep feeding the beast with new shows, often with higher price tags. (Full disclosure: I was EVP and GM for Discovery’s Animal Planet from 2001-2003.)
Clearly, both sides can learn from each other. But will they?
Perhaps the biggest movements within merger mania — or at least the most interesting area to watch — will be seen in the companies’ less visible networks. For instance, Travel Channel, a strong brand but not as successful from a ratings perspective as Food or HGTV, is facing yet another management shift. Once in the Discovery empire (1997-2007), Travel has shuttled from owner to owner in its 30-year existence, with Scripps paying $900 million for it in 2009, and now it will be back in the Discovery fold.
Practically as soon as news of the merger became official, speculation arose that the fate of both companies’ smaller, digital networks would now be at stake. Destination America, Discovery Life, Science, Discovery Family, American Heroes Channel, DIY, Cooking Channel, Great American Country… You get the picture. Even in the absence of merger mania, observers have been openly predicting that networks with lower distribution and minimal ratings will eventually close up shop. (See Esquire, Pivot.) Already, original programming on many of these “digi-nets” is limited, with increasing reliance on repeating shows off the shelves of their parent networks. Both Scripps’ Ken Lowe and Discovery’s David Zaslav have addressed the possibility that some brands might be, in Lowe’s words, “better positioned for different platforms.” With all that in mind, be prepared to say good-bye to a network or two.
OK, so maybe media consolidation is less like a high-stakes bingo game, and more like global warming. We may have thought that those rising temperatures were an aberration, but now we know it’s real (or at least most people do). Similarly, we may have thought cord-cutting and the growth of the Internet wouldn’t affect the cable business, but now we know. And Discovery and Scripps are adapting — the only way they know how — to meet the future of our business.
Michael Cascio is president and CEO of M&C Media LLC, where he advises selected media and production partners, and produces documentaries. He is also a guest speaker and writer, whose recent article for the Sunday New York Times revealed how his experience as a backstage janitor prepared him for a career in television. At National Geographic, A&E, Animal Planet, and MSNBC, Cascio has won four Emmys, two Oscar nominations and a “Producer of the Year” award.