Discovery Communications is looking to build a “global content engine” with the acquisition of Scripps Networks Interactive.
Discovery announced this morning (July 31) that it would be buying Scripps for US$14.6 billion in a cash and stock transaction. The deal is expected to close by early 2018.
The combined company will produce approximately 8,000 hours of original programming annually and be home to approximately 300,000 hours of library content, and will generate a combined 7 billion short-form video streams monthly.
“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,” said David Zaslav (pictured), president and CEO, Discovery Communications, in a statement.
Discovery expects the combined group to create cost synergies of US$350 million, although the companies say it is too early to tell how these synergies will affect their flagship brands and if any of them will ‘go away.’
In an analyst call, Zaslav said the company would be evaluating all of its brands, adding that Discovery had started to look at its 12 channels in the U.S. and were seeing that a strong eight may be the direction that the industry is moving.
Kenneth Lowe, chair, president & CEO, Scripps Networks Interactive, said the teams will first consider which brands might be better positioned as a different format and a different delivery.
Lowe is expected to join Discovery’s board of directors following the close of the transaction.
Scripps’ lifestyle-centric portfolio includes HGTV, Food Network, DIY Network, Cooking Channel, Travel Channel and Great American Country. Those networks should complement Discovery’s roster, which includes its flagship Discovery Channel as well as TLC, Animal Planet, Investigation Discovery, OWN: Oprah Winfrey Network, Science Channel, Destination America, Velocity and American Heroes Channel.
Bringing the two network groups together may provide a unique value proposition for U.S. cable consumers in the emerging skinny bundle era.
Meanwhile, Discovery’s international foothold should benefit Scripps’ brands in territories where the latter company hasn’t yet penetrated the market.
Lowe noted that while Discovery had a global mindset early on, Scripps only began making global moves in the last five years or so.
“If you take the infrastructure, the distribution and, quite frankly, the time Discovery has been developing its global footprint […] they can almost immediately accelerate a lot of our brands that, in my opinion, would have taken several years to fill out,” he said.
Earlier in 2017, Scripps struck a deal with German broadcaster ProSieben Sat.1 for more than 1,200 hours of Scripps lifestyle programming stemming from across its channel roster. International operations for Scripps include multi-channel operator TVN in Poland; UKTV, a joint partnership with BBC Worldwide; Asian Food Channel and Fine Living Network.
Discovery’s recent international moves have included the acquisition of Eurosport, and subsequently, securing exclusive European TV and multiplatform broadcast rights for the four Olympic Games to be held between 2018-2024.
Although the acquisition represents a huge move for Discovery, Zaslav noted that it’s important for companies to not become complacent as there’s “no final step” for media companies today.
While the deal will enable Discovery to have more optionality going forward, Zaslav stated that another benefit of the acquisition is a strong balance sheet that will allow them to grow in the future, whether that be investing in themselves, in the brands Scripps has developed, or in smaller “selective” purchases and acquisitions.
According to a release, the combined brands in the deal include, from Discovery: Discovery Channel, TLC, Investigation Discovery, Animal Planet, Science and Turbo/Velocity, as well as OWN in the U.S., Discovery Kids in Latin America, and Eurosport. Scripps holdings in the deal include: HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and Great American Country, as well as TVN, UKTV, Asian Food Channel and Fine Living Network.
“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,” said Lowe. “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.”
Discovery and Scripps discussed a potential merger twice before in recent years, most recently in 2014. Affiliates of Goldman Sachs will finance the cash portion of the deal.
(With reporting by Meagan Kashty and Barry Walsh)