A new cable giant was created overnight this week when Discovery Communications announced it will acquire Scripps Networks Interactive in a deal valued at $14.6 billion.
The move is a massive boon to Discovery’s value, giving it unprecedented leverage with other cable entities like Viacom and other telecommunication players.
Discovery Communications began as a single channel in 1985, and has since expanded its reach and influence into other markets. Ahead of the Scripps acquisition, the company emerged as a leader in unscripted as well as educational programming. Current assets include TLC, Animal Planet, the Science Channel, and Velocity – a Discovery-like channel focusing on automobiles.
By acquiring Scripps, Discovery Communications will now get to reap the benefits of several home improvement themed programs. New assets are to include HGTV, the Cooking Channel and the Food Network.
Shareholders are also set to get a slice of the pie. According to the Wall Street Journal, Scripps shareholders will receive $90 per share, with $63 of that coming in the form of cash and the rest going into a Class C Common share of Discovery stock.
News of the acquisition has sent waves throughout the telecommunications industry, with some analysts speculating Discovery is trying a new strategy for expanding in the age of instant media. Company officials are confident that an expansion into non-fiction programming will broaden their appeal with younger viewers who are becoming increasingly disillusioned with traditional media.
After the merge is complete, Discovery Communications will over have over 300,000 hours of content, and retain a hold on a whopping 20 percent of ad-supported cable audiences in the United States alone.
“The transaction supports and accelerates Discovery’s pivot from a linear TV-only company to a leading content provider across all screens and services around the world,” Discovery CEO David Zaslav told Reuters.
Fans of both Discovery Communications and Scripps may also reportedly look forward to new programming in the future. According to network executives, the merger puts Discovery in a better position to launch a variety of so-called “skinny bundle” networks at a lower cost to consumers – rather than the massive bundles that normally characterized cable packages.
The move by Discovery presents a much-needed shakeup in the balance of power within the telecommunications industry. Readily available entertainment mediums like YouTube have encouraged a massive amount of consumers (usually millennials) to join the “cord cutting” movement, which is essentially the practice of dropping cable altogether for online content they perceive to be more honest and less corrupt by corporate pressures.
The merger also puts a lot of pressure on existing giants like Viacom to also explore the “skinny bundle” approach, which could mean cable consumers may find themselves spending a lot less money every month on channels they don’t even watch.
Still, despite the cable industry’s treasure trove of cash, innovation is still on the side of new media. It’s now up to the likes of Discovery to catch up.
Regards,
Ethan Warrick
Editor
Wealth Authority
