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Discovery and Scripps Contemplate Tie-Up

As the cable television industry battles declining subscribers from the advent of streaming services and consumers rebelling against high prices, Discovery Communications and Scripps Networks are discussing a merger in the belief that sharing a future will aid in having a bright one.

Discovery Communications owns The Learning Channel, Animal Planet, and a strong international platform in addition to its namesake Discovery channel. Scripps meanwhile owns The Food Network and HGTV.

Since the talks are ongoing, terms of the deal have not been disclosed, but the combined company would have revenue close to $10 billion and have better leverage with cable and satellite operators.

Last year figures for Discovery Communications and Scripps Interactive in $,000s.

The companies talked about a merger previously in 2014, but the talks fell about largely because the Scripps family was hesitant to sell their stake.

Liberty Media’s John Malone — whose interests include Charter Communications, Lionsgate, SiriusXM, and Live Nation — is the leading shareholder at Discovery and is known for being one of the most intelligent media investors in the world.

Some analysts expressed skepticism that the merger would be a wise path forward. Barclays analyst Kannan Venkateshwar says “it is tough to see how a combination of 16 major networks will have more negotiating leverage with distributors when both legacy and new distributors are focused on making the bundle smaller. Most of the skinny bundles available now exclude Discovery and Scripps, reinforcing the perception that these are less critical relative to other networks.”

Those fears have not prevented investors from liking the potential transaction. Scripps Networks is trading higher by nearly 14% in trading on the New York Stock Exchange today, while Discovery Communications is higher by about 3%.

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