Discovery Buys Animal Planet Owner for $11B

The combination with Scripps Networks Interactive is expected to give Discovery more clout as it negotiates with cable distributors and advertisers.
Matthew HellerJuly 31, 2017

The owner of the Discovery Channel has agreed to acquire Scripps Networks Interactive for $11.9 billion, creating a 19-channel, lifestyle content network as it tries to increase its negotiating clout with cable distributors and advertisers.

Scripps channels such as HGTV, Travel Channel, and Food Network would join a Discovery Communications lineup that also includes Animal Planet, TLC, and OWN, giving the combined company about 20% of the advertising-supported pay-television audience in the U.S.

According to Business Insider, Discovery is seeking to “squeeze as much as it can” out of the cable industry’s dual revenue business model of subscription fees and ads amid the shift of viewers to streaming content.

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“In a few years, the TV business will likely have been reshaped dramatically,” Business Insider said. “But cable executives believe that there are several more lucrative years ahead before cord-cutting and streaming do irreparable damage.”

Discovery said Monday it would pay $90 per share for Scripps, representing a premium of about 34% to the undisturbed share price, and assume Scripps’ net debt of approximately $2.7 billion. Rival Viacom last week bowed out of the bidding process, clearing the way for Discovery, which had previously pursued Scripps in 2013 and early 2014.

“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,” Discovery CEO David Zaslav said in a news release.

As The New York Times reports, consolidation among cable and broadband providers including Comcast, Charter, Verizon, and AT&T “has put pressure on TV companies like Discovery to grow in size as a way to gain leverage in negotiations with cable distributors.”

“We view the deal as among the most logical in media,” RBC Capital Markets analyst Steven Cahall said in a recent report. “Both [companies] are somewhat relatively sub-scale when dealing with distributors, and while their combination may not put them on equal footing with a broadcast network or major sports rights owner, scale matters.”