A catch to safeguard the future
By Kate Bulkley
For Broadcast August 03, 2017
Discovery’s acquisition of Scripps is a nod towards TV’s changing reality, says Kate Bulkley
Are you a ‘superfan’? Do you even know what it means?
Discovery Communications chief executive David Zaslav was using the term liberally this week as he revealed the company’s $14.6bn acquisition of Scripps Interactive Networks. He thinks the superfan is the key to Discovery’s future and he is betting big.
Discovery beat Viacom to buy Scripps, paying a 34% premium to the Scripps share price before the pending deal began to leak a couple of weeks ago.
But all the big numbers can’t hide the fact that Zaslav is relying on his hunch that acquiring Scripps will help him to corral his ideal viewer – the superfan who just can’t live without HGTV’s Fixer Upper, Canadian format Wedding SOS, which airs on Scripps’ Fine Living Network in the US, or Discovery’s Deadliest Catch.
On the conference call announcing the deal, Zaslav said the strategy was to figure out what “passion content” people would prioritise: “What will people watch when they can watch anything, and what do we have that people will pay for before they pay for dinner?”
Buying Scripps means more niche programming in areas like food, travel, property, weddings and DIY, new superfan territory that skews very female and builds on Discovery’s female-oriented TLC channel.
The drive towards more superfan content should help the combined Discovery/Scripps in its negotiations with distribution partners, too, where the decades-old cable-TV revenue model around carriage fees and advertising is under increasing pressure from cord-cutting and digital disruption.
Together, Discovery and Scripps account for about 20% of US cable TV viewership but only attract a tenth of the affiliate fees paid to media groups for their content.
Zaslav is betting that being bigger will bring him more leverage with distributors and a bigger slice of both ad revenues and carriage fees.
This is not a new mantra for Zaslav. In 2015, Discovery made an audacious acquisition of near-exclusive rights to four sets of Olympic Games to use on its Eurosport channels and app.
For Zaslav, it’s all about scale. He knows that the future of TV is moving to apps and direct-to-consumer offerings. He thinks that niche content is a key ingredient of these skinny bundle packages – and to launching successful direct-to-consumer offers.
Both Discovery Communications and Scripps have moved into international markets over the past few years. Discovery in particular hoped that the underdevelopment of pay-TV in Europe would help them replicate the US pay-TV model there, as local economies recovered and consumers wanted more pay-TV choices.
What Zaslav and others did not bank on was how fast competition from digital companies would take root. Some observers say that many international markets will skip over pay-TV and go directly to OTT services as their preferred choice.
One analyst called the Discovery-Scripps deal a “shotgun marriage”, and yes, these two firms do need each other, given the squeeze that Netflix, Facebook et al are putting on traditional TV broadcasters.
The new digital giants are leveraging their deep pockets and global reach to become extremely content-focused. The Discovery/Scripps marriage, if not made in heaven, is certainly made with a nod toward the reality of how TV is changing.
From a UK perspective, Discovery’s purchase of Scripps has a couple of intriguing twists as well. Discovery’s local clout will grow as part-owner of UKTV, which operates niche channels including Dave, Alibi and Yesterday.
So if you’re reading this in between watching episodes of I Hate My Kitchen or Booze Traveller, then you’re a superfan and David Zaslav is after you.