David Zaslav, President and CEO of Discovery Communications
Perhaps, when you look beyond the headlines, you may think he has the clearest vision of how historic media properties can evolve and reinvent themselves in the new digital world.
Yes, this is about the company’s $14.6 billion-dollar acquisition of Scripps — but it’s so much more than that.
Discovery Communications Inc. is a global mass media and entertainment company that started as The Discovery Channel, a single cable channel, way back in 1985,.
Today, DCI channels include Discovery Channel, TLC, Animal Planet, Investigation Discovery, OWN: Oprah Winfrey Network, Science Channel, Discovery Family Channel, American Heroes Channel, Velocity, Destination America and Discovery Life Channel, and two Hispanic brands, Discovery en Español and Discovery Familia.
And while it is exploring subscription video-on-demand distribution through a number of partnerships, it is also producing its own digital platform experience.
DCI previously acquired Revision3 in 2012 for 30 million dollars, and in 2013 the online channels of YouTube star Philip DeFranco for an undisclosed amount.
Last year, DCI invested $100 million in a new digital media holding company, Group Nine Media, that merged Thrillist Media Group, NowThis Media, The Dodo and Discovery’s digital network Seeker and its SourceFed Studios. Group Nine is headed by Ben Lerer, formerly CEO of Thrillist.
The merging of the Millennial-focused properties makes Group Nine one of five biggest U.S.-based digital-media companies, generating more than 3.5 billion global monthly video views.DCI has an option to buy a controlling stake in Group Nine Media in the future.
What does DCI gets from buying Scripps, as reported by CNBC?
- An additional $3.44 billion in revenues (with $6.55 billion for DCI today)
- Added $1.55 billion in EBITDA ($2.47 billion for DCI now)
- $3 billion more in debt ($8 billion for DCI now)
- An added $1 billion in operating cash flow ($1.57 billion for DCI now)
The Scripps Networks include specialty channels HGTV, Travel Channel, Food Network and Cooking Channel — all of which lend themselves well to the most profitable niches in digital video.
The good news is, the combined entity gets more leverage as it deals with cable and satellite distributors.
The bad news is, the Discovery and Scripps networks have not found their way into most of the so-called skinny bundles, as cable customers shift to narrower offerings (and lower cost).
And Discovery/Scripps ad sales would account for 60 percent of the revenues. That would be “by far the largest in the industry,” according to Barclays analyst Kannan Venkateshwar, as quoted in Deadline/Hollywood.
It comes down to this: Zaslav needs to be focused on both shoring up the current business and making meaningful inroads into the mobile/millennial media marketplace.
Finding revenues and synergies between the old and new won’t be easy, but he’s been buying with clear-eyed focus, and the assets are performing.
Lerer said “We smoked it” with 114 million social media engagements for Group Nine in May 2017 — up from 70 million in January, as reported in TechCrunch.
Zaslav will need Lerer and his group to continue to grow as cable faces pressure. But clearly that’s part of the plan.