Discovery ‘still has bullets’ for deals post-Scripps

Discovery Communications is “not out of bullets” to use for company acquisitions despite its US$14.6 billion takeover of US compatriot Scripps Networks Interactive, its chief exec has said.

The Scripps deal will create one of the largest media companies in the US, and includes US$2.7 billion worth of new debt for Discovery.

However, this will not hamstring in it the acquisitions market due to the way the deal was financed, Discovery president and CEO David Zaslav told investors on a conference call yesterday.

“We’re not out of bullets,” he said. “Over the next two years we still have enough room to do some selective purchases that are smaller if we need to.”

On a wide-ranging investors’ call that followed the announcement of the Scripps purchase and second quarter financial results, Zaslav gave some colour on the shape of the business following deal closure, which is expected early next year.

He said having Travel Channel, Food Network, HGTV and other cablenets in the Discovery bouquet should push up prices for pay TV platforms. “When you put us together, we’re about 20% of the viewership on cable, but we’re less than 10% of the economics,” he said.

He also pointed to the potential of launching direct-to-consumer services at competitive prices, with the possibility of moving smaller and less lucrative networks going mobile- or digital-only.

Zaslav said discussions had not yet happened about “whether all of [the linear channels] are going to be survivors and winners, or whether some of them need to be invested in more”.

“Maybe some of them could be taken in a different way — to mobile or consumers,” he added.

Scripps chairman, president and CEO Kenneth Lowe agreed that networks with a “passionate base” of viewers could move to digital distribution in future, adding: “It’s way too early to think about which brands go away.”

Zaslav yesterday pointed to synergies between the Discovery model of targeting “passionate super fans” and Scripps’ thematic network bouquet as a key motive for a deal.