Discovery Communications and Scripps Networks Interactive have rekindled merger talks, according to people familiar with the negotiations, in a sign of further pressure on the cable television industry from mega-deals and digital disruption.
It is not certain that a deal will be reached. The two companies have flirted with a combination several times before. In 2014, talks fell apart when the family that controls Scripps decided it was not ready to sell. Scripps and Discovery declined to comment.
A merger would bring together a wide-ranging roster of US cable channels, including Animal Planet, TLC and the Discovery Channel, owned by Discovery, and the Food Network and HGTV, owned by Scripps.
Discovery, whose market cap is about $15bn and whose largest shareholder is billionaire John Malone, recorded $6.5bn in revenue in 2016. Scripps, with a market cap of $8.7bn, brought in $3.4bn in revenue last year.
Joining forces could strengthen their hand in negotiations with distributors at a time when cable TV is suffering subscriber declines. The industry faces competition from digital services like Netflix and Amazon, which are spending heavily on original content, and from so-called “skinny bundles” of cable channels offered by Sony, Dish, YouTube and others.
This erosion in subscribers, as well as consolidation among cable operators like Charter and Time Warner Cable, is squeezing network owners, which have become increasingly reliant on per-subscriber fees they collect from the companies that carry their channels. Adding to the pressure is AT&T’s pending AT&T’s pending purchase of Time Warner, which would give the telecoms company a big footprint in content.
Neither Discovery nor Scripps owns sports rights or a broadcast network, increasing the challenge of getting their networks into new digitally delivered packages and securing lucrative deals with distributors.
The talks were first reported by the Wall Street Journal.
Get alerts on Discovery Inc when a new story is published