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Shark Week meets Worst Cooks in America

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FORGET your subscription to Netflix. Would you pay $5 a month for a collection of TV channels that gave you programmes such as “90 Day Fiancé”, “Pit Bulls and Parolees”, “My Cat from Hell”, “Worst Cooks in America” and “Shark Week”? Irresistible as this may seem, it is not yet on offer. But many believe that it has come closer. Discovery, a cable-network group, agreed on July 31st to buy another: Scripps Networks Interactive, owner of Food Network and HGTV, among other channels, in a $14.6bn deal. The combined firm will have 19 lifestyle- and reality-television-oriented channels including Animal Planet, DIY Network, Travel Channel and the flagship Discovery Channel (home of “Shark Week”).

The impetus for the combination is the declining market in America for expensive pay-TV bundles of 200 channels, which can cost close to $100 a month. In the past few years millions of consumers have spurned such bloated packages for cheaper streaming services like Netflix and Amazon Prime video. Sales of digital-TV antennae, used to receive broadcast networks without a cable subscription, have surged to 7.4m last year. Discovery Channel has lost more than 8m subscribers in five years, a decline of about 8% (chiefly because of the decline of fat bundles).

It might seem unwise to add more cable networks by buying Scripps. Discovery offered a 34% premium on its price. Viacom, another channel group, had also been bidding, which is likely to have increased the price. “Scripps picked the right time to sell and Discovery picked the wrong time to buy,” notes Michael Nathanson of MoffettNathanson, a research firm. Executives at Discovery argue, though, that distributors such as Charter and Comcast should be able to entice consumers with much cheaper pay-TV options. The total wholesale cost of Discovery and Scripps’ 19 channels is $3 per subscriber a month, less than half of the cost of just one of Disney’s channels, ESPN. “We’re really good value,” says David Leavy, a Discovery executive.

Yet he will face significant hurdles in persuading distributors or consumers of that worth. Distributors have struck agreements with large competitors of Discovery, such as Time Warner and 21st Century Fox, that limit the selling of too many alternative bundles (such as the kind that Discovery would like to sell) that exclude their channels. In addition, pay-TV providers believe that customers want live entertainment, especially sport, and that if they do not offer networks such as ESPN, consumers will have all the more reason to drop cable for Netflix. Streaming services like YouTube, Hulu and Sling sell “skinny” TV bundles that include the more expensive sports networks, and mostly exclude Discovery’s cheap channels.

A $5-a-month option may yet emerge, however. Rich Greenfield of BTIG, a research firm, believes the growing antennae sales indicate a hunger for inexpensive options. Non-sports bundles of cheaper channels, from the likes of Discovery and Viacom, are inevitable. In the future, Mr Leavy says, Discovery may even wish to sell direct to the consumer.

But will the offering be compelling enough to stand out? Netflix and Amazon can make the sort of reality shows that Discovery and Scripps offer. Some producers of their content are being directly approached by streaming services to make content for them. It does not cost much to make “Cupcake Wars” or “House Hunters”. “It all comes down to what are your barriers to entry,” Mr Nathanson says. “What moats have you built? How defendable are those moats?” At least Discovery can infest them with sharks.

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Julio Marchi ©

Publisher / Editor at BS News & Media Services
A free thinker, not labelled as anything, not associated with any party, not part of any group or engaged with any religion... A simple guy tired of the nowadays bullshit who decided to promote more serious debates about what is really happening hoping to bring back intelligence to the superficial and shallow news & headlines that unfortunately took over the existing media scene.
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