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Discovery Communications seeking to merge with Scripps Networks Interactive
Due to the emergence of online streaming services such as Netflix, Amazon Prime and Hulu, the demand for traditional TV broadcasting has taken a hit. As consumers especially those belonging to the younger demographic have slowly made their way towards substitutes, advertisement too has followed suit. In fact according to some sources 2016 was the first year in which online advertisement overtook the value of traditional TV advertisement, clearly emphasizing the change that has taken place.
Given these recent developments in the TV broadcasting market, it comes as no surprise that a growing number of players have sought to merge and consolidate their positions in the market together with other players. As competition stiffens due to changing trends, profit margins will also take hits. This is why consolidation is and will remain a trend in the TV broadcasting market in the coming years. Examples in recent years include Comcast and NBCUniversal merging in 2009 as well as the ongoing merger negotiations talks between AT&T and Time Warner, which is just awaiting approval from the US Department of Justice before the deal can be finalized.
In this context relatively smaller players such as Discovery Corporation and Scripps Networks Interactive have a difficult choice to make, which is should they remain independent and small in size or too begin merging so as to contain and be able to resist the huge financial power of some of the new emerging rivals post mergers.
The Scripps family has traditionally sought to maintain the independence of their company but Discovery it seems is intent on ensuring that it and Scripps do end up in a merger deal. Discovery has tried at least twice before to merge with Scripps but failed due to differences over price and the reluctance of the Scripps family. It remains to be seen whether talks can succeed this time but demand for merging with Scripps is certainly high with competitor Viacom also looking at a potential merger deal with Scripps. Any deal for merging with Scripps that goes ahead hence will probably see the purchaser paying a higher price for Scripps than they would have originally imagined, due to strong demand for the company and stiff competition in the wider market.