Finance

Analyst Sees Problems With Discovery-Scripps Combination

Ratings down on Scripps shows 10/09/2017 12:56 PM Eastern
Media analyst Michael Nathanson

Analyst Michael Nathanson of MoffettNathanson Research says that even though Discovery Communications stock has fallen since July when it announced it was acquiring Scripps Networks Interactive, he still recommends selling Discovery stock.

Back when the deal was announced, Nathanson noted that combining two cable network companies doesn’t address the issues facing the industry. Now, in a research note Monday (Oct. 9), he said: “While the combination will no doubt generate massive cost savings, we are not sure that getting bigger is actually better.”

Nathanson said that Scripps’s run as an outperformer in both ratings and advertising revenue growth might have ended. He notes that the biggest show on Scripps’ Food Network, Chopped, is down 24% in adults 25-54, and that four of the five top shows on HGTV are down in the ratings. The show that’s up — Fixer Upper — recently announced that it is going off the air.

Related: Scripps Chief Lowe Could Land $91.6M Payday in Discovery Deal

Because of ratings weakness he sees Scripps’s third-quarter advertising revenue coming in at flat, compared to an earlier estimate of up 4%. For the full year, he’s lowering his ad growth forecast to 2% from 4%.

With Discovery, the subscriber losses at traditional cable and satellite operators is likely to depress future affiliate fee growth because Discovery has not been included in many of the new digitally distributed skinny bundle packages.

Read more at broadcastingcable.com.

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