HGTV-parent Scripps Networks Interactive could be snapped up in short order by Viacom Inc. or Discovery Communications Inc. Either takeover scenario would create a media giant far better positioned to offer advertisers a compelling audience mix, more high quality programming under one roof, and advanced ad-targeting products.
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A Discovery-Scripps tie-up would create a must-buy network group for advertisers interested in targeting women. A Viacom deal could inject some of its ad-targeting prowess into Scripps' business and offer advertisers programming reaching a broad range of demographics.
And either combination would yield the sheer benefits that come with scale, including more attention from ad buyers with the most spending power. The ad buyers, in turn, will be pleased to be able to negotiate bulk buys at better prices than they could get from two smaller concerns.
During negotiations, "we start with the bigger guys first," said Lyle Schwartz, president of investment for ad-buying giant GroupM in North America.
In a bleak TV ratings environment, media companies have been looking to refocus on a few core networks and de-emphasize or even shut down others. Again, bigger companies can accelerate that process.
"There are simply too many ad-supported entities on television," said Ben Winkler, chief investment officer at ad-buying firm OMD. If mergers happen, "the playing field will be narrower but more lush," he said.
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With family-friendly unscripted shows, like HGTV's "Property Brothers" and "Fixer Upper" and Food Network's "Chopped," Scripps is a favorite among advertisers trying to reach women. No rival has been able to emulate the company's strategy and programming, said buyers. As a category, lifestyle programming of the kind Scripps specializes in has generally outperformed general entertainment in the ratings over the past several years.
Scripps has trumpeted the fact that people tend to watch its programming live, opposed to time-shifting it, an advantage with marketers.
"Scripps has done an excellent job of bringing quality content to a handful of networks and attracting high value high income women in endemic content," said Mr. Winkler. "They found a vertical that's relevant to a lot of advertisers."
Discovery is strong with female audiences as well, and the tandem would be formidable. Among the top 20 cable networks, four of the five most female-skewing channels are owned by Discovery and Scripps, according to Nielsen data.
A Viacom deal would offer a different value proposition for advertisers, offering marketers a "coast to coast" mix of demographics including young men. Some clients wouldn't be interested in Scripps' food or gardening programming, but combined with Viacom's MTV or the Paramount channel, that could be an enticing portfolio. "I can work with them across a lot more networks, genres, demographics," Mr. Schwartz said.
Scripps programming could raise the profile of networks like Viacom's TV Land, said another longtime ad buyer. It might not be as easy to "dismiss" those channels when you want to reach women through Scripps, she said.
Ad buyers are also looking for media companies to offer new ad products that help them target younger audiences foregoing traditional cable. Those offerings might include more compelling data and analytics targeting tools, virtual reality ad formats, cross-screen campaign packages or events, said Mr. Winkler.
Ad industry executives don't view Scripps as a leader in this area. A deal with either Discovery or Viacom could provide Scripps with the financial resources to invest more in advanced ad products.
Viacom, in particular, has been aggressive on this front. The company recently teamed up with rivals Turner and Fox to build a new audience-targeting tool called OpenAP. The company also has a data product called Vantage to help advertisers figure out which Viacom channels best reach their target audiences.
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(END) Dow Jones Newswires
July 26, 2017 15:49 ET (19:49 GMT)