Can Snap Help Discovery Go for the Gold?
One of last week's hardest-hit stocks -- Discovery Communications (NASDAQ: DISCA) (NASDAQ: DISCK) -- could be getting a boost from one of last week's biggest winners. Snapchat parent Snap, Inc. (NYSE: SNAP) is teaming up with Discovery's Eurosport to promote next year's Winter Olympic Games in South Korea.
Discovery Communications holds the exclusive TV and multimedia rights for the Olympic Games through 2024 in 50 different countries and European territories. Multilanguage Eurosport-curated videos will be produced for Snapchat's Stories feature. It's a win-win deal. Discovery will be able to get its content in front of jaded millennials who aren't watching live sports as much as they used to. Snapchat gets to draw in a global audience at a time when rival Instagram is eating its lunch overseas.
Passing the torch
Snap is coming off a big week. Shares soared 12% last week after Credit Suisse boosted its price target on the stock from $17 to $20. Discovery Communications went the other way, suffering a 10% decline. There was no company-specific news, but DirecTV revealing that it experienced a net decline of 90,000 television companies sent ripples through the cable networks. Snapchat needs couch potatoes paying up for Animal Planet, TLC, and its namesake channel on bloated pay TV bundles.
Cord-cutters are eating away at Discovery. The media giant is working on its third consecutive year of 2% top-line growth. Live sports programming was supposed to be the savior for the media giants, but demand isn't keeping up with supply. We've seen niche giant ESPN shed stateside subscribers every year since peaking in 2011, and NFL ratings are down nearly 8% so far this season.
Along comes Snapchat, which may not be much of a market darling -- the stock is still trading below this year's $17 IPO price despite last week's rally -- but at least it's growing its audience. Teaming up to provide Eurosport-curated pieces and user-uploaded clips isn't likely to get young audiences to fork over for fat cable bundles again. That ship has sailed. The goal here has to be general engagement in live sports and ability to monetize that traffic.
The International Olympic Committee may have waited until 2016's Rio Olympics to get behind digital initiatives, but it's applauding Discovery's deal with Snap. No live sporting event is immune to the growingly fickle and disinterested ways of young consumers, and Snapchat's grasp on millennials seems like the right place to make its mark when February's snowy contests begin. Discovery needs Snap, and Snap may also need Discovery.
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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Discovery Communications. The Motley Fool has a disclosure policy.