Viacom is unlikely to buy Scripps Networks, and that’s a good thing.
- The beleaguered cable company needs to make a transformative, digital-centric move.
- The MTV-owner could instead steer billions toward companies like BuzzFeed, Spotify or even Roku.
Up until late Wednesday it looked as though Viacom was very serious about acquiring Scripps Networks, which is valued at upwards of $US11 billion. But now the Wall Street Journal is reporting that Viacom is out of the Scripps sweepstakes, leaving Discovery Communications alone in the bidding.
That’s a good thing for Viacom, because there are so many other things it could buy with that kind of money that have the potential to transform its business.
Reuters had been reporting that Viacom, which owns networks like MTV and Comedy Central, was willing to pay cash for Scripps, owner of networks like Food Network and HGTV. Putting aside whether a company saddled with loads of debt should be spending anywhere near that kind of money, the logic was as follows:
- A Scripps/Viacom combo would help the entity negotiate with cable distributors like Comcast to make sure it gets distribution and good rates for its channels. Cable companies like Comcast pay networks like MTV a few bucks to carry them. Power players like ESPN can pull in over $US9 per sub.
- Plus, the portfolio of networks in a Scripps/Viacom buffet would make the company a must buy with advertisers, as WSJ noted.
In other words, Viacom was looking at Scripps as a way to shore up that sweet dual revenue cable model.
Here’s the thing. Why double down on a business that is getting hit on two fronts? People are cutting the cord at an accelerated pace. And they are not watching live ad-supported TV at the level they used to.
Owning a bunch more cable channels than you used to isn’t going to change either trend.
Viacom CEO Bob Bakish has been credited with unveiling a very disciplined strategy earlier this year when he announced that Viacom would focus it’s energies on just six core channels, rather than a few dozen. Sounds very reasonable. But boil it down, and the plan he laid out was basically, “we’re going to focus on linear TV, just not as much of it.”
That’s coming at a time when Viacom’s youth-oriented network like Nickelodeon and MTV are feeling the pain of consumer media habits shifting more than others. It’s unlikely that hoping for the next “Jersey Shore”-sized hit is going to change that. And yes, adding networks like HGTV to the mix bring an attractive audience. But you could argue that the kind of programming that Scripps networks specialises in, such as instructional food shows and DIY project shows, are the kind that easily get dropped from the average TV binger’s diet.
Plus, as Recode’s Ed Lee noted, that content of content is all over the web for free.
Thus, Viacom doesn’t need to expand its fading cable empire. It needs to prep itself for the coming digital war. There are so many ways it could jumpstart such an effort with $US11 billion, or far less. Such as:
1) Buy BuzzFeed. Reports are that the BuzzFeed turned down Disney a few years ago. And since then NBCUniversal has invested in the digital media company, so this may not be a realistic option. But its worth a discussion. In the near term, BuzzFeed’s not nearly as lucrative as Scripps, but the company has a connection with a new generation of consumers and has shown a remarkable ability to launch new brands like Tasty seemingly overnight. Exactly the kinds of things Viacom should be doing.
2) Buy Spotify. This was BTIG Research media analyst Rich Greenfield’s suggestion to Business Insider. That would give Viacom a direct-to-consumer subscription business that is music based. “That’s the perfect fit,” he said. There is the matter of Spotify’s $US13 billion valuation and pending IPO. But if you’re going to splurge …
3) Buy a bunch of digital media companies. Everyone in digital media is pivoting to video and wondering about consolidation and where to go next. That seems like the right conditions for a shopping spree. What would it cost for Viacom to snatch up Pop Sugar, Mic, Defy Media or Tastemade? Surely not $US11 billion. You could maybe even collect all four. Throw in Cheddar for good measure.
None of these would solve the ratings or distribution challenges. But it would help get the company started on how to program and connect with the mobile-centric generation that is key to Viacom’s future.
4) Disrupt yourself.
There’s been lots of talk of Viacom joining forces with other cable companies to explore a cheaper, skinnier bundle for non sports fans. Do that! But in the meantime, why not launch your own direct to consumer Nickelodeon? You could call it Nickelodeon Go. That might annoy some of your distribution partners. But Viacom is already at odds with some of them. Otherwise, they’re conceding this arena to Google, which has YouTube Kids. People will pay for Paw Patrol.
5) Incubate you’re own newbie brands.
Look at what CNN has done with its feel good social video brand Great Big Story, which was born on Facebook and is now aspiring to become an “over the top” cable net. That’s only cost CNN $US40 million! Where’s Viacom’s version of that?
6) Pull an Otter. As part of a joint venture known as Otter Media, AT&T has invested in digital video brands like Fullscreen and Crunchyroll, fostering their growth without having to run them or own them outright. Now the New York Post says Otter could be worth $US1 billion. Seems like there’s a playbook to follow here for Viacom.
7) Pull an Axel Springer. Similarly, the German media giant has invested in a slew of early stage US digital content companies, like Thrillist, NowThis and Mic. The dual benefit is that the company’s traditional media businesses theoretically get to learn from the newer contenders, and if one hits it big, Axel gets a payoff. And who knows, if you like one, you can buy the whole thing (see Insider, Business).
8) Plunge into ad tech. This would be a major curveball. But one thing Viacom is credited with is being ahead of the pack in terms of data-driven TV ad targeting. What if the company purchased video ad tech players like Innovid or Videology and try to become the industry leader if and when TV ads are delivered dynamically to TV sets and mobile devices much like targeted web ads?
9) Buy Roku. Another left turn. But Roku is actually trending ahead of Google’s Chromecast and Apple TV in terms of the devices people use to stream content on TV, according to eMarketer. The company is talking about a billion dollar IPO. What if Viacom could take advantage of Roku’s real estate (the interface many use to navigate their TVs) and also the ads that Roku delivers to many TV apps?
10) Buy Snapchat. Or sell to Snapchat. Neither will probably work. But hey.
11) Sell to Google or Amazon. We all will someday.