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Redstone family hungry for acquisition, Discovery runs a mile

Super Bowl LIII was perfectly timed to overshadow some strange speculation last week regarding CBS, with reports that the broadcaster wants to swallow an entertainment outfit in the guise of Discovery, Sony Pictures or MGM, prior to revisiting the awkward Viacom merger once the two-year truce ends.

Discovery has since denied the report, published by CNBC, but that doesn’t mean Shari Redstone’s hunger for fresh meat has subsided, one she can put in the hands of a new CEO, to be announced as soon as next month to fill the boots of Leslie Moonves.

Discovery’s chief corporate operations officer David Leavy said in a statement, “The CNBC story is inaccurate. Discovery is not for sale. We remain extremely confident in our growth strategy in the US and globally as we continue to build the leading portfolio of superfan brands in every market around the world.”

However, remember when Viacom tried and failed to buy Scripps Networks in 2017 and Scripps ended up falling to Discovery instead in a $14.6 billion deal? Well, a bid for Discovery would give the Redstone family their long sought target after all.

CBS will certainly want to make the most of its recent momentum in the streaming space, having just a couple of weeks ago experienced its busiest weekend to date for new subscriber sign ups, crediting the NFL and Star Trek, although it did not dish out exact figures. What’s more likely than buying big with someone like Discovery, is that a merged CBS-Viacom will pounce on an entertainment group when the chips are down to wrangle a bargain price.

That said, CBS viewing figures are down just like everyone else’s, between 5% and 35% depending on which channels you look at, and Viacom’s fading brands like MTV are hanging on by a thread. In fact, this week Viacom launched the MTV Play video streaming app in the UK market costing £3.99 ($5.20) a month. The youth-targeted service will offer catch-up and boxsets from popular titles and there is reportedly scope for partnering with telcos. We give it until the end of the year.

MTV Play seems like a backwards step from Viacom, just a few months after we praised its exclusive new deal with Netflix, setting a trend for studios which are also struggling to straddle the market right now as a direct result of the combined demise of the cinema and excessive and outdated pay TV packages.

That said, when you look at the major broadcast TV channels in the US, and anywhere else for that matter, each have tried to “cover” the online space – take CBS, it has 28 core TV channels, 15 with the CBS brand, but of course it has TV Everywhere through cable, as well as its own paid CBS All Access and Showtime OTT services. Its advertising takes in both broadcast and online, and it never releases a breakdown between the two.

It’s interesting though that John Malone has been gradually buying up Discovery stock, with something like 30% share of voting rights, and we feel the cable cowboy would be unlikely to sell his share.

Discovery Communications has a market cap of $14.2 billion as of writing, while MGM Resorts International sits at around $15.9 billion, with the latter operating a successful entertainment business in the live events space, making it the most peculiar of the three rumored CBS takeover targets. Sony Pictures is of course part of a technology behemoth who we also feel is unlikely to sell this part of its business.

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