Does a Discovery Communications and Scripps Network Deal Make Sense?

Does a Discovery Communications and Scripps Network Deal Make Sense?

Rumors that Discovery Communications (NASDAQ: DISCA)(NASDAQ: DISCB)(NASDAQ: DISCK) and Scripps Network Interactive (NASDAQ: SNI) were discussing a possible merger of operations were substantiated this week when Discovery announced second quarter results. In a difficult cable TV market, this move could make a lot of sense for Discovery shareholders and even more for owners of Scripps.

Discovery features a week long block of TV programming called Shark Week once a year. Image source: Discovery Communications.

Why the need in the first place for these negotiations? It's all about fighting back against cord cutting, driven by disruptive online streaming services like Netflix (NASDAQ: NFLX) and Amazon's (NASDAQ: AMZN) Prime video service. For example, Netflix crushed all expectations last month when it showed that its subscribers in the U.S. surpassed 50 million, more that the roughly 48.5 million of the major cable networks.

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Source: Fool.com