Discovery, Scripps downgraded as analyst says all non-live networks are at risk

Shark Week
Discovery's Shark Week ratings were down this year.

In a broad-reaching rebuke of all programmers who don’t have the wherewithal to present live sports and news, MoffattNathanson analyst Michael Nathanson has downgraded Discovery Networks and Scripps Networks Interactive from “neutral” to “sell.” 

“The biggest near-term challenge will be the amassing and holding of large, live viewership that can’t be replaced by SVOD, DVRs, VOD or digital,” Nathanson said in a report sent to investors last week. “Stand-alone cable network companies (Viacom, AMC Networks, Scripps Network and Discovery) will continue to be challenged. Media companies with strong brands in sports and news … like Disney, Fox and Time Warner will be rewarded with increasing affiliate fees and ad dollars. As viewers gain more control of their programming grids, the owners of non-essential and non-live content are at significant rise. Either you are live and large … or dead.”

Of Scripps, Nathanson noted, “We remain cautious on SNI’s future outlook given increasing pressure on affiliate fees and greater competition for content pressuring programming costs.”

And in regard to Discovery, he added, “domestically we worry about competition for viewership without live marquee programming such as news or sports and its impact on advertising,” Nathanson said. “Internationally, Discovery is still in the early days of monetizing its Eurosport acquisition and newly acquired expensive sports rights, like the Olympics.”

Despite ESPN’s recent troubles with subscriber attribution, Nathanson sees the sports network and its parent, Disney, as being better insulated from changing market conditions than most. Viewership of sports programming declined at 1 percent annually from 2010-11 to 2015-16, he noted, while non-sports programming was down 3 percent a year over that same frame. 

Disney, he added, is the only company to garner most of its ad revenue from live sources, with 59 percent of gross ratings points coming from either sports or news.

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