Discovery Inc. has named Jane Latman general manager of Travel Channel, one of the networks Discovery acquired when it bought Scripps Networks Interactive.

Latman will continue to serve as executive VP, development and research, for Investigation Discovery and American Heroes Channel, and as general manager of Destination America.

Travel Channel didn’t have a general manager. The executives who had been in charge of programming for the network—Allison Page and Courtney White--were promoted to senior posts at HGTV and Food Network.

Related: Discovery Gives New Duties to Execs Schleiff, Page, White

Those networks, also from the SNI acquisition, are overseen by former Scripps executive Kathleen Finch, now Discovery’s Chief Lifestyle Brands Officer.

Earlier this month, Discovery Group president Henry Schlieff was put in charge of Travel Channel. Schlieff, who reports to Finch, also runs ID, American Heroes and Destination America.

“Jane is an unrivaled force in the television industry whose visionary creativity, natural leadership skills and passionate belief in collaboration make her one of the most, deservedly, respected executives in the industry,” said Schleiff. “I’m continually impressed by her ability to cultivate content that converts viewers into passionate fans – and, move a brand forward – a trait that will undoubtedly make her a successful steward at Travel Channel.”

Latman gets credit for creating programming that has powered ID from being the No. 50 network a decade ago to No. 1 today among women 25 to 54.

She joined Discovery in 2003.

Discovery Communications, cleared to acquire Scripps Networks Interactive, on Thursday (March 1) announced new management for the combined company.

Among the top Scripps execs taking prominent roles are Jon Steinlauf, who will be chief U.S. advertising sales officer. Ben Price, currently president of U.S. ad sales for Discovery, will report to Steinlauf, along with Leigh Anne Brodsky, currently executive VP of Discovery Global Enterprises.

Scripps’s programming chief, Kathleen Finch, will become chief lifestyle brand officer for the combined company with oversight of HGTV, Food Network, TLC, ID, Travel Channel, DIY Network, Cooking Channel, Discovery Life, American Heroes Channel, Destination America, Great American Country and Lifestyle Digital Studios in the U.S.

Related: Discovery to Shut Down Maryland HQ, Move to New York

Henry Schleiff will continue as group president for ID, Destination America and American Heroes Channel. Howard Lee, currently executive VP, development & production for TLC and general manager of Discovery Life, will be the new president and GM for TLC and Discovery Life, effective immediately. Both Schleiff and Lee will report to Finch upon closing of the transaction.

Nancy Daniels, currently president of TLC, will assume the new role of Chief Brand Officer, Discovery & Factual, effective immediately. Daniels will lead all aspects of the Discovery Channel and Science Channel brands. Rich Ross, currently group president of Discovery Channel and Science Channel, will be leaving the company.

“Today’s announcement is another major milestone in combining these two fantastic companies into a new kind of media company with the most trusted portfolio of real life entertainment brands in the world,” said David Zaslav, president and CEO, Discovery Communications. “Upon closing, each division will have a best-in-class leader focused on quickly integrating the combined teams to create new ways for advertisers and distributors to reach highly targeted audiences at scale; capturing operating efficiencies across both companies; and driving innovation to continue telling great stories and nourishing our passionate, loyal superfans around the world across every consumer screen, service and platform.”

Related | broadcastingcable.com: Scripps Networks Interactive Has Higher 4th Quarter Profit

Other executives who will be reporting to Zaslav include:

Gunnar Wiedenfels, currently Discovery’s CFO, who will be CFO for the combined company.

Jean-Briac Perrette, currently president and CEO of Discovery Networks International, will continue in that role for the combined company.

Bruce Campbell, currently chief development, distribution and legal officer for Discovery, will continue in that role. Leading the combined company’s linear, non-linear and mobile distribution efforts in the U.S. & Canada will be Eric Phillips, president, affiliate distribution, reporting to Campbell. Discovery’s General Counsel, Savalle Sims, will retain that role for the combined company, also reporting to Campbell.

Adria Alpert Romm, currently serving as Chief Human Resources and Global Diversity Officer for Discovery, will continue in that role for the combined company.

Susanna Dinnage, currently serving as Global President of the Animal Planet network in the U.S. and Animal Planet brand worldwide, will continue in that role.

Erik Logan, currently serving as president of OWN: Oprah Winfrey Network, will continue in that role and report to the OWN Venture board of directors.

Karen Leever, currently serving as executive VP and GM, Digital Media U.S., and Mike Lang, currently serving as president, Discovery Networks International Digital & CEO TEN/MotorTrend, will continue in those roles for the new company reporting to Zaslav.

Current Scripps Networks executives not assuming roles in the company going forward will participate in the integration process following the deal's close to ensure a smooth transition of responsibilities, Discovery said.

Merger and acquisition activity in the U.S. media and telecommunications industry picked up in 2017, though the value of those deals was lower than in 2016, according to a report by PwC.

Last year saw 876 deals announced, up 29% from the year before. Those deals were worth $138.8 billion, down 31%.

Related: Viacom Shares Dip 7% as Deal Fervor Fizzles

Most of the value of those deals was wrapped up in a handful of what PwC terms megadeals, worth $5 billion or more.

Those transactions were the The Walt Disney Co.’s proposal to acquire TV and studio assets from 21st Century Fox, worth $68.4 billion; Discovery Communications' bid to acquire Scripps Networks Interactive, worth $11.8 billion; and Crown Castle International Corp.’s acquisition of Lightower Fiber Networks, worth $7.1 billion.

PwC said another 15 deals in 2017 were valued between $1 billion and $5 billion.

Related: Comcast's Roberts Downplays M&A Desires

The deals come amid big changes in the media business.

“The traditional media players are refocusing their strategy as they consider what their position will be in the ecosystem and whether they will be part of the next big deal, while non-traditional media players are honing in on the next big value play as they look to have a stake in the new future of [media,]” PwC said in its report.

Bart Spiegel, U.S. media & telecommunications deals partner at PwC, said: “Given the robust deal market in 2017, we expect 2018 to be another banner year as companies look to expand on their capabilities and portfolio. Many of the deal theses underpinning 2017 M&A will continue into 2018.”

Related: The Five Biggest Deals of 2017

In its report, PwC identified trends that will drive deal making and shape the media and telecom landscape. They include the rise of artificial intelligence; the importance of creating authentic user experiences; headline-making mega deals as companies seek scale, access to content, technology and operating efficiencies; growth of internet video, internet ads and gaming; and network upgrades by telecom companies

In an ever-shifting media landscape, both content creators and distributors spent most of 2017 chasing scale.

With changing consumer habits and growing appetites for more choice, lower prices and true on-demand availability, that pursuit is expected to continue well into the new year.

Scale economics is nothing new to the cable industry — the business was based on the concept that giving consumers more channels would create more customers who would require more channels. The real shift is in how companies in the video space are defining big. Toward the end of the year, more companies were asking themselves, how much scale is enough?

On one side of the argument is The Walt Disney Co., which late last year decided that there is no such thing as too much scale, agreeing to plunk down $66.1 billion for 21st Century Fox’s TV and movie studio, FX and National Geographic cable channels, 22 regional sports networks and U.K. satellite assets.

But Fox, a pioneer in the cable and broadcast business for decades, saw an opportunity to scale down, paring its holdings to a streamlined few — its Fox broadcast network and stations, Fox News Channel, Fox Business Network and national sports networks FS1, FS2 and Big Ten Network.

For Fox, scale is important, but it’s the right type of scale — news and live sports — that is best.

Distributors weren’t immune to the impact of scale during the year, either. Riding a wave of optimism that tax reform and a friendlier business environment would serve as a catalyst to bigger distribution deals, overall cable operator stocks were up 25% in the first nine months of the year, as speculation swirled around possible deals between Charter Communications and Verizon Communications, Charter and Sprint, and Charter and anybody else. But those hopes were dashed in September after Comcast said it would lose video customers in Q3. Add to that an apparent slowing of cable’s biggest profit center — broadband — and distributor gains began to shrink.

“Investors are transitioning to more of a higher data monetization, wireless market share, still-solid overall financial growth and increasingly large capital return strategies,” Pivotal Research Group CEO and senior media and communications analyst Jeff Wlodarczak said. “At the end of the day, I think we are in the seventh inning of the transition for cable.” He expects to see seasonal subscriber gains in the fourth and first quarters, he added, which should help the stocks.

While most investors remain sanguine about the cable business, they are also leery of the blood-letting power of the so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Google). With a combined market capitalization of almost $3 trillion, those five stocks not only dwarf the pay TV distribution business, which has a combined $800 billion market cap — these companies have the resources to upend the entire distribution model, snapping up sports and entertainment content at will, or at least driving the prices paid for that programming into the stratosphere.

As the new year begins, we chart how the three biggest sectors of the pay TV industry performed in 2017 and the prospects — good and bad — for 2018.

Distributors
Best Performing Stock in 2017: Charter Communications (16.7%)
Worst Performing Stock in 2017: WideOpenWest (-35.9%)

Distributors rode an optimistic wave for most of 2017 — Comcast and Charter were up nearly 20% and 40%, respectively, heading into September — that came unceremoniously crashing down after investors panicked over video subscriber declines. Comcast touched off the mini-firestorm with its Sept. 7 announcement that it would shed between 100,000 and 150,000 video customers in the third quarter, nearly erasing the 161,000 customers it gained in 2016.

Investors headed for the exits, with Comcast stock falling 7% on Sept. 7, but gradually came back to the fold. The sector in general rose 9.2% for the year, backing out new entrants Altice USA and WideOpenWest; the stocks fared better, up 11.2% for the year.

On the telco side, AT&T was down 8.6% mainly after the government moved to block its deal to acquire Time Warner, and Verizon was relatively flat as investors struggled to decipher its video strategy.

Continued pressure from over-the-top competitors only added to the panic after distributors lost a collective 827,000 video customers in Q3, well above the 559,000 the lost in the prior year. Adding insult to injury: Broadband growth, the one consistent bright spot for cable operators over the past decade, was showing signs of slowing down. Comcast and Charter added 818,000 and 908,000 broadband customers, respectively, in the first nine months of 2017, about 17% behind the prior year’s pace.

While most analysts believe cable broadband will hold its own in the coming years, video is expected to play an increasingly minor role in the overall business. UBS media analyst John Hodulik estimated video would account for 20% of total cash flow in 2018, dropping to 10% by 2020.

Tax reform also will play a big role in added profitability, with Hodulik estimating it would help drive 20% increases in earnings per share and free cash flow for AT&T, Verizon, Comcast and Disney. And while some have already given back some of the expected windfall — AT&T and Comcast announced $1,000 cash bonuses for employees in December — what the companies do with the money is up to them.

“Capital freed could be used for capex, buybacks, dividends or strategic investment,” Hodulik wrote, adding that future deals also could be added to the mix. “Despite the uncertainty cast by AT&T-TWX, we expect M&A to remain a focus with the potential for further media and infrastructure deals.”

Wireless also is expected to play a big role in the coming year, with Charter’s much-anticipated wireless offering — through its mobile virtual network operator (MVNO) pact with Verizon — expected to debut later in the year.

Comcast introduced its wireless product Xfinity Mobile in April, also via the Verizon MVNO, and has more than 250,000 customers for the service. Hodulik estimated that could rise to 500,000 by the end of the year and coupled with Charter, cable operators could have more than 1 million wireless customers by the end of 2018. That’s about one-third of the wireless industry’s net annual growth.

Programmers
Best Performing Stock in 2017: WWE (66.2%)
Worst Performing Stock in 2017: Discovery Communications (-18.4%)

Faced with the havoc that a direct-to-consumer world could wreak on the programing business, content providers struggled with whether to take a more is better or bare bones approach. Both concepts were at play as the year drew to a close.

On the more is better front, Disney’s planned purchase of certain 21st Century Fox assets was the biggest example, but there were others, too.

In July, Discovery Communications pulled the trigger on a long-awaited buy of Scripps Networks Interactive for $14.6 billion. Discovery had long pursued Scripps — the two were reportedly negotiating a deal in 2014, but ended talks — and the inclusion of its similarly themed networks seemed like a perfect fit.

Some analysts, such as Sanford Bernstein media analyst Todd Juenger, have questioned the concept of going big on programming content in a market where consumers seem to be telling distributors they want less, not more. In a recent research note shortly after the deal was announced in July, Juenger said that while Discovery and Scripps had run into the same trouble as other networks in the changing landscape, bigger isn’t necessarily better.

“If you combine Discovery and Scripps, you now have, literally, 20 networks, many of which MVPD’s don’t want,” Juenger wrote. “That’s already a problem for Discovery, but we think adding Scripps makes it worse.”

Juenger later called the Disney-Fox deal a classic “build or buy” decision, in which Disney determined it was more advantageous to buy added scale, saving the money, time and earnings dilution that a build would entail. But there are disadvantages to the buy scenario, too — buying requires paying a hefty premium for content that may never be realized.

Networks are obviously worried about the future, as many sense an end to the content bubble of new TV series being produced. With distributors pushing back on higher affiliate fees, declining advertising revenue and the growing threat from online giants like Google and Facebook, they have good reason to be scared.

It is no accident that the top performer in the pay TV network segment in 2017 — sports-entertainment titan WWE, up 66.2% for the year — got there mostly on speculation that Facebook would bid for rights to its flagship programs, Monday Night Raw and WWE SmackDown.

While Facebook could look to boost its content holdings, it already has a stranglehold on the advertising business. According to MoffettNathanson media analyst Michael Nathanson, traditional media advertising revenue declined 11% in Q3 2017, while digital advertising rose 22%. And Facebook and Google accounted for 74% of digital ad growth in the first half of 2017.

While the third quarter was the third straight period of decline for national TV ads — “the worst we’ve seen in the past decade,” according to Nathanson — the sluggish performance is expected to continue. He estimated that in 2018, a year with a Winter Olympic Games and midterm Congressional elections, traditional advertising will be down by 1% while overall spending will increase by 7%.

FAANG
Best Performing Stock in 2017: Amazon (56%)
Worst Performing Stock in 2017: Google (35.6%)

Amazon turned heads with its April purchase of streaming rights to a package of NFL Thursday Night Football games not for the amount paid — about $80 million — but for the message it sent to the industry. That simple purchase made it known that the online retail giant was a player in the live content business.

Amazon already is spending about $4 billion annually for content to fuel its Amazon Prime Video service, and the addition of live content could only make a powerful competitor even stronger.

BTIG media analyst Rich Greenfield thinks this may be the year Amazon goes deep with Thursday Night Football, bidding more than $600 million for exclusive rights.

While Amazon is expected to get deeper into the original content business, it will still lag behind Netflix, which is expected to plunk down $8 billion for content in 2018. Facebook, which bid $610 million for streaming rights to Indian Premier League cricket matches last year — it lost out to Fox’s Star India, which bid $2.5 billion — is expected to continue to test the content waters in 2018. In a blog post, Greenfield wrote that he expects Facebook to turn its focus on professional wrestling in 2018 — WWE’s rights deals with NBCUniversal for Raw and Smack- Down expire in 2019, but the programmer has said it plans to secure agreements for the U.S. and the U.K. markets in 2018.

Facebook already has a relationship with WWE: It announced a deal last year for a 12-episode show that airs on Facebook Watch called Mixed Match Challenge featuring Raw and SmackDown wrestlers.

In his blog, Greenfield saw that deal as a test bed for a deeper relationship between the companies, and said he believes not only will Facebook try to acquire digital rights for Raw and SmackDown, but it may also bid for exclusive linear rights in the U.S. and U.K.

“The question for 2018 is will Facebook start ‘winning’ the bidding processes it enters or just drive the price up on legacy media rights buyers?” Greenfield wrote.

But other analysts were puzzled by the social media giant’s video strategy, which so far has been a mix of user-generated short-form content and some short-to-medium professionally produced shows for its “Watch” and “Discover” tabs.

Nathanson wrote in December that Facebook hasn’t been very aggressive, save for the cricket bid, in trying to attract studios or smaller content creators for programming.

In a research note, Nathanson wrote that Facebook appears to be tiptoeing into the video space and that a more aggressive stance is “critical for it to jump start this initiative and get real attention in what is already an incredibly crowded space.”

For Google, the launch of YouTube TV hasn’t created the competitive storm some believed it would despite its attractive price point of $35 per month and lineup of 40-plus channels, including broadcast networks, AMC Network, Disney Channel and sports networks. But that could change in 2018 as the service’s reach expands.

YouTube TV was available in 83 markets as of December, up from five at its April launch. Apps for Roku and Apple TV, as well as for smart TVs, are expected in the first quarter of this year.

On the downside, some media executives see the distribution strategies of some of the new-entrant tech companies — especially Apple and Facebook — as “incoherent,” Barclays media analyst Kannan Venkateshwar said. That perception has caused some reluctance in licensing content to these companies, the analyst wrote, because the absence of a strong coherent distribution plan during the initial window of a deal can adversely affect the lifetime value of the content.

“Those selling content believe there are only about 10 or 11 serious buyers of content despite new entrants, i.e. the four broadcast networks, the top four to five cable networks, Netflix and Amazon,” Venkateshwar wrote.

With the expected closing of its $14.6 billion purchase of Scripps Networks Interactive just a few months away, Discovery Communications is planning to shut down its Silver Spring, Md., headquarters over the next two years and move its base of operations to New York.

In a memo to employees Tuesday, issued prior to an 11 a.m. Town Hall meeting for workers at the headquarters site, Discovery CEO David Zaslav said the plan was to shut down the Silver Spring location and sell it by 2019.

“This was one of the toughest calls we have made in our company’s history, and we do not take it lightly,” Zaslav said in the memo. “I felt strongly about sharing the news with all of you as quickly as possible once the decision was finalized. Maryland is where the magic of Discovery first began. It also is where many of you, and your loved ones, call home. Where so many wonderful ideas, stories and innovations were first imagined. After much discussion, analysis and debate, however, we believe this move is the right choice, at the right time, for the long-term success of our company.”

Discovery also plans to make Scripps’ current Knoxville, Tenn., headquarters a National Operations headquarters for the entire company and to transform Discovery’s Sterling, Va., facility ito a Technology Hub for the company. Scripps built a 150,000 square-foot operations facility in Knoxville in 2010.

Knoxville is where Scripps first launched HGTV and Food Network in 1994.

Discovery also plans to maintain a small Network Hub in Maryland to house select networks and roles that support them.

But at the center of Discovery’s new blueprint is New York. In the employee memo, Zaslav said the plan will be to consolidate Discovery and Scripps team members currently scattered between four locations in the city into a new Global Headquarters, for which planning is underway. Discovery hopes to move into the new building in the second half of 2019.

The moves come about three months after Discovery earmarked $10 million for a renovation of the Silver Spring HQ, relocating workers from surrounding areas and consolidating buildings. While some saw that September investment as proof that Discovery intended to keep its base in the area even after the Scripps deal closed, the company stressed that no final decisions had been made. On Tuesday, that final decision was made.

Discovery, which opened its Silver Spring headquarters in 2003, has about 1,300 employees in Maryland.

The Scripps deal is expected to close in the first quarter of this year.

Following is Zaslav’s memo in its entirety: 

Today I am announcing plans for a new Discovery global real estate strategy and footprint.

Chief among these changes, we have made the decision to move our global headquarters to New York City. We have therefore made the difficult decision to reduce our footprint in Maryland over time, with the ultimate closure and sale of our One Discovery Place headquarters building in Silver Spring, expected in 2019.

This was one of the toughest calls we have made in our company’s history, and we do not take it lightly. I felt strongly about sharing the news with all of you as quickly as possible once the decision was finalized. 

"Maryland is where the magic of Discovery first began.  It also is where many of you, and your loved ones, call home. Where so many wonderful ideas, stories and innovations were first imagined. 

"After much discussion, analysis and debate, however, we believe this move is the right choice, at the right time, for the long-term success of our company.  I will use the rest of this note to explain why, and ask you to please join me for a Town Hall at 1DP at 11AM ET today and live on workplace to discuss these changes in greater detail.

Responding to the Changing Landscape
You have heard me talk extensively about how dramatically the media industry is changing.  An industry that is more global, more consumer-focused and more multi-platform. We are constantly challenged by changing viewer tastes, behaviors and new entrants in the marketplace offering competing products. 

To compete, survive and grow, Discovery must continue to change as well.

For the past several years, we have started the journey to transition from a linear TV company with great cable distribution to a leading IP media company with world-class programming across all screens and services. Our investment in original content created new brands and fueled our expansion into sports, kids, short-form and direct-to-consumer products. The acquisitions of SBS, Eurosport and the rights to the Olympic Games in Europe expanded Discovery beyond our original nonfiction roots.  

The most recent milestone on our journey is Scripps. The pending acquisition has allowed us to undertake an in-depth analysis of where we work and how we work, and the chance to create the most efficient locations for our best-in-class creative, technology, production and operating functions to thrive now, and into the future. 

Beyond the headquarters move to New York and eventual closure of 1DP, we also plan, contingent on the deal closing, to create a National Operations Headquarters at Scripps’ current Knoxville, Tennessee campus and a Technology Hub at our Sterling facility in Northern Virginia.  We also plan to maintain a small Network Hub in Maryland to house select networks and roles that support them.

New York Global Headquarters
At the center of our new blueprint is New York. New York always has been home to the global media industry…our ad partners on Madison Avenue, investors and analysts on Wall Street, many of our creative and production community and, increasingly, our new short- and mid-form content partners, are based in New York. 

The plan would be to bring together the strength of all current Discovery and Scripps team members, currently spread across four different facilities in NY in a new Global Headquarters.  Planning for the space and location in New York is underway and we hope to move into a new building there in the second half of 2019. 

National Operations Headquarters in Knoxville
From an operating and financial perspective, it became clear that, pending closure of the Scripps transaction, we could not operate three large facilities in the U.S.  Since the announcement of the deal, we have evaluated the strengths, capabilities and advantages of the Knoxville, Tennessee campus, which houses the major Scripps brands and creative digital teams along with corporate functions. 

Featuring a compelling environment and infrastructure, Knoxville is a self-contained campus with many amenities and benefits for a National Operations Headquarters, including low cost of living, built-in facilities, and operational capabilities.

Northern Virginia Technology Hub
Discovery’s state-of-the-art media distribution facility in Sterling, Virginia, where we have originated over 80 feeds nearly flawlessly the last 13 years, will become a global technology center. 

The Northern Virginia Technology Hub, as it will be called, has been built as a model for the future. Our technology infrastructure is a competitive advantage and the team has done a terrific job investing for growth. It features modern digital technology, recently upgraded to take full advantage of flexible computing in the cloud, live playout capabilities, increased nonlinear publishing and much more. 

Beyond our global technology operation in Northern Virginia, we also plan to have a technology footprint in Knoxville and maintain several other international locations to service our global operations.

Global Creative Hubs & Regional Offices
Finally, we will continue bolstering our fantastic creative hubs in Los Angeles, New York, London, Miami, Warsaw and Milan, as well as in the Nordics, Brazil and Argentina, among others.  Over the past several years, we have benefited greatly from our expanded presence in these major global markets, offering closer proximity to robust local production communities and providing us more options for global content sourcing. 

To continue to support and draw from the community in Maryland, and to house select network and support functions, we will create a Maryland Network Hub. The Maryland location also will house other select functions, such as government relations, that are logically based in the Metropolitan DC area, as well as our Discovery Education division.

Since we wanted to tell you all as quickly as possible about these important decisions, we have not yet embarked on all the planning to determine which functions will be moved to which location.  For example, there is also duplication of facilities in other cities around the world, and we will continue the evaluation process following the closing of the Scripps acquisition regarding the most efficient and effective plan for housing our combined company employee base.

What This Means for You
We recognize this is challenging news, and that sharing it early would create some uncertainty, but we felt the benefit of more time, planning and transparency was important to help everyone impacted evaluate your own personal considerations.

After we close and begin the integration of Scripps, we will have a much clearer sense of timing and will regularly update you on any decisions that are made, and how and when your department will be impacted.

Our promise is to provide all the resources and support possible, and answer your questions as quickly as we can.

To that end, we will launch a host of resources and tools to help all employees navigate through this changing time. We will share more information about these resources in today’s Town Hall and over the upcoming weeks and months.

As always, thank you for your commitment and hard work for this great company.

David

Discovery Communications is positioning itself to help distributors find the net while looking for new content to fill traditional and non-traditional pay TV offerings both in the U.S. and internationally, CEO David Zaslav told analysts Thursday.

On a conference call with analysts to discuss third-quarter results, Zaslav said Discovery sees its pending purchase of Scripps Networks Interactive in furthering that strategy, giving it the compelling content that traditional and non-traditional distributors crave.

Zaslav said that the future seems to be pointing to large tech companies like Google, Amazon, Facebook and Apple getting deeper into the content delivery weeds. But as they expand their offerings, they’re going to need to partner with content creators.

Related > Facebook Willing to Experiment With Video

“We think that if Apple wanted to do a deal with one person and offer a Family Pak everywhere in the world, or if Facebook wanted to do that or Amazon or if the mobile players wanted to do it in Europe, who could they go to?” Zaslav asked on the call. “There [are] very few companies; it’s maybe less than three.”

Discovery and Scripps, which have established worldwide brands, are among that group.

“We see Scripps as a beginning,” Zaslav said. “Within two years we will be less than three-and-a-half-times levered. And we will be looking for what other IP do we have, how do we accelerate direct-to-consumer, how do we accelerate our overall market share. We think we are trying to be where the ball is. We see those big distributors are looking more and more for the ball, and the ball for them is content.”

Related > Discovery-Scripps: Thin Is In

Zaslav has been a big proponent of skinny bundles, and he has continued to point out how in Europe, sports-free packages are prevalent. On the call he said that the lack of a compelling non-sports bundle is one of the factors in the 3% decline in pay TV subscribers, and predicted such smaller offerings would become prevalent in the U.S., eventually.

While Discovery has had success with smaller bundles in Europe, it has been missing from key offerings in the U.S. from Hulu and YouTube. But Zaslav pointed out that Discovery is on DirecTVNow and Sony PlayStation Vue and is in talks with other OTT providers for carriage, He hinted that could come after the Scripps deal closes, expected early next year.

Discovery Communications said it signed a definitive agreement to buy Scripps Networks Interactive for $14.6 billion in cash and stock.

The price equals $90 a share, according to the companies—up 34% from where Scripps Networks was trading before sales rumors started on July 18. Viacom had also expressed interest in buying Scripps Networks, but bowed out of the bidding last week.

The move creates a larger programmer at a time when the industry is consolidating. But the new company still must operate in a challenging environment in which pay TV subscribers are falling and television advertising spending is growing slowly and facing strong competition from digital media.

Related: Analysts: Discovery-Scripps Merger Won’t Solve Problems

Neither company has links to a U.S. broadcaster or major domestic sports rights, so it will remain to be seen how much leverage the combined company will have with distributors.

“This is an exciting new chapter for Discovery," Discovery CEO David Zaslav said in a statement. "Scripps is one of the best run media companies in the world with terrific assets, strong brands and popular talent and formats. Our business is about great storytelling, authentic characters and passionate super fans. We believe that by coming together with Scripps, we will create a stronger, more flexible and more dynamic media company with a global content engine that can be fully optimized and monetized across our combined networks, products and services in every country around the world.”

Related: Discovery, Scripps Report Q2 Earnings

Discovery and Scripps will have nearly 20% share of ad-supported pay-TV audiences in the U.S., the companies said. Additionally, the combination will be home to five of the top pay-TV networks for women and will account for over 20% share of women watching primetime pay-TV in the U.S.

While making the announcement that Discovery Communications had agreed to buy Scripps Networks Interactive, the two companies released second- quarter financial results.

Discovery said its second-quarter net income dropped 8% to $374 million. The company attributed the downturn to currency fluctuations, losses from equity and solar investments. Earnings per share were 64 cents, down from 66 cents a year ago.

Revenue at Discovery rose 2% to $1.745 billion.

At Discovery’s U.S. networks, operating income rose 4% to $567 million. Revenue rose 2% to $890 million.

Distribution revenue was up 4%, while ad revenue hit $472 million, flat versus $471 million a year ago.

Scripps Networks Interactive’s preliminary results for the second quarter shows income from operations before income taxes were $400.8 million, up 20.8%.

Read more at B&C.

Viacom has withdrawn its interest in acquiring Scripps Networks Interactive, sources said.

The company had reportedly given Scripps Networks an all-cash offer worth $10.6 billion earlier this week.

Discovery Communications, which started the merger talks that seem to have put SNI in play, is still talking with the company.

Related: Scripps, Discovery Stocks Soar on Deal Speculation

For a cable programmer like Discovery or Viacom, acquiring SNI -- with its strong brands led by HGTV and Food Networks -- would create greater scale at a time when distributors are consolidating and consumers are seeking lower cost skinnier bundles of channels.

But analysts say a combination of Discovery and Scripps would not address the industry’s main problems of declining ratings, slow ad revenue growth and subscribers shifting from pay TV to digital video. 

News of Viacom’s withdrawal from the bidding for Scripps was earlier reported by Variety.

Scripps Networks Interactive stock rose 20% and Discovery Communications shares increased more than 7% in early trading after reports surfaced late Tuesday that the two were in early merger talks.

According to a report in the Wall Street Journal, Discovery and Scripps have held early discussions about a possible merger. While there is no guarantee that a deal would be realized, news about further consolidation in the programming business was enough to goose the stocks. Scripps shares went as high as $80.45 each (up 20% or $13.43 per share) in early trading Wednesday and were priced at $76.64 (up 14.4%) at 10:40 a.m. Discovery shares reached $27.92 per share (up 7%) before settling down to $226.80(up 2.8%) at 10:40 a.m. It was the single highest increase for both stocks in months.

Reuters reported later that Viacom has also held informal talks with Scripps Networks, which added to the increases in the latter’s stock price. Viacom shares were up 1.5% ( 55 cents each) to $36.01 per share at 10:40 a.m.

Discovery and Scripps have been down this path before. In late 2013, the two held preliminary talks but shelved them after the Scripps family, which controls Scripps Networks, decided it didn’t want to sell.

Discovery and Scripps Networks officials declined comment.

Both companies have struggled along with the rest of the industry to address changing viewing habits and falling ratings as consumers migrate from linear television to online, SVOD and OTT offerings. Discovery's stable of channels includes the Discovery Channel, TLC, Animal Planet, ID Discovery and other networks with a focus on non-fiction programming that would appear to mesh nicely with SNI's Food Network, HGTV, Travel Channel and GAC programming assets.

Analysts were split about a possible Discovery/Scripps Networks combination, with MoffettNathanson media analyst Michael Nathanson writing in a research note that pairing the networks groups won’t solve their problems. While Scripps Networks had surprisingly strong ad revenue growth last year, one indication that it may be a good time to sell, it will be difficult to duplicate. 

“While there will likely be ample cost synergies, international revenue opportunities and improved relative scale, we don’t think this merger will fundamentally alter the long-term prospects of these companies,” Nathanson wrote.  “If anything, it does allow for a couple of years of a new narrative to form about future inorganic opportunities.”

On the other side of the spectrum, RBC Capital Markets media analyst Steven Cahall called the potential deal a “sign of the times,” adding that he saw it as one of the most logical combinations in the content space as added scale should improve the merged entity’s leverage in carriage negotiations.

“We think investors have viewed consolidation among smaller players as an eventual inevitability, but this potential deal would suggest that the corporates are more proactive than we had previously thought,” Cahall wrote. “From here, we will be looking for a better picture of the deal, assuming it's real, and contemplating what other transactions, if any, could follow. “

Credit Suisse media analyst Omar Sheik wrote in a note to clients that he believed a Discovery/Scripps Networks combination had “low credibility.”

“The report looks vague, and our initial view is that it has low credibility,” Sheikh wrote. “Combining the two portfolios of unscripted cable networks has some industrial logic, but previously reported discussions between the companies probably came to nothing because the price/structure of a transaction could not be agreed. We struggle to see what might have changed now.”

UBS Securities media analyst Doug Mitchelson wrote in a research report that while there is a strong case for the synergies in a deal – he estimated between $150 million and $250 million – pairing the two programmers may only make things worse.

“Having 18 combined networks in a world shifting towards skinnier bundles might only compound secular challenges,” Mitchelson wrote.