Discovery, Sky at Impasse Over New TV Deal, Risking Blackout

  • Sky’s pay-TV customers would lose access to TLC, Animal Planet
  • Discovery seeking more money to take up slack for ad declines

Discovery Communications Inc. channels including TLC and Animal Planet are at risk of going dark for 5.5 million Sky Plc TV customers in U.K., as the companies hit an impasse in negotiations toward a new contract.

Discovery and Sky traded accusations in statements Wednesday, with a Jan. 31 deadline looming to strike a new deal. All 12 Discovery channels currently available to Sky and NOW TV customers, like Discovery Channel, Eurosport and DMAX, would be blacked out if the two sides remain deadlocked.

Discovery, on a growth spurt in Europe, has been trying to extract more money from pay-TV distributors like Sky to make up for a loss of subscribers and stalled advertising growth in the U.S. While half of Discovery’s sales comes from such fees, the company is planning to offer content directly to European consumers who subscribe to Eurosport through a recent deal with MLB Advanced Media, posing a potential threat to TV providers in that region. With its deal acquiring Eurosport, Discovery became the first media company to hold all the European rights for the Olympic games.

Discovery is taking a hard line against Sky, which last month agreed to be acquired by Rupert Murdoch’s 21st Century Fox Inc. as the billionaire seeks to consolidate his television empire across two continents. Sky provides satellite-TV service to 21.8 million customers across the U.K., Ireland, Italy, Germany and Austria, while Fox owns cable networks that compete directly against Discovery, such as Fox UK and National Geographic Channel.

“We are concerned that with the recently announced Fox transaction, Sky’s market strength and incentive to disadvantage independent TV content providers will only increase,” said Discovery, which counts billionaire John Malone as an investor.

Shares of Silver Spring, Maryland-based Discovery fell 3.2 percent to $27.58 in New York. Sky shares were little changed at London close.

Sky, for its part, attacked Discovery’s value to TV viewers, noting that much of its programming is only available live, versus on-demand. The Discovery flagship channel has fallen 33 percent since 2006, according to Sky, and the whole portfolio is down 15 percent in the last year. According to Discovery, the Discovery Channel has twice the audience of National Geographic.

“Despite our best efforts to reach a sensible agreement, we, like many other platforms and broadcasters across Europe, have found the price expectations for the Discovery portfolio to be completely unrealistic,” the London-based distributor said.

“We’ve taken the decision not to renew this contract on the terms offered.”

Disputes between TV networks and distributors are common, and they occasionally reach a stalemate as both sides try to demand better deals.

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