Discovery has purchased Three. What happens now?

After years of losses and months of speculation, Three has finally been sold. We spoke with the CEO of MediaWorks and the new owner of its streaming operations, Discovery, about their plans for the channel.

This morning, the acquisition of the long-rumored MediaWorks streaming operations (mainly Three, along with a few extras) and the US cable TV monster was formally announced. According to outgoing MediaWorks CEO Michael Anderson, the deal was in a due diligence phase before Covid-19 arrived, which later tweaked it and forced a restart from scratch.

It ends a saga that has been going on for almost a year, since the news was known the channel was up for sale, and somehow from at least the Mark Weldon era, when TV3 (as it was known then) began a period of rapid transformation in which some of its most popular stars left and its emphasis on In the face of audiences, it shifted from news, local drama, and comedy to multi-night reality shows. That created content that could be cross-promoted on radio, digital, and outdoors – synergies that were a big part of the proposition for advertisers.

The new owners are large (more than US $ 11 billion in revenue), successful (more than US $ 1 billion in profits) and multinational (present in the main television markets of the world).

Yet despite their scale and financial security, several questions remain about what the new Threes will look like. I have spoken with Anderson, company president Jack Matthews (representing Oaktree, longtime private equity owners), and Discovery APAC president Simon Robinson to try to understand what this means for their staff and your audience.

Michael Anderson, CEO of MediaWorks (Photo: Supplied)

What is Discovery and what is your plan here?

Discovery is a multinational media company, which grew out of the channel of the same name, but now spans dozens of brands and hundreds of channels around the world, including Animal Planet, Food Network, HGTV, TLC, and Oprah Winfrey Network. It has been in New Zealand for 26 years, operating six channels on Sky and also has dozens of other channels internationally. Most are broadcast on pay television and operate in some kind of niche, although it does have some channels of more general interest and free channels in Europe.

Discovery is essentially backing itself to take the long-term loss-making TV business and turn it around, presumably by filling in much of the show with content it already owns and creates elsewhere and is therefore low-cost. or null.

What you said will no What he does is abandon his bet on the news, or on local productions. The new operation will be overseen by Glen Kyne, who had been in the position of Chief Commercial Officer, a beloved staff member who provides leadership continuity to an executive who has seen a number of high-profile exits, including CEO Anderson and the content manager. Andrew Szusterman.

What about Newshub?

This is perhaps the most pressing question: Merging all of the company’s radio, television and digital news services into one operation was the biggest project of Hal Crawford, the news chief who left earlier this year. . However, it is still a large and expensive area of ​​business, and the largest order line that could plausibly be closed.

According to Anderson, Discovery “has been very clear about the value of the news” throughout the process, and Robinson said that the news was critical to the value of the brand. It is also instructive that MediaWorks, the name that the rest of the radio and outdoor advertising assets will still trade under, intends to contract with Newshub to continue to provide newsletters for its radio stations. This includes their flagship AM Show, which will continue to run on both Three and Magic Talk.

For all that, there is no guarantee that these words will translate into a long-term engagement with the news in its current form. Newshub costs tens of millions a year to publish, and while it has lost high-profile (and expensive) stars like John Campbell, Hilary Barry, and Paul Henry in recent years, it is still an area that may find itself subject to scrutiny from those trying to return profitability to a media business.

Three’s The Project (Photo: Tres)

What will happen to Three’s local strategy?

When we spoke, Discovery’s Robinson noted that it operates in more than 200 countries and spends $ 4 billion on content each year, with $ 3 billion outside of the company’s base of operations in the United States.

The point is that it is a global company and creates local content for local markets. This will be a comfort to both the local production sector and New Zealand on Air: each needs Three to stay, and the more committed he is to the local, the easier it will be to work with.

That said, Robinson repeatedly emphasized that the priority for now is “closing the deal”; the only thing that could destabilize it from here on would be to take measures that would generate a significant and negative reaction from the sectors concerned. The result is that even if the new owners intend to make major changes to the schedule, there is no incentive to reveal their hand now.

What about your reality shows?

This was the closest Robinson came to leaning into significant change. Through HGTV, Discovery has access to a wealth of home improvement shows, so why would it continue to buy the rights to The Block? This is one of the key ways that Discovery can save money as a new owner: by reducing programming costs. Some of this will be filling your schedule with foreign productions. But some might do so by lowering the steep license fees paid to create New Zealand versions of formats like Married at First Sight and Dancing With the Stars.

It’s not reality, but The Project is another format fee heading to Australia (to Rove McManus, the cool 2000s talk show host Rove). There is a chance that the 7pm space will become the cost-saving goal, whether it’s creating a new format around current talent or introducing a completely different product.

Amy and Stu from The Block

How will the decoupling of radio and abroad affect the advertising business?

The word chairman of the board that Matthews uses to cover the radio and television division is “de-synergization,” but he also says there is interest in the companies continuing to work together. Obviously this is already happening throughout the news operation, but there is a strong incentive for pre-existing sales relationships, in which multiple platforms are packaged and sold together, to keep going.

Since TVNZ and its rival NZME have a close working relationship, there is good reason to stay close to combat that competition. Likewise, the other six Discovery channels in New Zealand, running on Sky, provide additional inventory to work with.

All sales occur in the context of a very difficult business environment. Robinson said Discovery is entering the deal “with eyes wide open – we face the same micro and macroeconomic challenges everywhere.” He also bravely tried to spin the difficulties media companies face as a positive: because they were suffering before the pandemic, they know how to hold on to crises, a skill that he says not all sectors have. It’s certainly a way of framing it.