Discovery Enters Into Negotiating Window To Buy 20% Stake In Eurosport

Discovery is making its first significant play in the sports media marketplace by entering into an exclusive negotiating window to buy a 20% stake in the European sports media company Eurosport for cash considerations of $221.6M. Discovery holds an option to take a controlling 51% stake in the company after two years. If Discovery exercises that option, France-based TF1, which co-owns Eurosport, can exercise an option of its own that would give Discovery complete control in the company. "Eurosport is a much more manageable sports programming model with diversified rights fees, as compared to higher and more competitive U.S. sports rights," Discovery President & CEO David Zaslav said during a conference call Friday morning. Zaslav said he was attracted by Eurosports' portfolio of rights, which stayed away from big ticket items like European soccer. "Eurosport is not in the big sports business. It is in the affinity sports business," he said. "The goal is that on a number of days every month -- not every day -- that this is somebody's favorite network, whether it be skiing or tennis or curling. … It's carved out an interesting niche that's a little bit different than traditional sports, where the fees are very high. … It's the only platform where if you having skiing rights and you want to build that sport, it's the only platform where you can go and reach 59 countries." Zaslav said the Eurosport purchase does not make Discovery any more likely to compete for rights in the U.S. market. "The U.S. sports business tends to be dominated by huge checks that you have to spend to buy a big sport, and then you build an asset around it," he said. "I don't see us getting into that business in the U.S. … The attack on sports in the United States is both aggressive and pretty well played. I don't see anything that we bring to the table with sports. The costs are very high. The margins aren't as attractive as our business" (John Ourand, THE DAILY).

ENHANCES DISCOVERY'S STRATEGY: Zaslav said with the acquisition of Eurosport, Discovery will be the “largest programmer in Europe and we'll be the largest pay-TV global programmer outside the U.S.” Zaslav: “It really enhances our overall strategy of taking our great content … and taking it around the world. This helps to supercharge that international story and reinforces the fact that as a global company, we're much stronger and geographically, we're much more stable and positioned for growth.” He notes Eurosport is the “leader in sports all across Europe,” and there is “no platform that even comes close.” Zaslav: “In fact, there is no platform that's really multi-country. So Eurosport is a great brand in 59 countries but more importantly, they're in the sports business without paying a lot of money for sports. … The attraction for us is we're in all 59 of those countries with between six and eight channels of our own. In most of those markets, we're the No. 1 channel for men, and we have a top channel for women. When you put that together with Eurosport, we think that we have some more value to bring to advertisers and distributors” (“Squawk on the Street,” CNBC, 12/14).