Discovery, Comcast Agree to Long-Term Carriage Deal

Affiliate Pact Had Expired on June 30

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After a series of protracted, sometimes contentious negotiations, Comcast and Discovery Communications have put their differences aside, locking in a long-term deal that includes a provision for TV Everywhere.

Financial terms were not disclosed, although Discovery has been securing high single-digit percentage increases in its affiliate deals with other operators. Discovery's domestic networks in 2014 generated $1.29 billion in affiliate revenue, flat versus the year-ago period.

The previous carriage deal had expired on June 30, just a few days before Discovery's flagship channel began airing its high-rated annual "Shark Week" stunt. In moving "Shark Week" up a month -- last year's event kicked off in early August -- Discovery may have been able to bolster its negotiating position with the nation's largest cable company. (If nothing else, the July 5 launch allowed Discovery Channel to scare up an even greater pile of summer movie dollars.)

While it's not unheard-of for programmers and operators to negotiate in good faith after a contract has elapsed, the Discovery-Comcast talks may have been a bit more chippy than usual. Discovery's demand for increased affiliate fees aside, the negotiations came on the heels of a very public squabble over the proposed Comcast-Time Warner Cable merger.

Speaking to investors last November, Discovery President and CEO David Zaslav said "everyone should be concerned" about the potential consolidation of the two biggest cable operators, adding that the scale of the $45 billion takeover would pose a threat to consumers and content creators alike.

Two months earlier, in a filing with the Securities Exchange Commission, Comcast accused Discovery of requesting "to negotiate its affiliation agreement early in exchange for [its] support or non-opposition of" the proposed TWC transaction. A subsequent filing characterized Discovery's stance as "extortionate," adding that the programmer had been seeking "unwarranted business concessions" from Comcast.

Discovery fired back, saying that it was concerned about how the scale of a combined Comcast-TWC would allow the operator "to impose deep price reductions and onerous terms" on content providers.

This sort of back and forth went on while the Federal Communications Commission continued assessing the merits of the proposed merger. Comcast ultimately scrapped its bid to acquire Time Warner Cable in April.

Mr. Zaslav was quick to try to put the rancor to bed, telling investors in May that any ill will between the two parties was "all behind us now," adding that the goal going forward was to come to terms on a new carriage deal "that makes sense for both of us."

And the talks didn't yield the blackouts that often accompany retransmission fights.

With the new deal in hand, Discovery's 12 U.S. networks are assured continued carriage in Comcast's 22.5 million video households. Comcast subscribers will be able to stream Discovery networks over the internet.

The agreement comes on the eve of Discovery's August 5 second quarter earnings call and as the company's ad sales team prepares to close out the last of its 2015-16 upfront business.

The carriage deal was confirmed in a joint announcement by Mr. Zaslav and Comcast president and CEO Neil Smit.

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