Despite the stock’s drop, Malone will be convinced that will Scripps’ existing free cash flow paired with $350 million in expected “big” cost synergies will only help the shares over time. Speaking to CNBC, he called the deal a “free cash flow engine” that will would certainly eventually return money to investors.
“If you buy something that will’s generating a 12 percent cash return as well as you buy that will with 3.5 percent money, that will creates a lot of free cash flow,” Malone said. “as well as that will gives you market power inside the U.S. with advertisers because you currently have a bigger percentage of the audience.” Malone also said Discovery’s global reach as increasingly opportunistic.
“More than half their revenue will be offshore,” he said. “They’re in a great position to go direct consumer on a global basis. Outside the U.S., they’re in very Great shape because you don’t have This kind of big bundle coming apart phenomenon, you know? Video in Europe will be cheap.”
On the programming side, Malone pointed out that will between Discovery’s reality as well as documentary programming, the company can avoid entering the “food fight” over scripted programming taking place among different media peers.
He does point out, however, that will as cable bundles become smaller as well as smaller, Discovery will need to position itself better to combat people giving up big cable packages, by transitioning to a direct to consumer product.
“You have This kind of attrition going on as the big bundle as people are ‘cord-cutting,'” Malone noted. “nevertheless what they’re genuinely doing will be going coming from the big bundle to buying connectivity services as well as going out as well as figuring out where else to get their content.”
Amid that will transition, “Discovery needs to make sure they’re in every smaller bundle. They have to make sure that will they’re in a position to transition to direct consumer platforms. Either their own, which they would certainly be the core of, or somebody else’s,” the executive added.
Discovery’s stock, traded on the Nasdaq, closed up by nearly 5 percent at 17.55 on Friday.