Discovery To Purchase Scripps Network For $11.9 Billion, Plus Snapchat Shares Hit A New Low

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“[I’m] Steve Jobs-ing it.”- Travis Kalanick’s rumored statement on a potential return to Uber. Even we can’t keep track of this stuff anymore.

Market Snapshot

  • The Dow closed at a record high, boosted by strong earnings.
  • The S&P and Nasdaq fell, dragged down by tech.
  • Oil finished higher, posting its largest monthly gain (+8.90%) since April 2016.
  • The dollar index slumped to its lowest level in over a year.

Cable Television & Chill

If you were wondering how Shark Week could get any better, throw in Guy Fieri with a 12oz sirloin. No no, not into the water.

On Monday, Discovery agreed to purchase Scripps Network for $11.9 billion, bringing together two media powerhouses.

Together, with their arsenal of shows including everything from Honey Boo Boo to Cake Boss, they hope to corner the reality television market.

So what you’re saying is…Honey Boo Boo holds the key to the market?

Sort of. With Rokus, Slingboxes and YouTube TVs attracting the eyes of millennial cord-cutters, your cable networks of old are looking for ways to stay sexy.

By creating a proverbial hodgepodge of Bizarre Foods and Dirty Jobs, Discovery is hoping to lure in more viewers with over 8,000 hours of original content and 300,000 hours of total content.

And if viewers take the bait, it could have strong implications for Discovery’s bottom line. The merger will not only create $350 million a year in synergies, but will also increase bargaining power with advertisers and program providers.

Don’t believe us? Together, the two will control four of the top five networks among female viewers (TLC, HGTV, Discovery ID and Food Network).

Impressive…who’s responsible?

Enter David Zaslav—Discovery CEO and all-around media extraordinaire.

Zaslav entered the picture in 2007 after 20 years at NBC. With a little bit of charm and a whole lot of hard work, he launched Discovery’s hit TV network Investigation Discovery, while aggressively expanding Discovery overseas (international revenue now accounts for 45% of the company’s $6.5 billion).

Now, he’s put the finishing touches on a deal that plans to make some serious noise in the media industry. If you thought Naked and Afraid was good, just you wait.

Out for Good Behavior

Yesterday, Snap (-1.01%) shares dropped 5.1% to $13.10 (an all-time low), before rebounding to $13.53. Since Snap’s IPO back on March 2nd, the media company has fallen well below its offering price of $17 a share.

Today marked yet another test for Spiegel & Co: the end of the first lockup period—the time following an IPO in which employees and early investors are prevented from selling shares in a company.

Why set a lockup period? Well, in Snap’s case, as shares plummeted from their $27 high, early investors may have been tempted to make off with a quick payday.

To prevent this selloff and minimize price volatility companies “lockup” their shares. And with Snap’s lockup ending there was an initial sell-off, but the downward move was only temporary.

That doesn’t mean Snap is in the clear. Investors can opt to sell shares at any point. But hey, at least it survived lockup day better than Twitter: TWTR dropped 18%.

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Hacking the DNC? Not cool. Spreading ransomware across international corporations? Despicable. And now, hackers may have taken it one step too far. Don’t you dare mess with Thrones.

Yesterday, a group of cybercriminals stole content from HBO, releasing upcoming episodes of Ballers and a script for Game of Thrones (see the full script here).

Only kidding, we would never spoil it.

Protecting content has become an all-too-real dilemma for media providers. Just this year, a hacker leaked ten episodes of Orange is the New Black, hoping for that big payday. It didn’t work.

Things went a bit differently for HBO. The good news? HBO wasn’t extorted for any money. The bad news? It still got hacked.

Not to worry, HBO has already released a statement: When the perpetrators are brought forth, they’ll be subjected to a hot dog bbq with Ramsay Bolton.

Private Browsing in China

The “Great Firewall of China” just got ten feet taller, and Virtual Private Network (VPN) developers are paying for it.

In China, VPNs aren’t just used to torrent the latest Jay-Z album or watch a blacked out football game. Internet censorship is so strict that Chinese residents use VPNs to access what we consider Web 101: Facebook, Google and Twitter, among others.

And to comply with a recent Chinese law, Apple has removed over 60 VPNs from the App Store, making it even more difficult to surf the web anonymously through encrypted connections.

Just another example of foreign tech companies getting stuffed in a locker by the Chinese government (i.e. Apple’s new data center or WhatsApp’s sketchy disruptions).

It might be time to start standing up to the schoolyard bully; this isn’t getting better anytime soon.

What Else Is Happening…

  • Lyft appointed Valerie Jarrett, a former Obama advisor, to its board.
  • Giphy, with 200 million users, finally announced plans to test sponsored GIFs.
  • Reddit raised a round of $200 million at a $1.8 billion valuation.
  • Washington’s MLS team (D.C. United) considers selling the team.

Economic Calendar

  • Monday:
  • Earnings: Panasonic (+/-), Pandora (+)
  • Economic Events: Pending Home Sales (+)
  • Tuesday:
  • Earnings: Allstate, Apple, Kate Spade, Shopify, Simon Property Group, Sprint, Steve Madden, Thomson Reuters, Under Armour, Xerox
  • Economic Events: Auto Sales, Truck Sales, Construction, Core PCE, Personal Income
  • Wednesday:
  • Earnings: 3D Systems, AIG, Cheesecake Factory, JLL, Plug Power, Square, Tesla, Time Warner, Adidas
  • Economic Events: Crude Inventories, ADP Employment Change, MBA Mortgage Applications
  • Thursday:
  • Earnings: Activision Blizzard, Aetna, Berkshire Hathaway, Duke Energy, Etsy, GrubHub, Kellogg, Kraft Heinz, Paramount, Shake Shack, Toyota, Yelp, Viacom, Yum!
  • Economic Calendar: Natural Gas Inventories, Factory Orders, Initial Claims
  • Friday:
  • Earnings: No Events Today
  • Economic C**alendar: Unemployment Rate, Nonfarm Payrolls, Trade Balance

Water Cooler

By the Numbers (Toy Industry)

When the Easy-Bake Oven market starts tanking, you know times are tough. Just last week, reports of weak sales in the U.K. and Brazil for Playskool and Easy-Bake Oven, sent the stock falling 9%. And in an era where kids are only turning from their iPads to even bigger iPads, you might think the toy industry’s days are numbered. Let’s roll the tape:

2.8%—YoY sales growth in the toy industry as of June 2017.

8.4%—YoY sales growth in the toy industry as of June 2016.

5.5%—YoY sales growth in the toy industry as of June 2015.

Now, you might be saying to yourself “Aha! So I was right all along.” Perhaps. But, it’s not that simple. Toy industry growth is historically volatile. Sales growth typically trends downward until a BIG name brand comes along, like The **Avengers or Stars Wars. It was these types of blockbusters that fueled growth from 2015 to 2016.

$700 million—toy sales generated by Star Wars in 2015.

$760 million—toy sales generated by Star Wars in 2016.

21%—percentage of licensed toy sales among all toys sold from 2008 to 2015.

41%—percentage of industry growth driven by licensed toy sales during 2008 to 2015.

So, the next time you go to throw that Hulk doll in the trash, and curse off Hasbro and Mattel, just consider there are a few big hits coming your way, including Thor: Ragnarok, Star Wars: The Last Jedi and Black Panther.

The Breakroom

Question of the Day

You and your opponent are playing a game whereby you take turns placing one penny per turn anywhere onto a perfectly round table. The winner is the one to fill up the table by placing the last penny. Given that you always move first, what strategy should you use to always win, regardless of what your opponent plays?

(Give up?)

Who Am I?

  1. I am Chairman and CEO of the world’s largest asset management firm.
  2. My company has $5.7 trillion in assets under management.
  3. I helped develop the mortgage-backed security market in the U.S.
  4. My two biggest influencers are Lee Kuan Yew, the founding father of Singapore, and Phil Jackson, the NBA coach.

(Any guesses?)

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Stat of the Day

$15.7 billion

Samsung’s Q2 revenue surpassed that of chipmaker rival, Intel ($14.8 billion), giving it the title of world’s largest chip maker by revenue—a title that Intel has held for nearly 25 years.