The explosive dispute between Sky and Discovery is on a knife edge

January 31, 2017

The explosive dispute between Sky and Discovery is on a knife edge

LONDON — Discovery and Sky's explosive disagreement will come to a head on Tuesday — but it could still go either way.

Discovery is threatening to remove its 13 channels from the Sky platform at midnight on Tuesday unless Sky is prepared to stump up more cash. Sky believes it has already offered Discovery a fair price.

Both sides maintain that they have not walked away from the negotiating table and, privately, neither has ruled out the possibility of an eleventh-hour deal.

The broadcasters would not comment on whether talks are scheduled for Tuesday, but Campaign and City AM have reported that "peace" negotiations are taking place. Discovery has also pulled back its social media offensive on the issue, although viewers are still being warned about the disagreement on the broadcaster's website.

They appear to be some distance apart on price. Sky said Discovery is demanding a "completely unrealistic" £1 billion. Discovery has dismissed this figure, arguing it is based on "alternative facts," and said Sky pays less for its channels now than it did in 2006.

If an agreement is not reached, Discovery will give notice to Sky and its channels will be taken off the platform. It means Sky viewers will be left without stations including Discovery Channel, TLC, and Eurosport, which are home to shows like "Idris Elba: Fighter" and Australian Open tennis.

This is not necessarily irrevocable, however, and a deal could theoretically be reached after Discovery's deadline, restoring its channels to Sky subscribers.

Discovery has more to lose

On paper, Discovery has the most to lose from walking away. Some back-of-the-envelope calculations show more than half of its potential audience would disappear overnight by coming off Sky — and with it a healthy chunk of revenue.

Sky does not break out its UK subscriber numbers after acquiring Sky Italia and Sky Deutschland in 2014, but at last count in 2015, it had more than 12 million TV customers in Britain. Discovery is also available on Virgin Media and BT, which have 1.5 million and 3.7 million subscribers respectively. It also has Freeview channel Quest.

Sky, on the other hand, would lose some exclusive programming, including Discovery's premium US content, and sport. It is keen to hang on to Discovery's flagship channels, including Eurosport, but is reluctant to pay a premium for smaller channels, such as Discovery History and Discovery Science, which are reliant on a diet of repeats.

"Discovery has got itself in an awkward position and in revenue terms, it has much more to lose proportionately than Sky," said Toby Syfret, director of TV research at Enders Analysis. "But it has to fight its corner. As one broadcaster, who shall remain unnamed once said to me: When it comes to carriage deals, Sky gives you just enough oxygen to breathe."

Syfret does believe a deal will be made eventually — even if it is not on Tuesday. "It's in the interests of both parties to reach an agreement and I'm sure they will reach a compromise in due course," he added.

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