QRTEA + DISCA

[jafar280]

A tie up b/w DISCA + QRTEA makes a lot of sense to me. Bundling QRTEA into a DISCA streaming/DTC offering eliminates cable commissions currently paid by QRTEA (up to 5% of sales). QRTEA customer base, consumer data, and e-comm knowhow also helps get DISCA streaming & e-comm aspirations off the ground.

 

Anyone following either name...?

[KJP]

Are you suggesting that QVC and HSN would be better off if they charged fees for viewers to watch them?  Isn't there a reason QVC and HSN currently have to pay cable companies to carry them, as opposed to getting paid by the cable companies for their content?

 

 

 

 

[KJP]

I'm suggesting that it be "thrown in" to bundles DISCA is planning to launch, which target women. No "cost" to the consumer.

 

QRTEA's business model is to get on as many distribution platforms as possible, so they'd love to be "thrown in" to any DTC bundle that would take them.  DISCA doesn't need to buy QRTEA to do that.

 

To the extent you're suggesting that QVC and HSN would be exclusive to a DISCA-based DTC bundle, that would likely kill the business by vastly shrinking distribution of those channels.

[KJP]

You are aware QRTEA pays up to 5% of sales to the distributor, correct?

If the distributor were to own QRTEA, this 5% expense is eliminated (worth +20% to QRTEA EBITDA @ full conversion).

 

 

Assume the distributor is currently getting $100 million from QRTEA.  That $100 million shows up as an expense for QRTEA and as revenue for the distributor. 

 

If the distributor were to buy QRTEA, and for internal accounting purposes the distribution payments were eliminated, then the QRTEA division's results would look better by $100 million because it would be allocated $100 million less in expenses, but the distribution division's results would look worse by the same $100 million, because it would be allocated $100 million less in revenue.  Combining the entities does not change the economics of both and no value has been created.  That is why vertical integration often doesn't make sense.