In a deal that will surely make activist groups froth and may have rivals looking over their shoulders, Discovery Communications Inc. and Hasbro Inc. are partnering on a new kids' cable channel aimed at the elusive 14-and-under demographic.
Under the terms of the deal, Hasbro, maker of Trivial Pursuit, G.I. Joe, Transformers and Scrabble, will pay $300 million for a 50% stake in Discovery Kids Network, the cable programmer's children's channel, which is available in 60 million homes. Discovery Kids will be renamed and relaunched late next year.
For Discovery, the deal lowers its exposure in a business that has proved to be a rare misfire for the cable programming giant. Viacom Inc.'s Nickelodeon, Walt Disney Co.'s Disney Channel and Time Warner Inc.'s Cartoon Network dominate the children's arena in terms of ratings and advertising, while Discovery Kids has yet to make a dent.
Other efforts by Discovery to jump-start Discovery Kids, including a ballyhooed partnership with NBC a few years ago, have failed to raise the brand. Last fall the cable channel asked Nielsen to stop measuring its ratings because audience numbers were so tiny.
"We needed some more oomph, we needed a partner that had some additional understanding of kids," said Discovery Chief Executive David Zaslav. "If we can strike the right note, we think we can build a compelling business."
That note is merchandising, which Zaslav and Hasbro Chief Executive Brian Goldner stressed would be a priority.
Hasbro had been looking for a television partner for the last year and approached several cable networks before reaching an accord with Discovery.
"TV is the next step for us to relaunch and reinvent our brands," Goldner said, citing the company's previous success in movies, with "Transformers," and video games, through a deal with Electronic Arts Inc.
The ink was barely dry on the press release before advocacy groups started blasting the new channel.
"This partnership represents a new low in children's television, a network devoted to showing infomercials for Hasbro's toys and games," said Susan Linn, director of the Boston-based Campaign for a Commercial-Free Childhood.
Commercial Alert, a Washington, D.C.-based watchdog, said the venture "sounds like nothing more than a scheme to deliver program-length advertisements to children."
Although Hasbro will provide original programming for the channel, Zaslav and Goldner dismissed those concerns.
"This network will not be successful if it is overly commercialized," Goldner said. Hasbro has a lot of say in the programming, but the channel will carry educational fare from Discovery's library and material from outside producers.
Discovery and Hasbro will have equal representation on a board of directors. Discovery will oversee advertising and distribution. Neither company's name will be used for the channel's new moniker.
The deal with Hasbro is Zaslav's latest step to make over Discovery. The company has created channels focused on the environment and crime, and next year will launch a cable network in partnership with Oprah Winfrey.