Shift in kids’ TV habits drives big changes to Discovery-Hasbro partnership

The seismic shifts in the way kids watch TV has led to major changes in the partnership between Discovery Communications and Hasbro in the Hub Network.

The kidvid channel that launched in October 2010 will be rebranded Discovery Family Channel as of Oct. 13. Hasbro’s ownership stake in the channel will drop from 50% to 40% as the programming focus shifts to Hasbro-produced children’s fare in the daytime hours and family-friendly fare in primetime.

Discovery group prexy Henry Schleiff will add oversight of the rebranded channel to his growing portfolio. Discovery exec Tom Cosgrove will serve as general manager of the Discovery Family.

The changes were sparked in part by the fact that the sides were coming up on the expiration of their original partnership agreement. With so much of kidvid viewing moving to VOD and SVOD platforms, the partners realized that a linear channel squarely devoted to kivid has limited growth potential. That reinforces how much the rise of on-demand options has changed the game for linear TV programmers in just the four years since the Hub was born.

At the same time, Discovery’s research showed that the Hub attracts a healthy “co-viewing” audience of kids and adults watching together in primetime. With the brand overhaul, the plan is to program original series designed to appeal to multigenerational family audiences in primetime. The partners see an opening for a channel that is consistently focused on drawing multigenerational viewers in primetime.

Hasbro, meanwhile, gains more flexibility to sell new and existing shows to digital outlets such as Netflix and Amazon. Kidvid is a huge component of overall viewing for the SVOD heavyweights, even though it doesn’t get nearly as much attention in pop culture as original series aimed at adults.

Discovery bought out the additional 10% stake in the channel from Hasbro. That allows Discovery to consolidate the outlet’s revenue and earnings with those of its 12 other majority-owned channels in the U.S.

Hub, which was a makeover of the former Discovery Kids channel, has been consistently overshadowed by its more established rivals, Disney Channel and Nickelodeon, but it is nonetheless a profitable venture for the partners. It’s said to deliver nearly $100 million in annual earnings, which will now flow directly to Discovery’s bottom line as it will have majority control.

Discovery and Hasbro execs stressed that the decision to revise the terms of the partnership was done by mutual agreement in the best way to make the most of the asset. Hub Network has grown its subscriber base from 56 million cable homes in 2010 to about 70 million today. The channel makes most of its money on affiliate fees, so the hope is to grow the advertising side with broader-based programming in primetime.

“Hasbro is a world-class company with franchises and characters that appeal to kids and families around the world. They have been terrific partners over the past several years as we developed our kids television audience in the U.S., and we look forward to a continued strong collaboration as we evolve to the Discovery Family Channel together,” said Discovery Communications’ prexy-CEO David Zaslav.

The decision by Hub’s founding president Margaret Loesch to step down by year’s end also accelerated the makeover process. Discovery and Hasbro both recognized that they stood to benefit from modified terms.

“This was the result of conversations about the most important elements of our success and how to bring the strengths of each parent company to bear to move the channel forward,” Brian Goldner, president-CEO of Hasbro, told Variety. “We saw the opportunity to build up the audience in the evenings and show advertisers that they have a great opportunity to reach adults and kids.”

Hasbro-produced hits for the Hub include the toons “My Little Pony,” “Littlest Pet Show” and “Transformers Rescue Bots.” Primetime programming will now be drawn in part from the Discovery vault of shows revolving around natural history, adventure and science themes.

For Rhode Island-based Hasbro, the Discovery channel is a the centerpiece of a content-focused strategy that involves feature films, such as the “Transformers” series with Paramount and the upcoming “Ouija” due out next month from Universal.

The toymaker is investing big in production through its Burbank-based Hasbro Studios arm. “We are continuing to develop partnerships with the big studios for some of our biggest brands,” Goldner said. “And you’ll see us developing movies with smaller budgets and strong filmmakers.”