Discovery Communications, Hasbro Venture The Hub Revises Fees for Animation Fare

My Little Pony - TV Still - 2010

The kids network, which has gotten off to a slow ratings start, said the change will trigger testing for possible goodwill impairment, according to a regulatory filing.

NEW YORK - Discovery Communications and Hasbro joint venture children's cable network The Hub last month revised the license fees it pays for animated programs, which also triggers testing for possible goodwill impairment, according to a regulatory filing Monday.

A Discovery spokeswoman said that the process is simply an accounting exercise though and that the programming contract changes are immaterial.

The Hub launched in October and has so far not made a big splash in the ratings against established kids players, such as Nickelodeon or Cartoon Network. Discovery and Hasbro executives have repeatedly said that the former Discovery Kids channel, much like Discovery's venture network OWN: The Oprah Winfrey Network, which has seen increasing investments from Discovery, will need time to find an audience.

The Hub pays license fees for content, and Hasbro Studios, which is owned by Hasbro, is a provider of "a significant amount of the content" that plays on The Hub, according to Drew Crum, analyst at Stifel, Nicolaus. Among the Hasbro Studios shows on the network are Transformers Prime, My Little Pony Friendship is Magic and G.I. Joe Renegades.

Observers expect that weaker-performing shows will get lower fees under the changes mentioned in the regulatory filing with better-performing shows, including Hasbro fare, getting higher fees.

In May, Discovery Communications "amended its agreement with Hasbro Inc. regarding The Hub to revise the license fees paid by The Hub for animated programs," Discovery said in a filing with the SEC on Monday without specifying the changes. "This amendment creates a trigger event for purposes of intangible asset and goodwill impairment testing."

It added that the Hub’s management "is in the process of conducting a fair value analysis to support goodwill impairment testing, however the assessment is not complete and no determinations have been made." Discovery said it expects that the evaluation will be completed during the third quarter.

A Hub spokesman couldn't immediately be reached for comment.


Twitter: @georgszalai