Discovery to Take Control of Hub Children's Network

Discovery Communications Inc. and toy giant Hasbro Inc. are ending their equal partnership in the Hub, a cable network that hoped to become a force in children's television but made little headway against more-established competitors such as Nickelodeon and the Disney Channel.

Under the terms being completed, Discovery would take a controlling interest in the Hub and reposition the channel as a family network aimed at parents as well as children, people close to the talks said. Hasbro will retain a large stake in the service and control six hours of daytime programming on the network, from 9 a.m. to 3 p.m., these people said.

The makeover could take place as early as the fourth quarter; the Hub is expected to be renamed Discovery Family.

Launched in 2010 with a $300 investment from Hasbro for half of the network, the Hub was designed to be an outlet for some of Hasbro's best-known toy brands, including G.I. Joe, Transformers and My Little Pony. But it never managed to gain traction against Viacom Inc.'s Nickelodeon and Walt Disney Co.'s Disney Channel. Nickelodeon and Disney Channel both average well over one million viewers a day while the Hub barely cracks 100,000 viewers, according to Nielsen.

The channel has faced some significant headwinds. Children have shifted a growing proportion of their television viewing to online services. Moreover, tougher advertising restrictions have forced many fast-food and snack brands to steer clear of children programming—another reason for the shift in strategy.

Andrew Warren, Discovery's chief financial officer, acknowledged at a Bank of America Merrill Lynch conference Tuesday that the children's-television market has proved to be very competitive. Moreover, since the Hub's launch, streaming services from companies such as Netflix Inc. and Amazon.com Inc. have moved aggressively into children's TV.

These developments, Mr. Warren said, prompted the Hub to refocus its programming strategy on the entire family. "There are fewer and fewer channels out there where children and parents can watch together. Our objective, and our programming imperative, is to continue to think about daytime for children and nighttime for family," he said.

Mr. Warren said there was "white space" in the media landscape for this target audience, adding that Disney's ABC Family is "a wonderful channel, but it's really for young teenage girls."

The Hub was a source of tension between Discovery and Hasbro. Hub executives often clashed with Hasbro over programming strategy.

Hasbro regarded the partnership with Discovery as a way to drive toy sales, and that often led the toy maker to balk at supporting shows that had good ratings but weren't moving product, current and former Hub executives said.

A Hasbro spokeswoman said: "Discovery and Hasbro have enjoyed a successful relationship" and "we look forward to continuing to work together to bring award-winning programming to children and families." .

The toy maker has only recently started to turn a small profit from the venture. At the end of last year, its stake was valued at $321 million.

"It's not their core expertise," said Eric Handler, a toy analyst at MKM Partners.

The Hub had been overseen by Margaret Loesch, a veteran children's-TV programmer, who announced her plans to resign in June. The new channel will be placed in a business unit overseen by Henry Schleiff, group president of many of Discovery's newest and fastest-growing channels, including Investigation Discovery, Destination America, American Heroes Channel and Discovery Life.

Hub's rebranding is the latest example of Discovery's efforts to overhaul underperforming channels. In the past, it has turned Discovery Health into OWN: the Oprah Winfrey Network; HD Theater into Velocity, which is aimed at men who enjoy life in the fast lane; Planet Green into Destination America, a channel that, among other things, celebrates fast food and quirky jobs.

With 75 million homes, the Hub has a broad reach. However, pay-TV distributors are starting to push back at having to carry such low-rated services. Discovery will need to increase the audience for the revamped service or risk having it dropped when its contracts come up for renewal.

While Hasbro's presence and operational role at the network are expected to decline, it may seek other outlets for its content. It has had on-again, off-again talks with Time Warner Inc.'s Cartoon Network about being an outlet for the toy manufacturer's shows.