Discovery's streaming service will play nice with pay-TV partners
As Discovery prepares to launch a streaming service that aggregates the bulk of its brands onto one direct-to-consumer OTT platform, the programmer says it's being mindful to develop it in cooperation with its various pay-TV distribution partners in the US and abroad.
"We're in discussion with all of our distributors," David Zaslav, Discovery's president and CEO, said last Thursday, February 27, on the company's earnings call, adding that he had been on the horn with Charter Communications CEO Tom Rutledge just the night before. "The cable guys aren't going to wake up and find out what we're doing. They're going to be in rooms with us figuring out what we're doing that creates more value for both of us."
Discovery's pay-TV-friendly distribution approach for its yet-to-be-named streaming service appears to align relatively closely with that of Peacock, an OTT service from NBCU that will initially be available to Comcast X1 and Xfinity Flex customers on April 15 ahead of a national launch set for July 15. On the other end, WarnerMedia's new HBO Max service has rankled some pay-TV distributors brecause of concerns that the new offering will cause existing HBO subs to defect to the new, bigger offering and accelerate cord-cutting.
Discovery has not announced all the specifics about the streaming service under development, including possible launch dates and pricing. Zaslav did stress that the company won't be selling its best stuff to OTT services like Netflix and Amazon, but allowed that Discovery would complement its digital distribution strategy by licensing a subset of fare to various other subscription and ad-supported VoD platforms.
"We're differentiated, and we fit well with all of them," he said. "As we sift through the analysis, we are confident that we are playing a different game than everyone else."
Pursuing the aggregation angle
The central part of the plan is to build an offering that aggregates Discovery's full content stable, including shows and other content it acquired in 2018 from Scripps Networks Interactive, a deal that brought networks such as Food Network, HGTV and Travel Channel under Discovery's umbrella.
Zaslav estimates that Discovery has a library of about 60,000 hours of content with an annual production pipeline of 8,000 new hours, and that Discovery owns the global rights for the vast majority of its content.
Discovery's broader streaming plan builds on some direct-to-consumer (DTC) success it's already enjoyed with Dplay, an ad-supported streaming service launched in countries such as Denmark, Japan, the Netherlands, Spain and the UK. But it is also arriving on the scene as Discovery and other programmers reassess how they are distributing and monetizing content as the pay-TV market contiues to erode.
DTC to play big role in Discovery's next chapter
With the integration of Scripps completed, "investors are focused on the future trajectory of linear trends and the looming potential of Discovery's digital offerings," Michael Nathanson, analyst with MoffettNathanson, said in a research note distributed late last week. "The overarching debate is whether Discovery's next-gen and DTC investments will transform the company quickly enough to offset the risk that the revenue picture darkens further."
Discovery appears to be blazing a stable path toward that future. Nathanson notes that Discovery brought in more than $700 million of next-gen and direct-to-consumer revenue in 2019, with expectations to grow that to over $1 billion in 2020 and approach 10% of total company revenues.
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- HBO Max Might Rankle Pay-TV Distributors
- US pay-TV losses widen to 864K in Q4
— Jeff Baumgartner, Senior Editor, Light Reading