Discovery Communications didn't make any grand subscriber predictions for its new, direct-to-consumer streaming service – Discovery+ – but analysts believe its penetration rate will be helped along by its US partnership with Verizon, in addition to a globally focused deployment strategy.
ISI Evercore said it assumes Discovery+ will add about 15 million subscribers in 2021, helped by an approximate 30% penetration from the Verizon agreement, plus an additional 8 million global net adds. ISI Evercore sees that slowing down to 5 million net adds in 2022 as the Verizon partnership rolls off.
Again, these are all assumptions. "Given that Discovery did not provide long-term financial targets, analysts and investors will have to determine on their own if Discovery will have a big enough lifeboat to survive and thrive in the rough waters of a declining linear TV universe," Michael Nathanson, analyst with MoffettNathanson, explained in a research note.
Discovery expects Discovery+ to have a domestic addressable market of at least 70 million homes, and roughly 400 million globally.
Like CBS All Access or Disney+... or both?
Analysts also wonder if Discovery+'s success will follow a slow and steady path like CBS All Access (a service that's big with "Star Trek" fans but will expand in early 2021 when it is rechristened as Paramount+), or take a rocket ride like Disney+, which has rapidly swelled to more than 73 million subs worldwide. They seem to agree that Discovery+ will end up being big of both, depending on the region.
"In the very crowded U.S. market, CBS All Access … is more likely a better analogy for Discovery+ as it serves both super fans of CBS and a sub-set of cord-cutters," Nathanson explained. In the US, he sees Discovery+ reaching "third-tier" penetration levels, behind first-tier service Netflix and a set of services in the second tier: Amazon Prime Video, Hulu (the SVoD service) and Disney+.
Internationally, he sees Discovery+ being a more differentiated and incremental service that would more closely mirror what Disney+ brings to the table.
Colin Dixon, founder and chief analyst at nScreenMedia, agrees that Discovery+ could see a bifurcated level of appeal in the US and abroad.
Dixon sees Discovery+ as a harder sell in the US, as pay-TV customers already have access to plenty of Discovery content on linear channels, VoD and what's stored in their DVRs. A subset of superfans might turn to Discovery+ to augment what they get with pay-TV.
Meanwhile, cord-cutters have been living without a lot of that kind of content and have already gravitated to YouTube or other streaming services, such as CuriosityStream, to get their fill of the programming genres offered by Discovery+.
"I think it's only the hardcore fans that have pay-TV that will pick this service up [in the US]. I think it's a really tough sell," Dixon said, but likewise believes that Discovery is smart to add a bunch of original fare for the new streaming service.
But Dixon expects the story to be different in a market like Europe, where Discovery+ will feature live sports, including Eurosport and Olympics coverage, and have a greater appeal among consumers who have jettisoned or simply don't want a traditional pay-TV service.
Discovery+ "will pick up a ton of subscribers" heading into the 2021 Tokyo games, said Dixon, who expects the programmer to have an easy time converting Dplay subscribers to Discovery+. "I like the story better for Discovery+ in Europe that I do in the US."
Back to the US, a portion of Discovery+'s growth will come from a Verizon deal that will provide a free year of the new SVoD service to customers on certain Fios and mobile service tiers, and up to six months of Discovery+ on some other service tiers. MoffettNathanson and ISI Evercore both estimate that about 21 million Verizon accounts are eligible for the Discovery+ promotion in some form.
Discovery set a January 4, 2021, US launch date for Discovery+. The ad-supported service will fetch $4.99 per month; an ad-free version will run $6.99 per month. The service will debut with more than 55,000 episodes, including more than 50 original titles and 150 hours-plus of exclusive content. Discovery estimates that Discovery+ will offer more than 1,000 hours of original fare in year one.
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— Jeff Baumgartner, Senior Editor, Light Reading