Discovery CEO "Hopeful" on Comcast Carriage Talks, Plans U.S. Streaming Launch
European OTT services provide "valuable learnings that we can apply in the U.S. and other markets," says David Zaslav.
Discovery Communications CEO David Zaslav said on Thursday that he was "hopeful" that Comcast would "negotiate in good faith" as a carriage deal between the companies is coming up for renewal and signaled plans to launch over-the-top services in the U.S. and Latin America, including direct-to-consumer offers.
"Comcast announced last year that our deal with them is up at the end of June," he said on Discovery's fourth-quarter earnings conference call. "As we all know, Comcast is the largest cable company, a key platform for any independent programmer, of which Discovery is the largest. With our deal coming up, we are hopeful that Comcast will negotiate in good faith, like all of our other TV distributors have over the last several years."
Zaslav has repeatedly expressed concern that Comcast, with its planned acquisition of Time Warner Cable, could gain too much leverage over cable networks groups, saying it "raises some real issues."
He also said the company was "not satisfied" with its U.S. ratings and advertising performance at the company late in 2014, but touted the company's international business. And he said "we have some real creative wind at our backs" with Discovery Channel's new leadership team and new programming investments.
On Thursday Zaslav also signaled that the company would roll out over-the-top video services in the U.S., possibly going direct-to-consumers, based on experiences gained in Europe. CBS and HBO are among content companies that have announced such over-the-top services.
Zaslav cited the Dplay OTT service in Scandinavia and the Eurosport Player that the company has been rolling out across Europe. The CEO said these services have nearly 250,000 subscribers who pay $8 per month on average. Zaslav called the OTT services a "growing revenue stream" and an opportunity to gain "valuable learnings that we can apply in the U.S. and other markets."
He said Discovery was looking to deploy Dplay in more European markets this year and strengthen Eurosport Player's content rights to accelerate its growth.
And he said the goal was "to take all of our learnings and expertise to support the strategy we will be taking to distribution partners and consumers in the U.S., Latin America and around the world." He said the company would detail its plans for such products in the U.S. and beyond in detail in the coming months.
"Discovery has a direct-to-consumer business that is profitable and growing, something very few media companies can say, and our opportunities within this landscape are growing rapidly," Zaslav summed up. "A look at our recent progress in Europe gives us good reason to be optimistic about our near- and long-term growth in this area."
He said the Eurosport Player tends to see a spike in new subscribers before big events. "If we have super-fan content ... we are getting big spikes before the Australian Open with people signing up where they can get eight courts," Zaslav said. "It's not affecting our viewership on Eurosport at all." Owning big specialty sports rights for big affinity groups has worked well, he said.
"Because we own the vast majority of our worldwide content and IP, we can take advantage of new ways to distribute and monetize our programming," Zaslav added, citing "new distributor entrants," over-the-top platforms and SVOD services that "expand our optionality" and bring in more revenue and reach more people.
In a Q&A, he predicted a stable U.S. pay TV market, but said pay TV firms had to do more to make more content available on TV Everywhere platforms. If TV Everywhere doesn't get enough of a push, "it will require all of us to go directly to the consumer, because the cable guys aren’t getting it done," Zaslav said.
Discussing possible direct-to-consumer and other OTT offers, he cited specialty sports and kids content as opportunities, especially in Latin America. Superfans still love to watch traditional TV, but seek out more elsewhere when passionate about content, he said.
"The best way would be a broad deployment of TV Everywhere in the U.S., and maybe taking some of our superfan affinity groups and going after them, the way Oprah [Winfrey] is now with offering a course for $60 or $70 to go and do deep-dives," Zaslav said. But the direct-to-consumer business may grow if pay TV operators don't roll out TV Everywhere more broadly, he concluded.