Discovery CEO on 'Studying' Comcast-Time Warner Cable Deal, Targeting Middle America

6:56 AM PST 05/28/2014 by Georg Szalai

David Zaslav suggests delays in the deal review, discusses the company's upfront ad market outlook, its approach to future digital licensing deals and how it expects to grow its carriage revenue in Europe.

Discovery Communications CEO David Zaslav said Wednesday that consolidation, such as the recently announced proposed Comcast acquisition of Time Warner Cable, "raises some real issues" and that "we're studying" the deal.

He also suggested that the deal looks like it will take longer than thought to make it through the regulatory review. Zaslav suggested that given regulators' moves so far and the additional combination of AT&T and DirecTV, the Comcast deal review would likely only be concluded in the first or even second quarter of 2015 instead of by the end of the year.

Speaking at the Sanford C. Bernstein Strategic Decisions Conference in New York in a session that was webcast, Zaslav also said that Discovery has had success and some protection from competition with networks that target niche audiences. He highlighted that TLC, for example, targets Middle American audiences, especially women. 19 and Counting, a show about evangelical family that home schools the kids, drew strong ratings Tuesday night, Zaslav said. "If you put that show on any other network in America, it wouldn't do well," he said.

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Such shows help with branding, ratings and advertising revenue. While people in New York and L.A. at times find Middle America activities, such as attending beaty pageants with ones kids on weekends, amusing, he said Discovery does well with such programming. "A lot of what we put on gets written up in New York and L.A., and they laugh and they think it's funny," Zaslav said. "But that's a way of life in Middle America that is meaningful and respected, and we respect it."

The Discovery CEO on Wednesday also touted the company's outlook for the upcoming upfront ad market. "We have some real momentum," he told the conference. "Right now, it feels good, and we have a strong hand coming in."

Zaslav said that broadcast networks still tend to get a 30 percent upfront premium because they can draw big audiences. But he highlighted that Discovery's ID is the number 2 network in daytime, so it shouldn't get such a big discount. He predicted it would take another couple of years to get fair value.

The Discovery CEO also said his team will look for increased carriage fee revenue in Europe and continues to feel good about digital licensing deals.

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A Netflix deal is coming up this year, and Zaslav said Discovery has evaluated other players to figure out if it makes more sense to offer content exclusively to one streaming service or make the rights available to more than one player. While he didn't share his exact plans, he said the digital licensing window is "valuable" and doesn't so far seem to cannibalize TV viewership.

Zaslav on Wednesday also discussed a recent $930 million deal that will see Discovery and Liberty Global jointly acquire independent U.K. production giant All3Media.

The acquisition is "a small deal for us," Zaslav said. Since production companies' profit margins are smaller than Discovery's, the company wouldn't want to get into the production space in a huge way, he explained. But he added that "we like the idea of having access to additional content and intellectual property."

Given that All3Media comprises 19 production companies, "that makes it more stable," Zaslav said. Plus, the company has seen "nice growth" and was available at a reasonable price multiple, he added.

And since All3Media is Discovery's number 3 content provider, owning a 50 percent stake in it is "a goodie," he said. "If we have good ideas for content, we can get the heads of the 19 companies on the phone on a Friday and say here is what we need from you."

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai

 

 

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