Discovery has learned from “a bunch of mistakes” in the sports business in Europe, a top executive said Wednesday.
JB Perrette, president and CEO Discovery Streaming and International, told the virtual MoffettNathanson Streaming Wars Summit that converting viewers of free sports offers to paying subscribers, for example, is harder than it may seem. “Can you give some people a little bit of something for free and then get them to pay?” he explained the conundrum, adding that this was “more challenging than you think.”
“We have learned a lot over the last eight years, and we made a lot of mistakes, frankly,” Perrette said, explaining that the firm was “trying to figure out” how to market the Eurosport Player as a stand-alone streaming service of the Eurosport network in Europe for years. “How do you make sports more than a pay-per-view business, which becomes very challenging from a churn perspective,” he explained.
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“That is why we decided to collapse our Eurosport business into our Discovery+ product,” now marketing it as Discovery+ With Sports, Perrette added. Since doing that a few months ago, the firm has seen “much higher engagement across both sports and entertainment and much better retention.” So the company will continue, and complete, rolling out that approach next year, the executive concluded.
How will that play out after the merger of Discovery and WarnerMedia? “We are going to have a very unique proposition in a Warner-Discovery world of a premium sports tier, an incredibly strong entertainment product, with great local and global content coming out of the U.S., and then obviously an opportunity still to have a potentially separate, free-to-view, ad-supported-only offering in market as well,” he said.
Perrette also addressed a more general question on the different needs of European sports services in Europe in the linear and streaming worlds. He responded by saying that in the traditional linear TV business, the goal for Eurosport, for example, is to offer eight to 10 “peak events” over the course of the year that make it a must-have service in the eyes of consumers and pay TV partners. On the other hand, “in the streaming space, you need to have volume” to retain users, Perrette said. Otherwise, “it just becomes a very costly business,” he explained. “You’ve got to have volume, you’ve got to have it all.”
The company has made growth in streaming a priority, just like many of its peers. Discovery recently disclosed that it had reached 20 million paying streaming subscribers worldwide to its direct-to-consumer services, including Discovery+, as of the end of its third quarter on Sept. 30.
In May, Discovery and AT&T’s WarnerMedia unveiled a megamerger, which they expect to close by mid-year 2022. A recent regulatory filing detailed that the merged giant’s planned stock symbol is “WBD” and that the stock will trade on the Nasdaq.
Discovery CEO David Zaslav has said he will move to Los Angeles to run the new content giant. He has also announced that Discovery was bringing on former top Disney executive, and his “old friend,” Kevin Mayer to consult on the future of streaming at the company.
Zaslav said on the firm’s third-quarter earnings conference call that the merger partners were “well on track” for a mid-2022 close of the combination, while management also said that the enlarged firm’s debt burden would be lower than originally expected, making the executive team even more optimistic about their ability to quickly reduce the post-merger debt load.
AT&T CEO John Stankey recently defended the deal after congressional Democrats raised concerns on competition grounds. “What’s been articulated in those letters is really unfounded,” he argued. “Having been through a number of these [transactions] in my career, getting letters from members of Congress is not unusual. … When you have a lot of members of Congress, there’s always going to be those that have a different lens they want to put on something.”
