Discovery CEO Dismisses Idea That TV Industry "Has a Cold"

The company must "change the basket" of content it owns amid changing consumer behavior in the digital age, David Zaslav tells a Cambridge convention and explains why the Murdochs are his biggest competitors.

Discovery Communications CEO David Zaslav told a TV industry convention in Cambridge, England on Thursday that last month's sharp sector stock selloff amid cord cutting posed no real new challenges to the TV industry that weren't previously known about.

Speaking at the biennial Royal Television Society (RTS) convention in Cambridge, England, which this year explores the topic of "Happy Valley or House of Cards? Television in 2020," he said it was all about a trend and message that Discovery has long understood. "That's that the world is changing," even if slower than sometimes suggested, he explained. "The investor community was thinking that it was not changing, and suddenly ... there were questions about whether the industry has a cold or is sick," he said about the market meltdown. "I don't think it has a cold or it is sick."

He added: "We’re getting ready for the change by asking how good our content is." Zaslav said that the people's perceptions of top content, which he compared to the shape of a pyramid, would continue to change amid the changing world and different consumer behavior in the digital age. Sports and kids content are key audience drivers in the digital age, which is why Discovery has focused on kids offers in Latin America and recently acquired the rights to the Olympics across Europe in a long-term deal. "It is a huge opportunity to move up in the pyramid" of popular content, he explained. "Sport is at the top of the pyramid ... We have to change the basket of [intellectual property]" Discovery owns.

After Zaslav touted Discovery as the biggest international player among U.S. entertainment companies, interviewer Howard Stringer, former chairman and CEO of Sony Corp., asked him who he viewed as his toughest competitor, and he mentioned 21st Century Fox, led by CEO James Murdoch, his father and chairman Rupert Murdoch and executive co-chairman Lachlan Murdoch. "James, and Rupert and Lachlan [are our biggest competitor], because we see the world the same" way and take a global approach to the business, Zaslav said.

The Discovery boss also touted European acquisitions that Discovery has made in recent years. Earlier this year, the company agreed to acquire full control of pan-European sports network Eurosport for $534 million. Late last year, the company together with John Malone's Liberty Global acquired production company All3Media. He lauded both for furthering the company's strategy and reach and said he saw more upside in the international business, especially in Western Europe, which he has repeatedly called a "new emerging market."

Would Discovery bid for broadcasters in the U.K.? The company was understood to be in the running for Channel 5, which Viacom ended up acquiring. "We don't really comment on what exactly we bid on," Zaslav said. "Our number one priority is international expansion, Latin America and Europe being front and center." He said the company can sustain double-digit growth without deals, but added that the company expected to deploy more capital for acquisitions. About the U.K., he said: "This is a fantastic market. If a channel became available here in the U.K., we would probably look at it."

Asked about his view on Apple, Amazon and Netflix, Zaslav said Thursday: "They all affirm a very simple concept: content is the juice," content is what excites people. He called the tech companies and their executives "brilliant," but emphasized that they provide devices or pipes that need strong content. "To overstate the case: it's just a device," Zaslav said. "And it's our content that makes that come alive."

He added that the content industry isn't collectively rational, meaning sector players do not always figure out strong and rational economic models that are sustainable and beneficial to all. "If there were no antitrust laws, we'd get together and tell them how content is offered," he said about Netflix & Co.

Other speakers at the RTS event, which runs through Friday, have included AMC Networks CEO Josh Sapan and Viacom CEO Philippe Dauman.

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